Employee benefits make up an important element of competitive compensation packages. Oftentimes, attractive benefit packages can help employers attract the best job candidates and retain top-performing employees—even if the salary may be the same or better elsewhere. Comprehensive benefit packages can help build employee loyalty and provide employees with a much-needed sense of security in these uncertain economic times.
With recent changes to health care requirements and a focus on shifting responsibility for both health care and financial decisions to employees, clubs face a new buffet of offerings that they can leverage to keep both employees happy and costs under control. According to SHRM’s HR Trendbook 2012 and their 2012 Employee Benefits Report, many companies are restructuring their benefit offerings to reflect emerging trends:
1. Keeping Up with Costs
Employers across the country expect the cost of their health care benefits will rise by an average of 7.2 percent, according to statistics from the National Business Group on Health.
To combat rising costs, many employers are looking to implement changes to their health care benefit offerings to help keep costs down and value up. Employers are attempting to keep costs down by increasing employee premium contributions (53%), increasing in-network deductibles (39%), increasing out-of-network deductibles (23%), and/or by increasing out- of-pocket costs (22%). Seventy-three percent of employers are also planning to offer consumer-directed health plans, which combine a more limited health coverage plan with a tax-advantaged savings account that plan subscribers can use to pay for additional health care costs. With the advent of health care plans with health savings accounts, many employers are also reducing their prescription drug coverage.
Twenty-five percent of employers are focusing on comprehensively reviewing their entire benefit packages—attempting to better balance benefits with a competitive salary and the tools needed to plan for a secure retirement—and are reallocating their budgets accordingly to deliver the best value to the employee at the lowest cost to the employer.
2. Reflecting Reform
With the recent confirmation from the Supreme Court that the Health Care Law is here to stay, companies are preparing to adapt their offerings to come into line with new requirements. Employers are focusing on complying with new reporting requirements, providing plan summaries to employees, and keeping up with new legal provisions and clarifications as they become evident throughout the year. (See www.nationalclub.org for more details on health care law compliance.)
With the advent of health care exchanges and the new requirements of the Patient Protection and Affordable Care Act, employers are seriously considering curtailing their health care coverage. According to the report 17th Annual Employer Survey on Purchasing Value in Health Care, released by Towers Watson and the National Business Group on Health, only three percent of employers are likely to discontinue health care plans for active employees in the next three years without providing a financial subsidy, but 45 percent report that they are likely to offer coverage to only a portion of their workforce, directing the rest to the exchanges for coverage options.
As the new standards for health care coverage continue to evolve, the future of employer provided coverage becomes less certain. The survey reflects that less than 23 percent of employers surveyed are very confident that they will continue to offer health care benefits ten years down the road—a drastic reduction from 73 percent in 2007.
3. Retirement Plan Review
New requirements from the U.S. Department of Labor are expected to slowly shed some light on the inner workings of retirement and pension plans in the near future. The recent disclosure requirements that went into effect in April and May for service providers and plan sponsors of defined contribution plans have helped both employers and employees better understand how their retirement dollars are being spent. Armed with the knowledge of what their service providers are charging, employers are using benchmark data to help evaluate less costly and more effective plan options.
SHRM’s 2012 Employee Benefits Report painted a clearer picture of what companies are offering their employees to assist with retirement savings: 92 percent of organizations offered defined contribution plans, 34 percent offered Roth 401(k) savings plans, 34 percent provided traditional defined benefit pension plans, and six percent offered cash balance pension plans. Unsurprisingly, as benefit costs continue to rise, fewer employers are offering defined benefit pension plans to all employees (down 12 percent since 2008) or providing employer matches for defined contribution retirement plans (down seven percent since 2008).
In addition to retirement savings or pension plans, some employers are making an effort to educate their employees about how best to manage their money by providing financial planning benefits. The majority of employers offer at least some form of investment advice (67%), but only 39 percent provide investment advice specifically geared toward planning for retirement.
4. Consumer Confidence
Many employers are attempting to reduce health care costs by encouraging employees to become more conscious health care consumers. Employers are now taking an active role in educating their employees about making healthy lifestyle choices—helping to reduce the cost of health care in the long run. When employees know how important it is to stay healthy, and are given the knowledge and tools to help them eat well, exercise more, quit smoking or pay closer attention to their overall wellness, they’re more likely to make conscious decisions that contribute to improved wellness habits and activities. Some employers are also educating their employees about how to make more informed decisions regarding everything from prescription drugs to pharmacy shopping habits.
As benefit plans become more complicated, employers are ramping up benefits communication efforts. While offerings may be less comprehensive to begin with, it’s also likely that employees aren’t taking full advantage of the options that they do have. Because both health care and financial benefits play an important role in employee loyalty and job satisfaction, the more employees know about their benefit options, the more likely they are to be satisfied with not just their benefits, but with their employers as well. According to the Bank of America Merrill Lynch 2012 Workplace Benefits Report, 80 percent of employers cited the need to discuss the broader advantages of each of their benefit plan offerings, 69 percent identified the need to increase the number of communication methods to explain benefits, 66 percent noted the need to increase the frequency of benefit communications, and 63 percent identified the need to target communications to specific employees.
5. Employee Incentives
With the shift to consumer-directed health plans, employees have a built-in incentive to keep health costs under control. Some employers are going one step further and offering rewards to encourage engagement in employee health. According to the 17th Annual Employer Survey on Purchasing Value in Health Care, nearly one-third of employers plan to either adopt or expand the use of financial incentives to help encourage healthy employee behaviors.
Not only are more employers offering office-based wellness programs, they’re also offering incentives for participation, such as contributions to health savings accounts or health reimbursement accounts. In some companies, those employees who don’t participate in employee wellness programs may be faced with higher health care premiums—making it better for both employees’ bodies and their pocketbooks to be engaged in companies’ wellness initiatives.
Conclusion
Many employees rely on their employer- provided benefits to help them stay healthy and financially secure throughout their working years and into their retirement. But, rising costs and new legal requirements may pave the way for drastic changes to how employers address those employee needs. In the near future, many employees will likely find themselves taking on greater responsibility for managing their retirement savings and health care expenses.
Jackie Abrams is NCA’s communications manager.