American Banker > Syndicated Banking Technology White Paper Series No. 1 June 2012 Employee Benefit > Employee Benefit Syndicate White Paper Series > No. 1 HR and benefit issues confronting employers Evolving Benefit Decision-Making Partnerships with Brokers and Consultants Future Benefit Initiatives A survey of the Employer Benefit Leadership Program, in partnership with:
Employee American Banker Benefit > News Syndicated > Background This white paper is the first in a series of quarterly reports that draw upon the Employee Benefit Leadership Forum, a research panel comprised of HR and benefits decision makers, benefit brokers and consultants who have knowledge about and influence over the HR/benefit industry. The report also represents the results of a syndicated research initiative in partnership with Unum, a leading benefits company. The survey and content are the products of collaboration between Employee Benefit News and our syndicate partner. A key focus of this survey, which was fielded in early 2012, was to examine employers partnerships with benefit carriers, brokers and consultants, and identify areas for improvement in these relationships. We also explored employers current and future initiatives for offering wellness programs and voluntary benefits as well as their intent to sponsor health benefits beyond 2014 as a result of federal health care reform. This survey draws upon the responses of 771 HR/benefit decision makers employed at organizations with 10 or more employees. We examine our results by employer company size (i.e., number of employees) to provide some perspective on the influence of company size. Results are presented for employer firms in each of the following employee size categories: 2 10 to 99 100 to 499 500 to 999 1,000 to 1,999 2,000 or more Executive Summary Despite cost pressures and erosion from government intervention, the foundation of the employerbased benefit system remains strong. Plan sponsors are committed to providing workplace benefits for the health and well-being of employees and are bringing new, senior-level management resources to bear on the challenges. In the meantime, relationships between employers and benefit providers are healthy, and brokers/consultants are building on established loyalties by offering more sophisticated strategic planning services to their clients. Key findings from the study include: Many employers don t support the Patient Protection and Affordable Care Act (PPACA). Forty-two percent of survey respondents believe the Supreme Court should invalidate the PPACA s employee mandate, while 35% haven t drawn a conclusion on the matter yet.
Employee American Banker Benefit > News Syndicated > Few employers are planning to drop health benefits after 2014. Overall, 71% of respondents report that it is very likely they will maintain their plans despite impending changes under the PPACA. A significant percentage (11%) of respondents report that they don t know what their plans are beyond 2014. Senior executives are gaining influence in benefit purchasing decisions. While top executives, including chief financial officers, have traditionally played a vital role in benefit decisions within smaller organizations, they appear to be becoming more active within larger firms as well. For example, 10% of survey respondents from organizations with at least 2,000 employees reported that the role of senior executives in benefit decision-making increased substantially. Many employers anticipate additional future cost sharing with employees. Consumers are clearly being pushed toward having more skin in the game. Overall, of employers anticipate this trend over the next three to five years. The largest employers (at least 2,000 employees) are somewhat more likely than the smallest employer group (10 to 99 employees) to shift employee benefit costs to employees. Specifically, only 28% of the smallest employer firms expect to increase cost-shifting, versus 4 of the largest employers. 3 Voluntary benefits remain a solid fixture on the employee benefit landscape. Overall, 80% of survey respondents offer some form of voluntary benefits, with some categories (e.g., AD&D, which is offered by 79% of survey respondents) far more prevalent than others (e.g., concierge services) available at only of the employers surveyed. The somewhat related finding of increasing employee cost sharing for benefits raises the question of whether voluntary benefits will remain a benefit category distinction. Employers are relying more on brokers and consultants for support. When asked whether there has been any change in their reliance upon these resources over the past two years, reported an increase in such reliance. Increased reliance was highest among employers in the middle size range those with between 1,000 and 1,999 employees. Advisers are playing a key role in driving employee engagement through education. Overall, employer satisfaction with the employee education services an important determinant in benefit engagement delivered by brokers and consultants is high, with 4 reporting very high satisfaction levels. Advisers also earned high employer satisfaction with enrollment services. EVOLVING RESPONSIBILITY FOR BENEFIT PURCHASING In the years before the cost and complexity of employee benefits reached today s high levels, the strategy, selection and purchase decisions around benefits often were left in the hands of mid level managers and executives. Increasingly, however, such decisions now rest within the ranks of senior
Employee American Banker Benefit > News Syndicated > executives (Figure 1). CFOs, for example, are identified as being involved at all or most stages of decision-making by 2 of surveyed employers. A larger proportion 3 are involved in the mid- to latter stages of decision-making. Figure 1 Senior Executive Involvement by Company Size (Number of Employees)* Q: During the past two years, how has the involvement of your firm s senior executives in benefit decision-making changed? 2 Of practical necessity, the smaller the employer, the greater the concentration of 10% decision-making for strategic matters in a handful of key executives or even a single 10 to 99 100 to 499 500 to 999 1,000 to 1,999 2,000+ leader. It is reasonable to suppose, for *Respondents indicating Increased somewhat or Increased substantially example, that the chief executive officer is the de facto employee benefits leader in the smallest organizations, whereas the CFO may stand in for the CEO at larger employers. Thus, for example, CFOs are involved in the mid- to latter stages of decision-making at 55% of the surveyed companies with 1,000 to 1,999 employees, and only 3 of employers with 10 to 99 employees. 38% 3 32% 4 The increasing level of involvement in benefit decision-making of senior executives in general is concentrated at the larger employer organizations. Specifically, at least one-third of employers with 500 or more employees reported that senior executives had become more involved in this arena within the past two years. Only 10% of employers in the 10 to 99 employee group reported an increasing level of senior executive involvement, suggesting it was already high to begin with. EMPLOYERS RELYING MORE ON BROKERS AND CONSULTANTS The PPACA gave employers much complexity to digest, and created an agenda of fundamental decisions about compliance strategies including whether to continue to offer health benefits. In addition, continuing strained economic conditions in many industries and geographic regions have kept pressure on employers to ensure that they are accomplishing all they hope to achieve with their employee benefit programs. Finally, ongoing innovation within the employee benefit industry, including technology-based services designed to encourage employees and their dependents to live healthier lifestyles, manage chronic conditions and step up their commitment to retirement saving, all give employers more decisions to make about optimizing their benefit offerings. It is likely that all of these factors have contributed to greater utilization of employee benefit brokers and consultants by some employers.
Employee American Banker Benefit > News Syndicated > Overall, of employers report that they have increased their reliance on brokers and consultants over the past two years. In contrast, only report that their reliance has decreased, as shown in Figure 2. Reported increases in the use of brokers and consultants were highest among larger employers. For example, employers in the 500 to 999 and 1,000 to 1,999 employee brackets increased their use of brokers and consultants by 4 and 4, respectively, in contrast to only 2 of employers in the 10 to 99 employee segment. Employer Satisfaction with Brokers and Consultants: A Mixed Bag It appears that the same factors driving more employers to rely upon brokers and consultants may be making them expect more from those relationships. We asked employers to rate their overall satisfaction with broker and consultant relationships, as well as their satisfaction with them in respect to particular facets of their benefit program. Overall satisfaction rates were high 62% reported being very and another 2. Only a small minority 2% reported being not at all with their brokers and consultants. Figure 2 Reliance on Brokers/Consultants by Company Size (Number of Employees) Q: In the past two years, how has your reliance on the advice of brokers/consultants changed in the purchase of benefits at your firm? Decreased Stayed the Same Increased Figure 3 Benefit Broker/Consultant Satisfaction Not at all un 3 2 2 21% However, satisfaction levels varied according to employer size and industry. In particular, 2% 1% 10% 1 1 2% 8% 8% 8% 5% 0%0% 0% satisfaction levels decline as organization size 10 to 99 100 to 499 500 to 999 1,000 to 1,999 rises, as shown in Figure 3. Just 45% of employers with at least 2,000 employees were very, in contrast to employers in the three smallest size brackets, where at least 60% reported being very. Whether the distinction is due to differences in service quality, or varying service standards and expectations on the part of large and smaller employers, is unclear. 62% TOTAL 10 to 99 100 to 499 500 to 999 1,000 to 1,999 2,000+ Q: Overall, how are you/your firm with your benefit broker(s)/consultant(s) services? 60% 1% Neither nor un 65% 2 3 49% 4 5 5 4 Very 5 71% 7 62% 45% 2,000+ 5
Employee American Banker Benefit > News Syndicated > Our research also provides a more granular look at employer satisfaction with benefit brokers and consultants with respect to five service categories: employee education, enrollment, health care regulation guidance, overall legal and regulation compliance support, and market trends/benchmarking (Figure 4). The survey also distinguishes between services provided by brokers and consultants on the one hand, and benefit carriers/providers on the other. One notable finding: In all of the five service categories, survey respondents generally reported greater satisfaction with their brokers and consultants than with their carriers and benefit providers. Figure 4 Services Satisfaction* Q: How are you/your firm with each of the following types of support services provided by your benefit brokers/consultants/agents and/or carriers/providers? Brokers/Consultants/Agents Healthcare regulation guidance Legal/regulation compliance support Enrollment Employee Education Market trends/ benchmarking 28% Carriers/Providers 50% 49% 80% *Respondents indicating somewhat or very 7 7 62% 71% 61% 6 One respondent, a manager of HR for a biotech company, shared his positive broker experience: Our brokers have taken the time to understand our culture and core values and ensure that any recommendations they make reflect the culture and values. They have respect for our time and are there when we need them (usually proactively), but let us own the benefits strategy and program. Employee Education 19% Overall employer satisfaction with the employee 12% 11% education services delivered by brokers and consultants was high with 4 reporting very high satisfaction levels (Figure 5). Only 5% said they 5% 5% were not at all. Large employers (at least 2,000 employees) were less enthusiastic with their brokers and consultants, however, than the smallest (10 to 99 employee) cohort; only 2 of Not at all Neither un nor un the larger group bestowed the top rating, versus 48% in the small employer segment. Figure 5 Satisfaction with Employee Education Q: Overall, how are you/your firm with your benefit broker(s)/consultant(s) agents? Benefit Brokers/ Consultants/Agents Benefit Carriers/ Providers 29% 41% 4 Very 6 On the other side of the fence, the overall percentage of respondents who rated their carriers and providers highly with respect to employee education was, with another 41% offering a more tepid somewhat rating.
Employee American Banker Benefit > News Syndicated > Enrollment Enrollment services garnered the highest level of satisfaction with brokers and consultants, with 5 very and an additional somewhat (Figure 6). As with many service areas, satisfaction levels were highest among the smaller organizations and, not surprisingly, so too were utilization levels. Whereas only 10% of the smallest employers indicated that they do not receive such services, 4 of the organizations with at least 2,000 employees were in that camp. A similar pattern is evident regarding enrollment services provided directly by carriers and other benefit service providers. Satisfaction levels for enrollment services provided by carriers and providers overall was 28% very and 39% somewhat. Health care Regulation Guidance Most survey respondents believe their brokers and consultants are doing a good job of keeping them abreast of the health care regulatory environment an impressive accomplishment given the rapid pace of new and complex developments with 51% giving a very rating and another somewhat (Figure 7). Employer size does not appear to play a significant role in satisfaction; high satisfaction levels were evident across all size categories. Figure 6 Enrollment Satisfaction Q: How are you/your firm with each of the following types of support services provided by your benefit brokers/ consultants/agents and/or carriers/providers? Benefit Brokers/ Consultants/Agents Benefit Carriers/ Providers Not at all un 1 2 Neither nor un 39% 5 28% Very Figure 7 Health Care Regulation Guidance Satisfaction Q: How are you/your firm with each of the following types of support services provided by your benefit brokers/ consultants/agents and/or carriers/providers? Benefit Brokers/ Consultants/Agents Benefit Carriers/ Providers 10% 10% 2 32% 51% 7 Legal/Regulation Compliance Support Satisfaction levels with legal/regulation compliance support generally fall along the same lines as with the provision of support Not at all un Neither nor un Very on health care regulatory matters. High marks for consultants in this area may be expected, given that compliance assistance typically is a high-priority component of their service packages. Half of respondents were very with their brokers and consultants regulatory and compliance support, with only reporting a complete lack of satisfaction (Figure 8). Employers generally are
Employee American Banker Benefit > News Syndicated > less enthusiastic about regulatory compliance support coming from carriers and benefit providers, with 2 reporting high satisfaction, and another 6 either somewhat or neutral. Market Trends/ Benchmarking Of the five service categories examined, market trends/benchmarking may potentially offer the greatest opportunity for improvement. Although 40% of respondents were very with the efforts of their brokers and consultants to keep them informed on trends and to supply them with data that put their own metrics into context, 51% were only somewhat or neutral (Figure 9). Larger companies gave their brokers and consultants higher marks in the area, however. It would be expected that consultants serving larger employers would be able to devote greater resources to producing sophisticated and customized data for their clients. The result may also reflect the probability that larger employers have more robust employee benefits departments with dedicated analysts whose job would require access to such data, and therefore demand it of their vendors. Employers did not give benefit carriers and providers high marks for supplying market trends and benchmarking data. Benchmarking data provided by carriers is insufficient for my organization s needs, lamented one vice president of benefits. Their data tends to be limited to their book of business, and often difficult to parse the data to comparable industries or other desired parameters. Figure 8 Legal/Regulation Compliance Support Q: How are you/your firm with each of the following types of support services provided by your benefit brokers/ consultants/agents and/or carriers/providers? Benefit Brokers/ Consultants/Agents Benefit Carriers/ Providers Not at all un 1 3 3 Neither nor un Figure 9 Market Trends/ Benchmarking Satisfaction un 50% 2 Very Q: How are you/your firm with each of the following types of support services provided by your benefit brokers/ consultants/agents and/or carriers/providers? Benefit Brokers/ Consultants/Agents Benefit Carriers/ Providers Not at all 5% 20% 50% Neither nor un 31% 40% 11% Very 8 However, the range of benchmarking data that an employer might expect to see from a benefit supplier could be narrower, given that vendors cannot be expected to be a neutral source of data comparing their services to those of their competitors.
Employee American Banker Benefit > News Syndicated > EMPLOYERS PLANs FOR FUTURE BENEFITS Figure 10 Benefits Offered Q: Which of the following benefits, either fully or partially funded by your organization, does your firm currently offer or plan to offer in 2012? And of those benefits currently offered, which ones will your firm maintain? 1) Continuation of Employer-Sponsored Health Benefits Figure 10 shows that, despite its high and rising cost, health coverage currently remains nearly universal (98% of respondents offer it) with little variation across all employer sizes. Prescription drug coverage is also offered by virtually all firms. Also prevalent is employee life insurance (9) and dental insurance (90%). In addition, we also asked survey respondents to identify benefits newly offered in 2012. Categories showing at least a 5% new-offer rate were cancer insurance, domestic partner health coverage, extra insurance for key personnel, life insurance Health care coverage for employees Prescription drug coverage Life insurance for employers Health care coverage for dependents Dental insurance Accidental death and dismemberment Long-term disability insurance Short-term disability insurance Medical health insurance Vision insurance Employee assistance program Medical flexible spending account Life insurance for dependents Health savings account/ Health reimbursement account Domestic partner health care coverage Supplemental accident insurance Executive benefits for key personnel Cancer insurance Health care coverage for part-time workers Long-term-care insurance for dependents, long-term-care insurance, supplemental accident insurance and vision benefits. 32% 2 2 20% 12% 5% 6 6 5 51% 4 41% 89% 7 5% 5 5% 5% 5% 98% 98% 9 90% 90% 1% 1% 0% 2% 2% 0% 0% 2% Offered in 2011 and continue to offer in 2012 Did not offer in 2011 but offer in 2012 9 As for what the future holds, a small minority of employers anticipate pulling out of the business of providing health benefits as a result of the enactment of the PPACA (Figure 11). A closer examination of the data reveals a remarkable consistency among respondents of all company sizes It must be noted, however, that any such predictions may be affected by the evolving probabilities of a roll back of any of the PPACA s key provisions by Congress or the U.S. Supreme Court. It is not insignificant that 11% of survey respondents declared that they simply don t know their plans beyond 2014, a blink of an eye in the world of employee benefits.
Employee American Banker Benefit > News Syndicated > 2) Commitment to Wellness One of the primary drivers behind the PPACA s enactment the seemingly intractable challenge of rising health care costs has been a principal motivation for offering wellness programs. However, the prevalence of wellness programs is highly dependent on organization size. For example, only 58% of employers with 10 to 99 employees reported having a wellness program, in contrast to 90% of employers with at least 2,000 employees. Figure 11 Likelihood to Sponsor Health Benefits Beyond 2014 Q: How likely is your firm to continue sponsoring health benefits beyond 2014 as a result of federal health care reform (i.e., PPACA)? 71% We also asked survey respondents to rate their satisfaction with their wellness programs. Satisfaction levels among large employers, where such plans are nearly universal, were lackluster with 3 indicating they were somewhat. Only about one-fifth of larger employers reported being very with their wellness efforts. Far from abandoning wellness strategies, however, larger employers appear poised to ramp up investments in those programs. For example, 50% of employers with at least 2,000 employees plan to increase those programs somewhat, and another 21% plan a significantly higher investment over the next two years. 1% Not at all likely unlikely 1 likely Very likely Don t Know Figure 12 Employee Financial Education* 11% Q: To what extent do you expect to increase or decrease your efforts to improve your employees financial education for each type of benefit in 2012 versus what was provided in 2011? Total 2,000+ Medical 48% 68% 10 Given the high educational emphasis of wellness programs, it is fitting that many employers, especially the larger ones, are also planning educational efforts with respect to the financial dimensions of medical and other key employee benefits as Figure 12 reveals. Retirement Voluntary (employee paid) insurance benefits Non medical group insurance benefits (e.g., Life, ADD&D, LTD, STD) Dental 28% 31% 28% 42% 6 *Respondents indicating Increased somewhat or Increased significantly Source: Employee benefit, February 2012 3) Employee Cost-Shifting Even as employers hope to improve employee health (and ultimately save money) through investment in wellness initiatives, they have not abandoned the long-standing pattern of asking employees to shoulder a greater proportion of health benefits cost. While only reported having increased employee cost-sharing significantly this year, another 29% reported having increased somewhat. Only 8% reported having made any cost-sharing moves in the opposite direction.
Employee American Banker Benefit > News Syndicated > A related survey question asked respondents to take a longer and broader look into the future and describe their anticipated level of financial commitment to their overall employee benefits plan over the next three to five years. A solid majority (61%) reported plans to continue to fund employee benefits at the same level as they do today. Another, however, predicted they would increasingly transfer more of the cost of benefits to our employees. An optimistic 2% anticipated increasing their commitment to benefits, while another 2% anticipate moving toward a fully voluntary posture in which employees foot the entire bill. 4) The Possible Expansion of Voluntary Benefits Today, voluntary benefits remain a solid fixture on the benefit landscape. Eighty percent of employers offer some form of voluntary benefits. For those employers who do not offer voluntary benefits the most common reason stated was a perceived lack of interest on the part of Figure 13 Voluntary Benefits Offer/Intent to Offer Dental insurance AD&D insurance Voluntary term life insurance Vision insurance Voluntary short-term disability insurance Cancer insurance Discount programs Accidental injury insurance (not AD&D) Critical illness insurance Voluntary whole life insurance Travel accident Supplemental health insurance Auto and homeowners insurance employees, or a simple philosophical preference for offering fully paid benefits. Q: Which of the following voluntary (100% employee paid) benefits are made available to your employees? Currently offer Do not offer but may 98% offer in the future Do not offer and do not plan to make available in the future 8% 35% 1 51% 4 4 41% 1 8% 12% Concierge benefits 90% 82% 79% 71% 61% 18% 1 1 10% 18% 70% 8 0 20 40 60 80 100 6 45% 48% 58% 4 31% 39% 35% 15% 1 31% 11 The prevalence of particular voluntary benefits offered by employers that make voluntary benefits available to employees varies widely. Figure 13 shows the most popular: dental insurance (82%), AD&D coverage (79%) and voluntary term life (71%). The top three categories of voluntary benefits that employers indicated they may offer in the future? Cancer insurance (18%), critical illness insurance (also 18%) and accidental injury insurance distinct from AD&D, at 1. Employer Challenges Reflecting a long-standing pattern, employers large and small today are challenged by managing increasing health insurance costs. Half of survey respondents identified this issue as their top concern, and another 20% as their second-highest concern (Figure 14). At the other end of the spectrum, employers are least challenged by the day-to-day aspects of benefits administration a fortuitous result given the nonstrategic nature of the matter. That routine benefits administration is under control likely reflects the power and sophistication of benefit information systems and the available support from benefit vendors, brokers and consultants.
Employee American Banker Benefit > News Syndicated > Figure 14 also shows employee engagement and morale, and adapting to changes due to health reform, as employer challenges. Attracting quality employees ranks highly for 2 of firms, a notable issue during a period of high unemployment. Yet retaining high-performing employees and benefits administration are among employers lowest-ranked challenges. This may suggest that benefits, along with other forms of compensation (financial and otherwise) are operating successfully, and that despite high unemployment levels in many regions, a lack of appropriately qualified workers who either live in the local labor force or are willing to relocate, is at the heart of the problem. UPCOMING RESEARCH To stay informed of the changing market trends among purchasers and providers of benefits, we conduct quarterly surveys among benefit professionals at employer organizations as well as with benefit brokers and consultants. The next quarterly survey in the Employee Benefit program will evaluate the critical issues facing benefit brokers and consultants. The following topics, among others, will be covered: Figure 14 HR Challenges: Most Challenging* Q: What are the biggest challenges facing your company right now with regard to the management of human resources and employee benefits? Rank the following challenges, with one being your company s greatest HR challenge. Managing increasing health insurance costs Employee engagement and morale Adapting to changes due to health care reform Attracting quality employess Maintaining compliance with employment laws Retaining high-performing employees Helping employees understand their benefits Day-to-day benefits administration *Ranked as 1 or 2 (most challenging) 15% 1 29% 2 70% 12 Products and services offered Selling voluntary benefits Client communications Challenges in selling benefits
Employee American Banker Benefit > News Syndicated > EMPLOYEE BENEFIT LEADERSHIP FORUM The Employee Benefit Leadership Forum is a community of HR and benefits decision makers, and benefit brokers and consultants who have knowledge about and influence over the benefit industry and have made a commitment to regularly share their opinions and insights with the editorial and research groups at Employee Benefit News and Employee Benefit Adviser. Forum members include C-level executives and other senior professionals employed at organizations of all sizes and industries as well employee benefit consultants and brokers. Through their active and ongoing participation in Employee Benefit, members help give voice to the industry s point of view and in turn influence a rapidly changing industry. They contribute to the editorial direction of Employee Benefit News and Employee Benefit Adviser publication and events, and have an impact on the strategic planning of our research syndicate partners. Visit www. sourcemedia. com to find out more about SourceMedia research programs or contact Robert Garrigan at 212-803-8644 or robert.garrigan@sourcemedia.com. 13 Survey Methodology This online survey was fielded during February 2012. In total, SourceMedia surveyed 771 benefit professionals at organizations offering health benefits to employees. Sample was randomly drawn from subscribers of Employee Benefit News. Participants responded to an email solicitation from SourceMedia inviting them to participate in the survey. Qualified respondents were HR/benefit decision makers employed at organizations with 10 or more employees. Respondents were also required to be involved in designing benefit plans and selecting benefit carriers for their organization. Margin of error for the total sample is +/- 3.5% at the 95% confidence level. Data was weighted based on the percentage of companies in employee size segments offering health insurance (based on LIMRA research). All proportions presented in this white paper are based on weighted data, although unweighted counts (n) are presented. Copyright SourceMedia, 2012 All Rights Reserved. Unauthorized reproduction is strictly prohibited.