Caremark Rx—one of the largest pharmaceutical services companies in the country—has found a way to cut costs, improve customer service and reduce administrative errors by insourcing all of its health and welfare benefits.

"Moving from outsourcing to insourcing has been a huge success for our company," says Marian Swanson, vice president of compensation and benefits. "We brought all of our benefits administration in-house and developed the entire benefits program ourselves, training our customer service representatives and using our own system support."

Back in late 1999, Caremark Rx's benefits outsourcer went out of business and gave the company 30 day's notice. Realizing there was no way to outsource with another company in just one month, Caremark Rx scrambled to put together an internal benefits center.

"We were already using PeopleSoft technology for our HR and payroll needs, and after a great deal of research and shopping around, we decided to also use PeopleSoft for our health and welfare benefits," Swanson says. "In the interim, we trained four temps, set up a phone system and created a 'mock' call center."

In the months that followed, the company installed the PeopleSoft module for benefits, built enrollment on the company's intranet and, in January 2001, went live.

To assist with intranet enrollment, Swanson and her staff of seven visited Caremark Rx's offices to answer questions and give onsite assistance. According to Swanson, employees were initially reluctant to enroll via the web, but the employees who logged on were pleasantly surprised by the convenience of the system. It was the first time employees could independently enroll without calling into the phone system, and 80 percent participated.

Looking back, Swanson admits it was a chaotic time, but says the transition has paid off. "Insourcing gives us control. We are more error-free now that we can monitor our mistakes, and by the end of last year, we had already realized our cost savings."

Under the right circumstances, insourcing company benefits can improve efficiency and reduce costs. Marian Swanson offers the following advice for organizations considering the move: Before moving your benefits in–house, be certain you have the system support you need—including the IT people to drive the system and work out any kinks. Take your time. Unless a situation like Caremark Rx's necessitates a quick change, do not rush your decision. Research all available options. Train your customer service representatives before they get on the phones. Each week, monitor their benefits knowledge by giving them a test.