About 150 million people in the U.S. – nearly half the population – receive their health care coverage through their employers, according to a recent report from the Kaiser Family Foundation. This is an expensive, complex arrangement for companies and the reality is that no matter what their specific industry, employers are also in the health care business.
Many companies find this an uncomfortable fact, but one they are trying to address in an economical and compassionate way. To gain a better understanding of how employers are approaching this responsibility, Zywave recently conducted its 2018 broker services survey and asked employers to name their top employee benefits challenges.
Among all 400 survey respondents, managing health care costs continues to be the top challenge (68 percent), up 4 percent from last year. Helping employees become better consumers of health care came next (41 percent), followed by attracting and retaining employees (34 percent), keeping in compliance with regulations (32 percent) and benefits administration and employee education (24 percent). Each of these areas presents its own complex set of problems, and all deserve close examination as companies seek creative solutions.
MANAGING HEALTH CARE COSTS
Health care costs have been increasing at an alarming rate for the past decade. According to the Kaiser Family Foundation, the average annual premium for employer-sponsored health insurance in 2018 was $19,616 for family coverage. That was a 5 percent increase over 2017, a 20 percent rise since 2013 and a startling 55 percent jump since 2008.
Many factors are contributing to this rise, including consolidation of managed care companies; the political/regulatory environment; new medical technologies; and increased prescription drug costs. But two of the biggest drivers are an aging population prone to health problems and generally poor health among Americans who often suffer from preventable risk factors such as obesity and high blood pressure. To manage these costs, employers are trying a number of solutions. A few of these include:
Using health care data to drive strategy. A Hewitt Associates survey found that employers cite using health care data to make strategic plan decisions as their top cost-cutting strategy. In fact, data is one of an organization’s greatest assets. Corralling and analyzing this data is critical to making better decisions and achieving better outcomes.
Greater emphasis on consumer-driven plans. These consumer-driven health plans (CDHPs) typically involve a health reimbursement account (HRA) or health savings account (HSA). When CDHPs are offered in conjunction with proper education, employees can become smarter health care consumers, which can save both themselves and employers money.
Promoting employee health and wellness. Many employers are creating comprehensive wellness programs, often targeting specific diseases, to improve employee health, lower health care costs and increase productivity.
Increased employee cost sharing. Employers are frequently passing on more costs to employees or are restructuring their health plans, often by increasing deductibles, increasing out-of-pocket maximums and increasing employee cost sharing for out-of-network providers and brand-name prescription drugs.
Strategic vendor management. More companies are aggressively evaluating their vendor relationships, replacing or eliminating vendors that do not produce measurable results and sometimes consolidating vendors for pricing power.
The purpose of CDHPs is to educate employees about the true costs of medical services and hold them more responsible for their medical purchase decisions. The hope is that employees will become better health care consumers and use health care services more efficiently, which should eventually lessen the demand and cost of health care.
One of the most common CDHPs pairs an HSA or HRA with a high-deductible insurance plan, which allows the employees to accumulate funds for health-related expenses. But CDHPs can only work when employers offer additional financial incentives and informational programs, such as preventive care services, wellness and disease management programs and cost and quality information. These tools provide employees with the information they need to make the best value-driven choices.
While there’s no getting around genetics, studies have shown that workplace wellness programs can motivate employees to eat healthier, exercise more and stop smoking. These diet and exercise improvements can head off preventable conditions such as type 2 diabetes and other health issues associated with obesity and smoking.
ATTRACTING AND RETAINING EMPLOYEES
In 2018, for the first time on record, there were more than 7 million unfilled jobs in the U.S., according to the Labor Department. This historically tight labor market is forcing businesses to fight hard to find and retain workers. Making matters worse is that employees are more inclined than ever to switch jobs. According to the Labor Department, 2.4 percent of Americans voluntarily left their positions in 2018, the highest rate since 2001.
But one way that employers can turn some of these trends in their favor is by offering well-designed health care benefits. That means tailoring benefits to four distinct generations of workers — baby boomers, GenX, millennials and GenZ. Older workers care more about age-related conditions and long-term care insurance, while younger workers care more about maternity coverage, paternal leave and newer options such as pet insurance.
To retain good employees of all generations, employers should survey them regularly to learn what is important to them and create benefits packages accordingly. When employers explain these benefits, they should also share total compensation statements to show the monetary value of those benefits.
KEEPING IN COMPLIANCE AND UP TO DATE ON CHANGING LEGISLATION
Federal law imposes numerous requirements on the health coverage that employers provide. Many laws apply to all group health plans, regardless of the size of the employer, including the Affordable Care Act’s (ACA) market reforms; HIPPA portability, privacy and security rules; Medicare Part D creditable coverage disclosures; mental health parity; and minimum hospital stay for newborns and mothers. However, large employers (generally defined as those having 50 or more employees) must also comply with the ACA’s employer shared responsibility rules, the ACA’s Form W-2 reporting rules and the Family and Medical Leave Act’s (FMLA) requirements.
These requirements are made more complex by constant legislative debate and action. For example, the recent repeal of the penalty for individuals without health insurance did not actually eliminate the individual mandate rule — it just eliminated the penalty. With the law still technically on the books, companies must be very careful how they report to the government. Many will need to consult with legal and benefits experts to ensure they stay in compliance.
AND EMPLOYEE EDUCATION
Benefits administration and employee education are huge challenges when, at many large companies, there could easily be just one HR person per 150 employees. But clear, consistent communication is vital, especially when introducing CDHPs. Employees are often skeptical about CDHPs for a variety of reasons, including concerns about higher out-of-pocket expenses, misinformation and lack of understanding or simple reluctance to switch from a traditional plan that seems to be working for them.
To win over employees, communications should be more like a marketing campaign than a typical HR information campaign, utilizing handouts, emails, videos, face-to-face meetings and presentations. Handling all questions as efficiently as possible, through after-hours spousal webinars, for example, is key to adoption and success.
The complexity of health care is not going to abate and neither is the role of employers in the health care market. So it’s incumbent upon companies to tackle these issues head on to create the best, most affordable health care for their employees, while also curbing the rise in their own health care costs. Fortunately, there are proven strategies for all these challenges, and most companies have resources inside the company, as well as trusted advisors outside the company, that can help guide the way.
Phil Boyle is director, employee benefits, at People’s United Insurance Agency. He can be reached at email@example.com.