And how advisors are stepping up and guiding their clients through an entirely new benefits challenge
by Gene LanzoniMr. Lanzoni is assistant vice-president withThe Guardian Life Insurance Company of America, leading its thought leadership programs. With 30 years in the financial services industry, he has played an integral role in developing such programs: MetLife’s Employee Benefits Trends study in 2001, Prudential’s Benefits & Beyond series in 2006 and Guardian’s Workplace Benefits Study in 2012. He is Chair of the Group & Worksite Benefits Committee for the Life Insurance Marketing Research Association (LIMRA) and on committees for the National Association of Dental Plans (NADP), the Council for Disability Awareness and the Integrated Benefits Institute (IBI). Visit guardianlife.com.
Requirements of the Affordable Care Act (ACA) continue to have significant effects on employers as they work to fund and deliver employee benefits programs that balance the needs of their businesses and their workforces.
Employers struggle with a range of challenges that have been intensified by the ACA, including increased compliance and administration, being able to offer wider benefits choices, and pressure to control costs of their benefits programs.
It’s clear that employers need guidance on how to manage these challenges. According to the Third Annual Guardian Workplace Benefits StudySM (July 2015), 60 percent of employers say they need help managing the ACA.
Brokers can play an important role in helping employers navigate the ACA and in identifying the best options that can help companies respond to challenges and move forward in a new benefits landscape. As companies reassess their approach to benefits, three trends are gaining momentum: increased outsourcing, reliance on private exchanges and consideration of self-insurance.
According to the Workplace Benefits Study, nearly 70 percent of employers expect that the ACA will increase the amount of regulation affecting their business, as well as the amount of administrative time required for their employee benefits programs. These challenges are especially overwhelming to many small- and medium-size companies, leading some to consider outsourcing more aspects of their benefits programs.
Outsourcing provides expertise that helps ensure compliance and tracking with new regulations. It can improve efficiency, particularly for the nearly half of benefits administrators surveyed by National Business Coalition on Health (NBCH)*, who indicated spending most of their time in the past year working to maintain compliance and lower costs.
As the benefits marketplace evolves, employers have a greater number of options for administration support. A majority of employers are currently outsourcing at least some of their benefits administration, an option that appears to be gaining popularity. A third of employers expect to further increase outsourcing as a direct result of the ACA. Those most likely to increase their level of outsourcing also say they are not yet well prepared for the compliance and administrative implications of the ACA.
As part of efficiencies achieved through outsourcing, employers hope to see other advantages like managing costs. Among employers that expect the ACA to lead to higher health insurance costs, more than four in 10 envision needing help from outside vendors.
Reliance on Health Care Exchanges
The majority of employers (70 percent) feel it’s highly important to help employees make better decisions and offer benefits that meet their workers’ personal needs. One way for employers to offer a diverse workforce more benefit choices and to improve the employee experience is through the use of a health care exchange.
Exchanges are gaining in popularity. In 2015, one in six employers offering medical benefits are using an exchange, while another four percent said they are likely to use an exchange in the coming year. Employers considering switching to an exchange are slightly more likely to move to a private exchange rather than a public (federal or state) one.
The majority of employers (60 percent) currently using an exchange for their medical or dental coverage find their experience to be positive. Smaller firms with fewer than 100 employees are more likely than large companies with at least 1,000 employees to have very positive experiences with the exchange.
The experience of migrating their medical and/or dental benefits to an exchange is generally a favorable one for most companies. Those currently using an exchange are less likely to believe the ACA will negatively impact their health costs or the amount of time required for benefits plan compliance and administration.
Consideration of Self-Insurance
78% of employers expect benefit cost increases due to the ACA. As a way to save on health care costs while still offering comprehensive benefits, self-insured medical plans are receiving increased attention. 58 percent of employers considering self-insuring say health care reform is the catalyst, citing cost control and less administration as major advantages.
Guardian’s study reflected that seven percent of all employers surveyed currently have a self-insured medical plan, but another 10 percent are considering one. While large companies are more likely to be self-insured or to consider such a plan for the future, self-insurance can be an attractive option to small employers concerned about the rising cost of providing health coverage. Small employers are more likely to predict that the ACA will greatly increase their health insurance costs. However, they’re also less likely to feel prepared than firms with at least 100 benefits-eligible employees.
Many companies considering a self-insured medical plan may pair it with stop loss insurance. Stop loss insurance provides protection against catastrophic or unpredictable claims, thereby limiting the liability for losses arising from self-insured plans.
Approximately a quarter of companies that have self-insured plans also carry stop loss insurance. Employers who are considering self-insurance are even more inclined to combine it with stop loss, with more than half expecting to add it.
The Role of Brokers in Addressing ACA Challenges
Despite changes in how employers manage benefits, the workplace continues to serve as the foundation of working Americans’ financial security. Sixty eight percent of employees rely on their benefits for at least half of their financial preparedness.
It’s no surprise that the majority of companies recognize the need to be prepared for the ACA in order to continue this foundation that is highly valued but employers face challenges with adapting. While 61% of employers cite “preparing for a post-healthcare reform era” as a highly important benefits objective, only four in 10 feel prepared to meet this objective.
Advisors can play a significant role in helping to educate companies about the ACA and developing strategies that make the best use of their benefit dollars. A majority of employers engage a broker, and the vast majority (80%) see their broker as being highly knowledgeable about healthcare reform.
There’s a clear role for brokers and insurance carriers they work with when it comes to helping employers understand how they can move forward in a new benefits landscape. Expertise is needed to educate about the often-confusing ACA benefits terrain. Brokers can provide guidance and recommendations
on new funding and delivery methods, such as the emergence of private exchanges, and whether self-insuring with stop loss insurance makes sense.
Complications of the ACA demand thoughtful benefits communications strategies as well. Brokers and other external experts already provide important support to employer communication efforts but employers say that even greater support is needed to educate employees about the impact of ACA on their company benefits. At the same time, U.S. workers rate healthcare reform and health insurance changes among the topics they’re interested in learning more about.
The challenges the ACA presents means there are opportunities for advisers to guide employers in how they can rethink benefits strategies and succeed in a new benefits landscape.
#2015-13940 (exp. 11/16)
*National Business Coalition on Health (NBCH), “Insights for Improvement: Data and analysis from the 2014 Inside Benefits Communication Survey.” www.nbch.org/ibcsurvey
Unless otherwise noted, all stats and figures derive from The Third Annual Workplace Benefits Study (July 2015). www.guardiananytime.com/2015-workplace-benefits-study.