The Shifting Dynamics of Employer Benefits

Employer-sponsored insurance is a significant aspect of life for America’s workforce. It accounts for the coverage of roughly 159 million non-elderly people a year, and many trends affect the benefits that employers offer, creating an ebb and flow in the prominence of this coverage throughout history.

Given the abundance of factors in play, it is vital to take inventory of these issues in order to prepare for and perform in a market that is constantly changing. A health-conscious workforce, an economy trying to pull itself out of the mud, and the increasing importance of technology and communication all affect the direction your clients will take 2010.

America’s health-conscious workforce
Take a quick glance down a shopping aisle, at television and Internet advertising, or at any restaurant menu, and you’ll see greater emphasis placed on healthy behavior. Companies have reached this level of health awareness because of consumer demands. More and more Americans insist on incorporating convenient options for a healthier life within their everyday routine. As more and more people realize the advantages of a healthy lifestyle, this is unlikely to change anytime soon.

The consideration that American workers give to employee benefits is at an equally high level. People care about their health and are eager to take advantage of initiatives that can help them live better and longer lives, and research has shown an increase in the number of employees leveraging preventive measures available through their employer-sponsored benefits. A MetLife survey conducted in the fall of 2009 revealed that nine out of 10 employees plan to maintain or increase their existing benefits in open enrollment programs for 2011. Despite the fact that 37 percent of employees stated that their discretionary income had fallen over the previous year, only 11 percent said that they plan to decrease their benefits in the coming year. In addition, Watson Wyatt and the National Business Group on Health found that 42 percent of employers experienced an increase in employees using the company health plan during 2009. This is a good indicator of the importance employees across the country place on health benefits. Another growing trend involves increasing the number “healthy well” employees while decreasing the “healthy unwell” population. (The “healthy unwell” are those employees who currently appear healthy yet put themselves at a greater risk of being chronically ill in the future through behaviors such as smoking, drinking, bad eating habits, etc.) Comparatively, the “healthy well” do not consistently partake in unhealthy activities and have a greater potential to remain healthy in the future. Employers and employees that focus on increasing healthy behaviors will experience mutual benefits in the long run.

Meet the needs: adjust plans and add incentives
As workers become more cognizant of their well-being and economic woes lead to higher and higher benefit premiums, employers are forced to make tough decisions in order to adjust the bottom line of their businesses. A survey performed by The Segal Company — a benefits, compensation, and HR consulting firm — illustrates the challenge employers experience as they attempt to juggle high costs with progressive benefits management. The study reveals that U.S. health plan cost trends are projected to be more than four times as great as the annual increase in average hourly earnings throughout 2010 and in years to come.

Employers typically pass along the cost increases to employees when they pull together group benefit designs to address the trends.

These pass-through costs are, in many cases, fiscally necessary.

In an attempt to control costs, some employers look to consolidate the amount of health plan options they offer. These types of changes can require employees to switch physicians or face higher out-of-network expenses. Hewitt Associates reports that cutting benefits to reduce costs usually is a short-term solution. Their research states that renegotiating supplier contracts can save up to 35 percent on employee benefits costs.

Similarly, others are implementing programs that closely monitor spousal and dependent coverage. These programs include health risk assessments for employees and their spouses and higher premiums for partners who have access to other coverage. To prevent employers from paying for those who are not eligible for coverage, dependent eligibility verification can result in significant savings.

Ensuring employee satisfaction while incurring minimal costs is a common goal. One way to achieve this is by increasing voluntary benefits. Doing so offers employees flexible choices that can be supported with very little administrative costs. Worksite benefits can also fill benefit gaps while helping employers receive better group rate prices. Additionally, these elections provide an alternative to meeting the needs of a diverse work force while controlling expenses.

One popular solution in the employer market is the implementation of health and wellness programs and incentives. Significant innovation and advancement has been made with these types of programs, as in other sectors of benefits administration. These programs often include initiatives that address prevention, lifestyle wellness, condition management, communication, and education.

More and more employers are making wellness programs a core component of their benefit offerings.