WageWorks 2009 Consumer-Directed Benefits Market Survey

Transcription

1 WageWorks 2009 Consumer-Directed Benefits Market Survey

2 WageWorks 2009 Consumer-Directed Benefits Market Survey Summary This report on the findings of WageWorks 2009 Consumer-Directed Benefits Market Survey will give you an idea of what role consumer-directed benefits play in today s market as well as some insight into what your peers and competitors are doing to navigate through these difficult times. We ve also included research from a private consumer-directed health care study as well as feedback from our product experts. Highlights Here are the highlights from WageWorks 2009 Consumer-Directed Benefits Market Survey: 70% of survey respondents will implement wage or hiring freezes this year 30% plan to reduce or restructure their HR staff 55% of respondents plan to introduce or increase wellness programs as part of their strategy to respond to market conditions 70% of respondents currently use more than one vendor to administer pre-tax benefit programs (e.g., FSA, HRA, HSA and commuter) 13% plan to consolidate benefit vendors in the near future 75% of respondents stated that the FICA tax savings generated by pre-tax benefits is an important part of their company s benefits strategy 43% of survey respondents plan to re-evaluate their benefits vendors this year as a direct result of market conditions 19% of respondents plan to introduce or increase non-healthcare benefit programs (e.g. commuter, gym or tuition) 13% of respondents plan to transition to or increase their reliance on consumer-directed health care (CDHC) 60% of respondents are looking for ways to reduce benefit costs 17% of the survey respondents plan to eliminate or replace retirement benefits or pension plans 88% of respondents said that communications play a big part in their benefits strategy Page 2 of 6

3 Results For most of us the impact of the economic crisis on human resource departments doesn t come as much of a surprise 72% of the HR managers and vice presidents we surveyed confirmed that the current economic situation has affected their benefits portfolio. But what is interesting is how these leaders plan to respond: Wage and Hiring Freezes You ve probably seen the headlines. News about wage and hiring freezes has been on the front pages for months now. According to a recent article in the New York Times by Catherine Rampell,... with orders for new products and services drying up and financing tight, employers are looking to shrink their costs drastically and are slashing their payrolls, anticipating a protracted decline for business in It s no surprise that this trend showed up in the responses to our survey: 70% of the respondents will implement wage or hiring freezes this year and 30% plan to reduce or restructure their HR staff. However, in our experience, companies that have taken a broader, creative approach to managing healthcare costs are more poised to weather the current economic hardships and curb wage and hiring freezes. For example, by offering a high deductible health plan (HDHP) with health savings accounts (HSAs), one of our mid-sized clients witnessed a net savings of $363,000 in the first year alone as well as a per capita reduction of 12%. As these figures help demonstrate, transitioning to a consumer-directed health model (e.g., HDHPs and HSAs or HRAs) has become a key part of our clients overall strategy to manage costs. Consolidating Benefit Vendors According to this survey, 70% of respondents currently use more than one vendor to administer pre-tax benefit programs (e.g., FSA, HSA, HRA and commuter), and only 13% plan to consolidate benefit vendors in the near future. Our research has shown that increasingly, employers are looking to consolidate suppliers across all spending account types, COBRA and other incentives in order to cut costs. In addition to saving money, interfacing with one supplier for these services makes it easier for program administrators and their employees to manage benefits (e.g., one login, one password, one CDHC account manager). Successful companies also understand the importance of making their plan designs easier. However, they also recognize that not all banks, carriers and third-party administrators can provide the service and technology to make their CDHC portfolio successful. For example, when it comes to HSAs, the initial market leadership was established by carriers that combined HDHPs with HSAs. However, because service and technology is not their core competency, many health plans fail to deliver in these areas and end up making the CDHC transition harder. Employers today want maximum choice and flexibility in their healthcare network. They want to have the option of offering multiple HDHPs while also maintaining a uniform CDHC approach that provides the best service possible. Furthermore, when an HSA is tied to a health plan and a company wants to change carriers, they will have to coordinate with their employees to transfer the account balance. This can often lead to confusion and frustration for all parties. Page 3 of 6

4 Re-evaluating Benefit Vendors 43% of survey respondents plan to re-evaluate their benefits vendors this year as a direct result of market conditions. Service was the single most important criterion for selecting a new benefits vendor, followed closely by cost and technology. Wellness Programs 55% of respondents plan to introduce or increase wellness programs as part of their strategy to respond to market conditions. This is similar to the growth we expect to see in our health reimbursement accounts (HRAs) this year. Our clients are increasingly searching for ways to manage employee health populations. To that end, we ve seen an uptake in adoptions of our customizable HRA programs to further support our client s wellness initiatives such as health risk assessments, disease management, and support for obesity and smoking cessation programs. Commuter, Gym and Tuition Programs 19% of respondents plan to introduce or increase non-healthcare benefit programs (e.g. commuter, gym or tuition). In fact, these types of benefits have long been one of the best kept secrets of the human resources world. With the recent increase in the monthly transit limit, both employers and employees can now take even more advantage of tax savings. Consumer-Directed Health Care According to WageWorks survey, 13% of respondents plan to transition to or increase their reliance on consumer-directed health care (CDHC). However, this number falls far short of the market research and statistics we ve seen. Part of the discrepancy may be due to the confusion surrounding the definition of CDHC. Today, most employers offer some type of CDHC solutions, such as FSAs, HRAs or HSAs and WageWorks projects that HSAs and customizable HRAs will represent approximately 42% of new business growth in 2009 as more companies adopt these savings vehicles alongside HDHPs to bring down medical costs. Overall HSAs continue to be the fastest growing healthcare account type. Furthermore, yearover-year increases in consumer-directed health plan (CDHP) adoption is greater than 40% and today nearly 50% of large employers offer HDHPs. As the following chart indicates, some industry analysts are even predicting double-digit growth for HSAs and HRAs this year alone: HSA HRA million 3.7 million million 7 million million (projected growth) 10.9 million (projected growth) Benefit Costs 60% of respondents are actively looking for ways to reduce benefit costs in light of today s economy. As previously mentioned, transitioning to a consumer-directed health model (e.g., HDHPs and HSAs or HRAs) has quickly become a key part of many of our clients strategies to reduce benefits costs. Furthermore, consolidating suppliers across all spending account types (e.g., FSA, HSA, HRAs and Commuter), COBRA and other incentives that help HR departments trim costs and reduce their administrative burden. Page 4 of 6

5 Retirement Benefits and Pension Plans 17% of the survey respondents plan to eliminate or replace retirement benefits or pension plans. This information backs up the trends we ve noticed in the marketplace today, particularly in light of this recession. Many of our clients have eliminated pension plans and moved towards defined contributions in WageWorks Retiree HRA programs. Ultimately, this migration allows them to regain some control over their long-term healthcare costs. FICA Savings 75% of respondents stated that the FICA tax savings generated by pretax benefits is an important part of their company s benefits strategy, and 88% of respondents said that communications play a big part in their benefits strategy. Our own research has shown that an employer s FICA savings is directly linked to how well administrators and employers engage and educate employees. Targeted and ongoing communications campaigns (pre and post enrollment) can greatly increase employee satisfaction and encourage them to take full advantage of the benefits offered by their employer. Higher participation rates will also increase your payroll tax savings, which can help set your company on the path towards developing a cost-neutral benefit. Here s an example of how a strong communications campaign can impact savings: Today, the national average for participation in flexible spending accounts is 18%. WageWorks average participation rate is 28%. As the chart above demonstrates, the difference between a few percentage points can start to add up. Conclusion Increasingly, employers are relying on consumer-directed health care (CDHC) strategies to mitigate costs and to create a healthier workforce. Offering high deductable health plans (HDHPs) combined with HRAs or HSAs is one of the primary strategies they utilize for presenting an affordable, yet attractive benefits portfolio. Vendors that provide a unified CDHC platform that enables employers to present multiple HDHPs from different health plans while also delivering on service, cost and technology have the competitive advantage. Other programs, such as wellness HRAs and commuter benefits provide a costefficient way to attract and retain top talent. Companies that take these types of broader, creative approaches to managing healthcare costs will be more poised to weather economic hardships. Did you know? WageWorks was the first third-party administrator to process FSAs, HRAs and HSAs on a single unified platform and in real-time. We were also the first to support an entirely electronic HSA enrollment process. Our HSA investment component won 1st place for innovation in 2005 (SourceMedia s Fund Operations) and is among very few services with no ancillary account fees, investment transaction fees, account closing, or transfer fees. Today, we feature integrated HSA services with both Citi and PNC Global Investment Servicing. Page 5 of 6

6 Definitions As the field of consumer-directed health care is relatively new and often a target of misinformation, it s important to obtain a common understanding of the terms under discussion in this report. Here are a few definitions to help ensure you get the most out of this information: Consumer-Directed Health Care (CDHC) refers to any health-related, account-based plan that encourages patient consumerism (FSA, HRA, HSA, or HDHP). Consumer-Directed Health Plan (CDHP) refers to any health plan that requires a higher risk of increased patient payment responsibility (high-deductible health plan or increased consumer out-of-pocket risk plan). High Deductible Health Plan (HDHP) refers to any IRS sanctioned high deductible health plan and is included as a subset of CDHPs. About WageWorks WageWorks is the nation s largest independent provider of consumer-directed benefits solutions for employers. Our forward thinking solutions combine technology and service to bring out the best in taxadvantaged benefits and incentive programs. The result is health care and dependent care, commuter, retiree benefits and wellness plans that are as easy for benefits professionals to administer as they are for employees to use. More than 100 of America's Fortune 500 employers and millions of their benefitseligible employees use WageWorks' programs. Contact Us Want more information about WageWorks Consumer-Directed Healthcare Accounts? GIVE US A CALL: OR CHECK OUT OUR WEBSITE: Page 6 of 6