Engaging Your Employees Meeting the challenges of employees benefits and communications needs in a diversifying workforce

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1 Engaging Your Employees Meeting the challenges of employees benefits and communications needs in a diversifying workforce GRANT DOWNS, DAVID BRENNER & DENNIS JOHNSON 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS

2 Agenda Introductions The Wild West Issues with the Employer/Employee Benefit Proposition Progress! Trends, Case Studies, and Emerging Capabilities Into the Sunset Q&A Session 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 2

3 Introductions 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 3

4 About the Data Aflac 2015 WorkForces Report Results from 25,000 employees across nearly 10,000 employers Conducted by third-party Representative of multiple industries, employer sizes and geographical locations AJG & Co Benefits & Strategy Bench Marking Survey Conducted by Gallagher Benefit Services Results from over 3,000 employers Over 50 Religious Niche member responses 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 4

5 Identify Strategize Solve Communicate 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 5

6 The Wild West 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 6

7 Common Dioceses Challenges 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 7

8 Common Challenges for All Organizations Controlling Employee Benefit Costs Attracting and Retaining a Competitive Workforce Maintaining/Decreasing Overall Operating Costs 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 8

9 Challenges by Organization Size 45% 48% 46% 23% 16% 20% 8% 9% 9% 11% 13% 13% 6% 8% 7% 8% 6% 5% Offering robust benefits while staying within budget/cost constraints Understanding the changing health care landscape Lack of employee interest in learning about benefit options Truly understanding what employees want when it comes to benefits offerings Small 3-99 Medium Large 500+ Having the HR staff appropriately communicate benefits Finding time to dedicate towards benefits selection and administration Q6: What are the top two challenges your company faces when offering benefits? Top Challenge Shown ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 9

10 Organizations Dollars Continue to Be Pinched 60% of GBS survey respondents had health plan premium increases greater than 4% 97% intend to continue offering benefits Cost-shifting to employees and changing carriers remain the top 2 tactics employers use to fight costs % Increase 4-8.9% % 12%+ % Respondents 27% 17% 16% 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 10

11 So What Does All of this Mean to an Employee? More often than not, increased out-of-pocket costs and confusion: 36% of large employers intend to increase co-pays 38% of large employers intend to increase employee premium contributions 10% of large employers intend to eliminate employer contributions for spouse/partner coverage More employees have to show for and understand insurance on their own 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 11

12 Financial Impact 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 12

13 Familiar Strategies 67% 49% 36% Increasing employee share of cost through plan design changes Changing carriers Offering HSA/HDHP 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 13

14 One medical event away from financial disaster 52% of employees have less than $1,000 to pay for out-of-pocket expenses 31% 28% 25% 27% 27% 22% 23% 21% 22% 25% 27% 25% 27% 26% 27% 25% 23% 23% 24% 21% Less than $500 Between $500 and $999 Between $1,000 and $4,999 $5,000 or more Q63. How much would you be able to pay for you or a family member for out-of-pocket expenses associated with an unexpected serious illness or accident that occurred today? Note: Prior to 2015, responses were Between $500 and $1000, Between $1000 and $5000, and More than $ ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 14

15 Employees are dealing with 2015 serious realities 68% agree* they regularly underestimate the total cost of injuries or illnesses 12% are dealing with serious health issues 17% have been contacted by a collection agency and/or had their credit score negatively impacted 20% have difficulty paying medical bills due to the high costs * = Top 3 Box responses ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 15

16 Communication 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 16

17 Perception vs. Reality How effectively company communicates about benefits 43% 49% 54% 54% 54% 46% 43% 39% 39% 40% 11% 8% 7% 7% 6% Extremely/Very effectively Somewhat effectively Not very/not all all effectively 55% of employees say they do not understand their total annual health care costs well Our employees understand the benefits communications we provide 70% 62% 27% Strongly/somewhat agree Netiher agree nor disagree Somewhat/Strongly disagree % 62% of employees say they rarely or only sometimes understand changes in coverage* Q18. How effectively do you think your company communicates with employees about benefits offered? Base: All respondents. Q29b. Please indicate how much you agree or disagree with the following statement: Our employees understand the benefits communications we provide. Base: All respondents. Note: In 2011, all respondents were not eligible to answer this question. = 2014 Open Enrollment Survey result ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 17 11% 9%

18 Employers think employees are satisfied with their benefits 13% of employees say they are extremely satisfied with their benefits package 34% If employer did not provide adequate coverage, likelihood to purchase additional insurance products 42% 37% 36% 40% 39% 40% 39% 26% 24% 24% 20% Extremely/Very likely Somewhat likely Not very/not all all likely Q29a: Please indicate how much you agree or disagree with the following statement: Our employees are satisfied with the benefits we offer. Base: All respondents. EEQ26: If your employer did not provide the type and level of health insurance coverage that you desired, how likely would you be to purchase additional insurance products to ensure your coverage is adequate, assuming the additional coverage was affordable? 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 18

19 but there s a communication breakdown How effectively company communicates about benefits 43% 49% 54% 54% 54% 46% 43% 39% 39% 40% 11% 8% 7% 7% 6% Extremely/Very effectively Somewhat effectively Not very/not all all effectively 55% of employees say they do not understand their total annual health care costs well Our employees understand the benefits communications we provide 70% 62% 27% 22% 11% 9% Strongly/somewhat agree Netiher agree nor disagree Somewhat/Strongly disagree % of employees say they rarely or only sometimes understand changes in coverage* Q18. How effectively do you think your company communicates with employees about benefits offered? Base: All respondents. Q29b. Please indicate how much you agree or disagree with the following statement: Our employees understand the benefits communications we provide. Base: All respondents. Note: In 2011, all respondents were not eligible to answer this question * = 2014 Open Enrollment Survey result ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 19

20 Progress! 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 20

21 High Deductible Health Plans Implementing HDHP s paired with Health Savings Accounts was the 3 rd most common response for future cost saving strategies HSA s offer a unique triple tax advantage to employees: Contributions are tax-free Growth is tax-free Distribution on Qualified Medical Expenses are tax free HSA s are valuable tools that employers should encourage employees to utilize and protect whenever possible 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 21

22 Case Study - Supplementing HDHPs with Worksite Benefits Challenge Implement a High Deductible Health Plan (HDHP) to reduce plan costs for both employer and contributions for employees Increased employee out of pocket exposure Pocket Contribution Savings Solution Supplement HDHP with Voluntary Accident and Critical Illness benefits Results Employer saves $200 per employee per year Employee saves net $42 per month in payroll deductions and reduces some risk of enrolling in HDHP Use Savings to Minimize Risk with Accident Plan Use Savings to Minimize Risk with Critical Illness Plan 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 22

23 Emerging Trend: Employer Paid Worksite Benefits Employee Incentives Affect employee behavior Encourage enrollment migration (i.e. to a new HDHP) Employer Spend Reallocation Redirect current total rewards spending Reallocate of benefit funds toward worksite benefits Soft Landing Soften impact of major changes to core benefits Give back with a lower cost option Worksite Benefits provide an edge in the competition for talent 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 23

24 Rounding Out a Benefit Package Critical Illness Benefit Example Employees can offset costs with purchase of $20,000 Guarantee Issue* Critical Illness Policy A Critical Illness can mean additional expenses Travel for treatment Lodging for treatment Alternative treatments not traditionally covered by insurance Other Additional Expenses -Example is for illustrative purposes *$10K, $20K and $30K GI available as part of Benefits for Life program Medical Costs Employee Financial Concerns when Facing a Critical Illness A Critical Illness coincides with increased medical costs Employees deductibles and out-of-pocket maximums are growing every and often range into the $1,000s in potential exposure Potential Loss of Income A Critical Illness often means missing periods of work Disability plans only replace a portion of a employee s income 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 24

25 Rounding Out a Benefit Package Accident Benefit Claim Example Example Employee Enrolled in HDHP Plan Emergency Room Visit for Fractured Arm Employee Enrolled in Aflac Accident Plan $100 Emergency Care $1,500 Deductible $200-20% Coinsurance for other services $15 Rx after deductible $1,400 Upper Arm Fracture $60 for 2 Follow-up Treatments Total of $1,715 Out-of-Pocket Expenses $1,560 Accident Plan Benefits 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 25

26 Benefits for Life Overview Program created as a specific response to the feedback received from our Diocese clients. Unique features not standardly available Guaranteed Issue coverage available (within guidelines). Carriers have agreed to unique enrollment and administrative requirements. No payroll deduction No eligibility file (census) required Carrier Partners: AFLAC UNUM Liberty Mutual Administrative Partner: Fringe Benefits Management Company (FBMC) 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 26

27 Administrative Ease Uniform Plan Offering and Underwriting Specific pre-defined benefit levels offered. Guaranteed Issue coverage available for actively at work employees within guidelines No Eligibility File (or census) Required Employees are added by the enrollment counselors to the database for quoting coverage No Payroll Deduction Required of Employer Employees will remit premium via ACH or debit/credit card. (A nominal administrative fee is incorporated.) This service is provided by Fringe Benefits Management Company (FBMC), a licensed TPA 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 27

28 Enrollment The implementation of a voluntary benefit plan also offers a very unique value proposition to employers the opportunity to expand benefits for employees, give employees personalized education and interaction, and accomplish over-arching organization communication goals. Only salaried Benefit Counselors are used to meet individually with all employees to educate and facilitate enrollment Enrollment is completed on-site during normal working hours Enrollment data is forwarded to insurance carriers and policies are mailed directly to employee. Campaign Style Enrollment Carried out over a shorter, set period of time - typically annual open enrollment More conducive to accomplishing specific client objectives Perpetual Enrollment Carried out by enrollers over an extended period of time, or perpetually depending on the case Allows client to treat the enroller(s) as an extension of their HR staff for employee on-boarding 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 28

29 Identify Strategize Solve Communicate 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 29

30 Q&A 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 30

31 So Tell em You re Coming! 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 31

32 Questionable state of financial affairs Confidence in financial future 49% 51% 48% 47% 44% 32% 31% 34% 26% 26% 25% 24% 21% 22% 22% Extremely/very confident Somewhat confident Not very/not at all confident % 25% My family is financially prepared for an unexpected emergency 44% 43% 40% 32% 28% 33% 32% Completely/strongly agree Somewhat agree Strongly/completely disagree Q50. How confident are you in your financial future? Base: All respondents. Q47_6: Please indicate how strongly you agree or disagree with the following statement regarding your current financial situation: I feel my family will be financially prepared in the event of an unexpected emergency ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 32

33 Employees would dip into savings for unexpected costs 55% 57% 59% 56% 56% 54% of employees would have to use a credit card and/or borrow from a retirement account to pay for out-of-pocket expenses 30% 30% 32% 34% 28% 24% 17% 19% 21% 20% 17% 19% 16% 18% 13% 14% 15% 16% 16% 15% 16% 14% 14% 16% 10% 6% 7% 7% 7% 6% Savings Credit card Borrow/withdraw money from my 401K or other retirement account Borrow from friends or family Get a second job Not sure how I would pay for out-of-pocket expenses Take out a second mortgage/home equity loan Q64. If you or a family member experienced an unexpected serious illness or accident today, how would you pay for the out-of-pocket expenses? Please select all that apply ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 33

34 Employees hear less than employers say Employer: Frequency of benefits communications 47% 35% 31% 33% 31% 28% 26% 28% 24% 26% 25% 24% 32% 31% 12% 5% 7% 9% 10% 7% 4% 6% 6% 7% Only at open enrollment or new hire enrollment 2 times throughout the year 3-5 times throughout the year 6-9 times throughout the year 10 or more times throughout the year Employee: Benefits communication in last 12 months 59% 52% 47% 48% 43% 18% 22% 22% 22% 25% 17% 19% 22% 26% 21% 4% 5% 5% 6% 4% 2% 3% 3% 3% 2% Only at open enrollment or new hire enrollment 2 times throughout the year 3-5 times throughout the year 6-9 times throughout the year 10 or more times throughout the year Q15: Thinking of the past 12 months, how many times did you or your human resources department communicate with employees about benefits that are available? Note: Due to changes in response options year over year, caution is advised when making comparisons to trend data. EEQ41: Thinking of the past 12 months, how many times did your human resources department communicate with you about employee benefits that are available? Note: In order to answer this question, respondents must indicate "Yes" their employer offers insurance benefits OR "Yes" their employer offers voluntary benefits 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 34

35 Survey Links Aflac 2015 Workforces Report GBS 2015 Benefits Strategy & Benchmarking Survey ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 35

36 Thank You 2016 ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS