Attracting and retaining employees and increasing employee job satisfaction continue to be the 2 most important goals of benefit plans, according to a recent Eastbridge Consulting Group study of over 500 employers with 10 to 2000+ employees. Helping employees plan for their financial future is also key, our survey found.
Still, employers are most influenced by cost issues when making benefits decisions, which can often undermine these goals.
In Eastbridge’s 2006 study, 90% of the benefit managers surveyed rated “controlling costs of both health and welfare benefits” as the most important factor they consider in making benefit decisions. Reducing human resources administrative costs was significantly lower in importance this year compared to a similar study by Eastbridge in 2002. This is perhaps a sign that cost increases in medical plans are taking precedence over reducing administrative costs.
The most popular approach to controlling costs is to increase employee contributions toward benefits. Interestingly, though, significantly fewer said they were likely to do this now compared to 2002 (39% today vs. 47% in 2002). Thirty-two percent said they would most likely increase deductibles, copayments or other features of their plans to control costs. More importantly, however, most employers favor these methods rather than opting for more drastic measures such as dropping benefits, moving benefits to an employee-pay-all basis or even moving to a defined-contribution approach.
Despite all the press coverage about employers wanting to reduce their benefit costs, employees still have access to a significant range of insurance coverage, and employers seem committed to continuing to offer this choice. More than 9 out of 10 employers in the study offer medical, prescription drug, and dental insurance. About 80% offer term life, accidental death and dismemberment, and short-term and long-term disability coverage to employees (either as employer-paid, employee-paid or on a cost-sharing basis). Few employers are looking to reduce the number of benefits or to cut benefit amounts. Most benefits are paid for by a combination of employer and employee funds. Only a few benefits (term life, AD&D and disability) continue to be paid by the employer alone.
Over half of the employers surveyed prefer to purchase benefits through a commissioned broker. For many, this is typically their core group benefits broker. (One-quarter prefers to work directly with carriers.)
The role the broker plays in an employer’s benefits decision-making is divided fairly evenly among 3 different options, all offering to take care of varying degrees of the “legwork” (see Table, “Role of the Broker.”) But for all 3, the employer retains the final decision. Only 6% of those using a broker said they leave most of the decision-making to the broker.