This year's recession has taken a noticeable toll on employee benefits. "Times are tight. Dollars are precious," Dr. Ron Leopold, vice president and national medical director of MetLife Institutional Business, told attendees at EBN's Benefits Forum & Expo, held in Atlanta in September. "There's a stated or unstated mandate that we have to justify the dollars that we're spending."
Under financial pressure, companies have turned to cost-saving measures, like eliminating the 401(k) match or cost-shifting to employees in the health plan. Many employers have tried to sweeten these benefit cutbacks with enhancements in other areas. For example, they might be adding new voluntary benefits or new workplace flexibility policies. But the benefit cutbacks haven't gone unnoticed by employees. At least 36% of workers feel their benefits package is worse now than it was three years ago, while 42% feel it's the same, and 22% feel it's better, according to recent MetLife research. That's not surprising, given this year's economic climate.
"Eventually, the economy will recover," so employers should invest in benefits now that will set the stage for success in the future, Leopold recommended.
New research from MetLife shows that employers consistently underestimate the influence that benefits have on employee loyalty. The percentage of employees who said benefits are important when choosing an employer grew from 25% in 2004 to 31% in 2008, according to a MetLife study.
From a strategic standpoint, Mark Gow, director of human resources for IAP Worldwide Services, recommends avoiding cost-shifting to employees with higher deductibles and higher copays. "Cost-shifting doesn't work. That's a short-term mentality that's focused on cost. It'll work for a little while, but my experience is it doesn't work in the long haul. Having a short-term focus like that is really detrimental," he said.
Reform could be 'game changer'
Many HR/benefits professionals are watching the health care reform debate closely to see how it will impact their business and their benefit plans. This is "an important moment in U.S. benefits history," Leopold remarked. He predicted that health care reform will be passed by the end of this year and that it will probably be a "game changer" for employer-sponsored health benefits. "Help your companies be smart about weathering the transition," he urged audience members.
In part, that means continuing to foster health and wellness among your employees. "There's a business value to a healthy working population" because a healthy group has less absenteeism, lower health care expenses and fewer disability claims, Leopold pointed out. Likewise, "there is a business value to a more financially secure working population," he added. Workers who are struggling with financial crises tend to be less productive and may have more absenteeism.
As always, clear communication about benefits is important during a difficult financial year. "You should anticipate an unprecedented level of interest, engagement and questions [about benefits] this year. Employees are going to be hungrier for the benefits that they can get at work," Leopold said. In particular, there's a growing interest in financial education and advice. Additionally, "your workforce may have a greater appetite for voluntary benefits than you actually recognize. We are seeing a resurgence in interest in voluntary benefits," Leopold said.
Gow said he doesn't see voluntary benefits as a retention tool, but they do help with recruiting. Likewise, "the 401(k) is a strong recruiting mechanism," he said. He feels that telecommuting benefits don't help much with recruiting, but do help a lot with retention and employee loyalty.
Few medical insurance changes seen for 2010
New survey data suggests that plan sponsors are moving ahead with relatively minor health plan adjustments driven more by economic conditions than the prospect of legislative reforms. The survey showed that, on average, employers contribute 70% of the premiums for medical insurance, with the largest group of employers reporting they pay between 66% and 85% of the premiums.
Further, while several employers provide a gamut of medical insurance offerings, the great majority (80%) offer a preferred provider organization (PPO) as a choice. In 2009, only a minority of employers had a consumer-driven health care (7%) or a high-deductible plan (6%) as options. This trend may change over time, the study postulates, as more employers look for ways to reduce medical premiums.
In general, few employers anticipate cancelling or changing how medical insurance is being funded in 2010. What's more, 82% of employers do not anticiapte contribution changes to their plans for the comng year. The actual dollar amount, however, is expected to change as the cost for 2010 plans increases or decreases. Fourteen percent of plan sponsors expect to decrease contributions, and 4% plan an increase.
Half of employers polled plan to make no adjustments to their medical insurance benefit, while 27% will make changes to which plans are offered, 14% will change insurance carriers, and 2% will rearrange eligible employees.
Though medical insurance changes showed the most dramatic alterations compared to other concentrations of the survey, employers seem to be holding back before making decisions. Stay tuned for more results and analysis in the December issue of EBN.
