Help your clients sidestep the health care reform hoopla to create a stronger benefits program
by Steve HeslerMr. Hesler is an assistant vice president of product development at Colonial Life & Accident Insurance Company. Contact him at 803-678-6743 or e-mail him at [email protected] Colonial Life is a market leader in providing financial protection benefits through the workplace, including disability, life, accident, dental, cancer, critical illness and hospital confinement insurance.
If the employee benefits world was a circus, then health care reform would be hogging the spotlight in the center ring — and not necessarily in a good way.
For the past eight years, implementation of and challenges to the Affordable Care Act have arguably created as many jeers as cheers. If nothing else, the legislation has been a continual source of concern and confusion for many of us in the industry and our clients.
That’s understandable, because after salaries, major medical insurance is the largest human resources expense our customers face. The problem is health care reform legislation has created so much distraction that many employers can’t see what’s going on in the other two rings. Just as a circus needs more than a lone lion tamer, a comprehensive, competitive employee benefits plan includes far more than major medical insurance.
Taking A Fresh Look
You can help your clients take a fresh look at their employee benefits program by focusing on the bigger picture. The good news is there are many options you can bring them to create a competitive edge while still managing the bottom line.
These include solutions that help:
- control ever-increasing health insurance and health care costs.
- bridge the widening the gap between what’s covered and what employees pay for out-of-pocket created by the accelerating trend toward high-deductible health plans.
- create greater flexibility and choice to meet the needs of today’s increasingly diverse workforce.
- employees understand their needs and options, make the best choices for themselves and their families, and justify your clients’ considerable investment in the benefits package.
Tame the Benefits Cost Beast
At least one thing is constant in our fast-changing benefits world: increasing costs. Health care premiums have increased by more than 300 percent since 1999.1 Your clients struggling with those growing costs usually move one of three ways:
- They absorb the increases. Some employers try this first, but most soon find the direct, negative impact on their bottom line isn’t sustainable.
- They drop health coverage. Most employers are avoiding this path. In fact, the percentage of firms offering health benefits has held steady for the past five years.1
- They shift more costs to employees. You’ve probably advised many of your clients to increase their employees’ share of major medical premiums, increase the amount of coinsurance employees pay, or move to a high-deductible health plan. And more than half of employers in one recent study are implementing one or more of these tactics.2 However, there’s a price to pay here, too. Higher premiums and coinsurance can have an immediate negative impact on employees. High-deductible plans keep health premiums lower, but also increase employees’ financial exposure. Both of these outcomes affect employee morale and satisfaction.
But there is another solution: redesigning the benefits package to include a higher-deductible health plan, paired with voluntary benefits to reduce employees’ financial exposure.
Voluntary benefits such as hospitalization, accident, critical illness and cancer insurance can help employees cover out-of-pocket medical costs, including deductibles and coinsurance. The benefits can also help pay expenses medical insurance doesn’t cover, such as transportation for treatment or even household bills while employees are out of work.
This type of coverage can be selected and paid for by employees, so your clients can offer it at no direct cost to their business.
However, some employers find they’re able to pay for some or all of the voluntary coverage with the premium savings from the high-deductible health plan. Total costs can be the same or lower than before, without sacrificing coverage.
Create a financial safety net
Employees are falling behind in the economic race with health care costs. The average deductible for employer-sponsored health plans surged 13 percent in 2016.1 By comparison, workers’ wages increased only 2 percent last year.3 In the last decade, the average deductible quadrupled from $300 to $1,200 — at least seven times faster than wages have risen in the same period.1, 4
No wonder many American workers struggle to pay unexpected medical bills. Nearly half — 47 percent — of surveyed Americans say they couldn’t cover a $400 emergency expense or would have to sell something or borrow the money. And close to a third went without some medical care in the past year because they couldn’t afford it.5
Voluntary insurance coverage can help bridge this widening financial gap by paying for out-of-pocket expenses. Benefits are paid directly to the insured to use however needed — for medical or nonmedical costs — and aren’t reduced by other insurance.
Because the coverage is offered through the workplace, employees can purchase it for less than they could buy it on their own. Payroll deduction adds to the convenience and most types of coverage can be paid for on a pretax basis, reducing the net cost. Pretaxing can also save your clients money by reducing payroll taxes.
A strong benefits package also positively affects workers’ attitudes toward their employers. This is especially important to employers finding retention of talent a major concern. Access to voluntary benefits makes employees much more likely to recommend their employer to others.6
Offer choice and flexibility
There are five generations, many ethnicities and varying family situations among those in the workplace today — all with different financial protection needs. The benefits that appeal to young singles in their first jobs, mid-career workers with active families and veteran employees eyeing retirement can be quite different.
Voluntary benefits offer your clients a solution to the challenging task of creating a benefits program that meets the needs of this increasingly diverse workforce. These options provide the expanded choices, greater flexibility and affordability their employees want and need.
Research shows employees want and value these additional benefits: One recent study showed a third of employees enroll in every type of coverage offered.6 The same study showed for nearly every type of coverage, the primary reason for purchase is peace of mind. Clearly, employees are aware of their financial fragility and are willing to take steps to protect their economic wellbeing through voluntary coverage.
Your clients may underestimate the strong interest their workers have in this coverage. There are large gaps between what employees list as “must-have” benefits compared with what employers offer, especially for accident, critical illness and hospital confinement insurance.7
Communicate for stronger engagement
Employers and employees agree effective communication is essential to ensure employees understand their needs and options, make the best choices for themselves and their families, and justify employers’ considerable investment in the benefits package. Yet there’s a significant disconnect between how employers and employees view their benefits communication.
Do all of your clients have a formal benefits communication plan? Barely a third of employers do. Yet the vast majority — 92 percent — think their approach is at least somewhat successful.8 Their workers disagree: Only a third of employees strongly agree they have a good understanding of all the insurance benefits offered by their employer.9
One reason for this discrepancy is the type of benefits communication and enrollment support employers provide. While nearly all employers with fewer than 500 employees — 94 percent — agree one-to-one enrollments are effective, only half offer them.7 Yet surveys of employees who have participated in individual benefits counseling show 95 percent say it was valuable and 98 percent say they understand their benefits better.10
Benefits communication support doesn’t have to hurt your clients’ bottom line. Leading benefits providers offer communication materials and tools as part of their services, at no additional cost. Some will customize printed materials and websites for each customer.
Look at the bigger picture
A strong benefits program is an essential tool for your clients to compete for and keep their talented workforce. Those who expand their focus — and their benefits package — beyond major medical coverage will be in a stronger position to both manage the bottom line and give their business a competitive edge. Increasingly, employers are finding voluntary benefits offer solutions to control costs, help employees protect their financial wellbeing, and provide expanded options for a diverse workforce. ◊
1. Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2016.
2. Wells Fargo, Employee Benefits Trend Study, 2016.
3. Bureau of Labor Statistics, Employment Cost Index, April 2017.
4. Consumer Price Index, U.S. City Average of Annual Inflation, April-April 2010-2015; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employee Statistics Survey, April-April 2010-2015.
5. Federal Reserve System, “Report on the Economic Well-Being of U.S. Households in 2014,” 2015.
6. Customer Benefits Analytics and Lodestar Advisory Partners, 2016 Employee Benefits Enrollment Study.
7. MetLife, 14th Annual U.S. Employee Benefit Trends Study, 2016.
8. LIMRA, Help Employers Connect the Dots, 2016.
9. Unum, 2014 U.S. Worker Benefits Survey, 2015.
10. Colonial Life post-enrollment surveys, 2009-2016.