Posts belonging to Category benefits

Will Employers Stop Offering Health Benefits?

Ezekiel Emanuel (an oncology doctor, professor of ethics at Penn and brother of Chicago mayor Rahm Emanuel) was one of the architects of the Affordable Care Act — which, as we all know, mandates that employers with at least 50 full-time-equivalent employees provide health insurance. So it’s a bit surprising to learn that Emanuel has just written a new book in which he predicts that, as a result of the ACA, most employers in the United States will have stopped offering health benefits to their employees by 2025.

Why will companies stop offering health benefits? Because, Emanuel argues in the book — Reinventing American Health Care: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System (how’s that for a title?) — the online insurance exchanges will provide employers with a viable alternative for doing so. Now, after you’ve picked yourself up off the floor from laughing so hard at the idea of being described as a “viable alternative” (although many of its worst bugs appear to have been fixed), note that Emanuel does acknowledge the botched rollout of the federal online exchange and some of the state ones, yet he describes others (such as Connecticut’s state exchange) that are working well. If all of the exchanges are fixed to the point that consumers can obtain health insurance by spending only 30 minutes or so enrolling, he says, then companies will indeed have a viable alternative to the expense and administrative hassles of providing benefits and can instead simply give their employees money to go out and purchase benefits on their own. The ACA’s excise taxes on high-cost health plans scheduled for 2018 are yet another incentive to get out of the health-benefits game, says Emanuel.

Private exchanges, which are essentially a defined-contribution approach to health benefits, have certainly sparked a lot of interest among employers lately. As many as 33 percent of respondents said private health exchanges would be their preferred approach to managing health care in the next three to five years, up from 5 percent now, according to Aon Hewitt’s Health Care Survey of more than 1,230 employers covering in excess of 10 million employees (Aon happens to be one of the vendors that offers a private exchange; others include Towers Watson, Buck Consultants and many smaller vendors). Brian Poger, CEO of consulting firm Benefitter, said at the just-concluded Health & Benefits Leadership Conference in Las Vegas that for many employees — especially low-wage workers with families – the health coverage available on public exchanges might be a better deal than that provided by their employers, considering that many have cut back or eliminated coverage for spouses and families.

Jettisoning traditional health benefits has yet to become a major trend among U.S. employers: Accenture estimated that 1 million employees enrolled in private exchanges last year, a tiny percentage of the nation’s workforce (although it also estimated that number could grow to 40 million by 2018). There is also the risk that employees on private exchanges will “buy down” — that is, purchase less-costly plans that may ultimately leave them with less coverage and worse health outcomes than traditional health plans, which tend to have “marginal” price differences, Mike Thompson, healthcare practice leader at PwC, told me last year. Companies that switch to private exchanges may also risk breaking the linkage between benefits and wellness, he said.

The expression “paradigm shift” is an overused cliché, but it’s clear we’re in one now when it comes to health benefits. Rest assured we’ll continue to cover this area closely.

Innovation Central

One of the most dynamic sessions at this year’s Health & Benefits Leadership Conference was the “Ideas and Innovators” session, in which experts from a variety of fields give five-minute presentations summarizing their thoughts on what HR leaders should do differently with regard to benefits.

Here’s a sampling of what some of them had to say: Lindsey Pollak, a millennial workplace expert and spokeswoman for The Hartford insurance company, called on companies to encourage mentoring between baby boomers and millennials. “Ninety percent of the millennials we surveyed said they appreciated guidance from boomers,” she said. “Millennials are digital natives, so they can mentor boomers in the use of technology.”

Millennials want the ability to customize their benefits, she said: “Millennials weren’t given teddy bears as kids; they were taken to Build-a-Bear workshops — they’re used to having things tailored for them.”

The same Hartford survey found that 70 percent of millennials consider themselves leaders, whether in their families, workplaces and communities. Companies can harness this leadership spirit for health and wellness, said Pollak — yet must keep in mind that millennials have also proven to be slow to sign up for benefits such as disability insurance. “Millennials aren’t taking advantage of these benefits — you must reach them on this.”

Brian Poger, founder and CEO of consulting firm Benefitter, urged employers to consider getting out of the business of providing health benefits (perhaps an odd thing to hear at a conference devoted to employee benefits). “Most employee raises are being absorbed by rising healthcare costs,” he said. “Why not offer cash instead of health benefits?”

Poger cited a McKinsey survey that found 85 percent of employees would stay with their employer even if they stopped offering health benefits. Many employers are charging signficantly higher premiums for spousal and family coverage or dropping it altogether, he said, which can be a major hardship for families earning the U.S. median household income of $51,000 a year. “Giving employees cash to purchase a family policy on the exchanges may be a better deal for them,” he said.

Lexie Dendrinelis, health promotion and wellness leader at manufacturing firm Barry-Wehmiller Cos., discussed how her company has made leadership and culture — rather than exercise and eating well — the centerpiece of health and wellness. “People can’t focus on their personal health if they’re stressed out about an unsafe workplace,” she said. “Building trustworthy leaders and cultures is the best intervention.”

At Barry-Wehmiller, the company has committed to building a “caring culture” where “we are committed to sending our friends home safe, well and fulfilled.” The company uses incentives and rewards to highlight positive behaviors and takes a “holistic approach” to caring for its employees and families, said Dendrinelis. “We are looking at creating a thriving culture that will bring down healthcare costs.”


Making Retirement Work

Retirement benefits and how to make them work — as in, you know, actually enabling employees to retire — was the subject of a spirited panel discussion at the second day of the Health & Benefits Leadership Conference in Las Vegas.

“Every day for the next 15 years, 10,000 people will reach retirement age,” said moderator Melissa Kahn, principal at benefits-consulting firm MJKAHN Associates. “This is the year that the last of the baby boomers will be turning 50. People are living longer and staying healthy longer and they’ll also be working longer.”

Many of these employees are concerned about retiring without enough funds to see them through old age, she said.

Panelist Greg Long, executive director of the Federal Retirement Thrift Investment Board, which administers the federal government’s 401(k) plan for federal employees (which has assets of $400 billion), talked about a step his agency took: It created an online tool that shows plan participants the monthly amount they would receive from an annuity based on their current plan balances. “You want them to focus on that monthly number, not the number that represents their account balances,” he said. This proved to be an excellent way to get participants focused on saving more and planning more for their retirement, said Long.

Laurie Rowley, co-founder and president of The National Association of Retirement Plan Participants, a nonprofit dedicated to financial education for the nation’s 75 million defined-contribution plan participants, discussed a comprehensive study her organization undertook to understand what drives plan-participant behavior. The biggest single impact on participants’ deferral rates, they found, was the company match. Financial literacy and the confidence participants have that they can actually acquire sufficient resources to retire comfortably were also key drivers, she said.

Trust was also an issue, said Rowley, with only 26 percent of study respondents saying they felt they could trust their DC plan’s recordkeeper.

Financial literacy has a fundamental impact on plan participant behavior, she said, including their deferral rates. Many people don’t understand the terminology related to financial planning and retirement.

“Financial literacy across all demograhpic groups is very low, and that impacts their confidence,” said Rowley. “We need to create personalized education that’s tailored around people’s financial needs. If you can inform them in a proactive way, that will really engage them.”

NARPP has created “just-in-time” educational materials that employers can provide to their workers as they’re making major financial decisions related to retirement planning, she says, adding that this material is available for employers to link to their own websites. Online education can also be valuable because some employees may be reluctant to let on how little they know about retirement and financial planning in front of their peers in a traditional classroom setting, said Rowley.

Catherine Golladay, vice president of participant services at Charles Schwab, said her firm has retrained its call-center staff to take a more “consultative” vs. transactional role with plan participants, using events such as an employee who calls in to make a hardship withdrawal from his 401(k) to discuss things like setting up an emergency savings fund and re-examining his investment strategy to generate higher returns.

“Our call centers have been trained to take a more conversational approach to interactions, with the goal of getting plan participants to think about whether their decisions make sense in the context of their financial lives,” she said.

Rowley said many employers that have set up auto-enrollment programs have cut back on financial education for their employees — and that’s a mistake.

“Our study shows that people who are auto-enrolled tend not to value their plans as much and are less financially literate,” she said. “But many plan sponsors have decided to roll back financial education in light of auto enrollment. That’s not right — many people still aren’t investing enough, and they still need education.”

Lessons from a Trusted Source

Consumer Reports has been a trusted source of information for folks in the market for a new car, a toaster oven or a snowblower. So why not healthcare?

I could be mistaken, but as a long-time subscriber, I’ve been noticing an increasing number of healthcare-related articles in Consumer Reports as of late. Articles86507521 like “Six Last-Minute Health Insurance Buying Tips” and “Six Tips for The Last Month of 2014 Health Care Open Enrollment.” But as Tara Montgomery made quite clear in her March 18 keynote during HRE‘s Health & Benefits Leadership Conference at Caesars Palace in Las Vegas, CR‘s commitment to healthcare these days goes well beyond an article here or there.

In its very first issue, Montgomery pointed out, CR covered healthcare, with a story on Alka Seltzer and whether it lived up to all of its claims.

But it wasn’t until around 2003, she explained, that CR expanded its efforts in the healthcare arena. Then, five or six years ago, she said, CR really stepped up its efforts as quality data started to emerge.

Montgomery, who is senior director of health partnerships and impact at CR, walked attendees through the multitude of products CR offers, and the partnerships it’s engaged in, that are aimed at informing consumers and giving them tools for making better decisions. (HRE also recently interviewed Montgomery, if you’d like to read more.)

Leveraging the trust inherent in the CR brand, Montgomery said, “We want to teach consumers how they can become better shoppers for healthcare.”

Near the end of her presentation, Montgomery offered attendees some of the lessons CR has learned along the way, including:

  • How valued its brand is to employees. “There’s a lot to be said for using a trusted messenger in this alienating healthcare system,” she explained.
  • There are a lot of good, positive stories that can be told regarding health and well-being, and people who have taken responsibility for their health.
  • You have to “push” your messages, because people are not out there seeking this kind of information, just yet.
  • When you put the right tools at the point of decision-making, good things happen.
  • Personalize what you do.  “One size fits all is not very helpful,” she said. “Don’t talk to everyone at once, but segment your audience.”
  • Use entertainment and humor in your communications. The organization is able to take advantage of its team of journalists, who are talented storytellers—and that is much better than sending out official documents.
  • Put safety first, which almost always results in cost-savings, too.
  • Write your materials at the 7th grade level. CR‘s research has found that even consumers with a high literacy level are extremely comfortable with communications at that level and didn’t feel the material was dumbing down to them. (Also, don’t make it text heavy and use graphics.)
  • It’s OK to incorporate games, but make sure that they’re truly helpful and not just gimmicky.
  • Make sure your messages have cultural relevance. “Don’t just show generic individuals sitting in the doctor’s office,” she said.

Do Workers Value Their Benefits?

disgruntledThe latest Mercer Workplace Survey finds that the perceived value of employee benefits among workers who participate in their company’s health and retirement benefits is starting to erode — especially among the younger generation. Workers under the age of 50 who say their benefits are “definitely worth it” in terms of what they pay out of pocket has “dropped precipitously” in two years from 45 percent to 30 percent, according to Mercer.

The survey, which is based on input from 1,506 employees enrolled in their companies’ health and retirement benefits, finds that benefits are still critically important: 93 percent agree with the statement “My health benefits are as important as my salary” while 86 percent disagree with the statement “My benefits don’t matter much to me.”

These rising levels of discontent can at least be partly attributed to cost-shifting by employers, says Mercer’s Beth Umland:

Out-of-pocket expenses for employees are likely to continue to rise. We’re seeing more cost-shifting and rapid growth in high-deductible consumer-directed health plans as employers are asked to cover more employees under health reform.”

Employees are also undoubtedly peeved about cutbacks in 401(k) matches and delayed matches by many companies. Although AOL has reversed its decision to delay its 401(k) match (CEO Tim Armstrong had originally said the delay was needed to compensate for the cost of “distressed babies,” among other things), other large firms like JPMorgan Chase, Oracle and Caesars Entertainment have reduced or delayed payment of their 401(k) matches and lengthened vesting schedules for their DC plans, according to an analysis of hundreds of government filings by Bloomberg News.

IBM shifted last year to a lump-sum payment of its 401(k) match, similar to what AOL originally did. Oracle stretches out the vesting schedule for its DC plan participants: employees are 25-percent vested after their first year of employment, another 25 percent vested after a second year and fully vested after four years with the company, according to Bloomberg.

These measures can make it much harder for employees to save enough for retirement, Brigitte Madrian, a Harvard professor who studies retirement policy, told Bloomberg:

There’s been an implicit contract for years and years — workers save and companies match — but now they’re changing the rules. Most individuals can’t do it on their own. We’re going in the wrong direction.”

The Mercer findings directly contradict a new survey from Guardian Life Insurance Co. which finds workers value their benefits plans more than they did two years ago.

Guardian says this increase in perceived value “suggests that American workers are valuing their benefit packages more than ever and reaffirms the value of workplace benefits for employers’ business strategy, especially for retaining employees.”

Courting Controversy at AOL

Tim ArmstrongAs you just might have heard, AOL chief Tim Armstrong is making headlines again, this time for attributing recent alterations to the company’s 401(k) plan in part to rising medical costs associated with two employees’ families “distressed babies.” Armstrong has since apologized, and emailed AOLers two days after making the contentious comments, to announce his reversal on the changes.

This latest flap comes just months after Armstrong made news by angrily firing an employee during a meeting; a move he apologized for within four days.

So, Armstrong has offered up the expected mea culpa here, expressing his regret for singling out two employees’ children as factors in AOL’s climbing medical costs.

But we thought it would be interesting—albeit in hindsight—to ask a handful of HR experts how they would handle Armstrong’s penchant for creating controversy, and perhaps give HR leaders a few pointers on how to keep executives at their organizations from making headlines for all the wrong reasons.

Here’s a sampling of what they had to say:

Rita McGrath, an associate professor of management at the Columbia Business School in New York, says a little coaching could go a long way for Armstrong.

“If there were ever a case for why a top-notch executive coach would be great for a CEO, this would have to be it,” says McGrath, who was quick to offer the disclaimer that executive coaching is “not the work that I do.”

“As an executive, everything that you do has substance and symbolism. In both of Armstrong’s somewhat bizarre communications—firing an employee in a public meeting, blaming cutbacks on ‘distressed’ babies—the symbolism conveys mean-spiritedness at best, and at worst [reveals] a guy who is unable to control himself in a public forum.”

A good executive coach, she says, “would be able to do two things: increase his awareness of the perception of his communications, and put in place mechanisms to help him change the more dangerous aspects of his behavior.”

Lou Solomon, founder of Charlotte, N.C.-based communication consultancy Interact and author of Say Something Real, doesn’t quite get why Armstrong was commenting on employee benefits at all, let alone making questionable remarks about “distressed babies.”

“Any changes in employee benefits should be facilitated and communicated by HR,” says Solomon. “There is nothing more destructive than a lone, loose-cannon CEO. The folks in HR and communications have to scramble to pick up the pieces, when they should have been out front to begin with.”

(Incidentally, Solomon raises an interesting point there. In a Feb. 10 column, Forbes contributor Dan Munro went a step further, wondering if the comments—whether uttered by Armstrong or anyone else—were not only insensitive, but perhaps constituted a HIPAA violation as well. Read it here.)

The fact that Armstrong even knew of these two employees’ healthcare situations is cause for concern, adds Rob Wilson, president of Employco USA Inc., a Westmont, Ill.-based employer management, contract staffing and human resource outsourcing services provider.

“From an HR perspective, you cannot talk about individual cases or personal employee issues,” said Wilson, in a statement. “Further, taking that information and using it as a scapegoat to cut retirement benefits is a poor business move.”

Matt Eventoff, owner of Princeton Public Speaking in Princeton, N.J., suggests HR can help keep executives from committing similar slips by helping them take a good look at themselves. Literally.

“Exposure is often very, very valuable for an executive,” says Eventoff. “Prior to an important call, presentation, panel discussion, etc., prep the executive by asking continuous questions and allowing the executive to answer—all while being taped, and then allowing the exec to review the tape.

“This is obviously very sensitive training, but simply seeing the answer on tape is eye-opening, especially for an executive who’s used to speaking ‘off the cuff.’ ”

The second step would be taking the executive’s answers to the aforementioned questions and “illustrating how they might sound and look to different audiences,” he continues, adding that HR may want to bring in an outsider for this part of the process.

“Asking difficult questions of a C-level executive can be uncomfortable for all parties, especially if they work together every day,” says Eventoff. “And it’s also difficult to tell your boss he or she is wrong on a regular basis. Every boss says they want this feedback, but the number [of those that truly do certainly does not include] every boss.”

Medical Costs Continue to Plummet

health moneyTwo major new studies indicate that the rate of growth for health-plan costs is at near-historic lows, thanks in part to the effects of the Affordable Care Act and new strategies by employers to limit costs and encourage better price-awareness among employees.

Segal’s Health Plan Cost Trends Survey finds that projected cost trend data is now growing at the slowest rate in 14 years. Meanwhile, PwC’s Health Research Institute projects a medical cost trend for this year of 6.5 percent – even lower than in 2013, itself a year of slowing cost trends. Both studies attribute at least some of the trend to Obamacare, as well as the tepid economic recovery and employer initiatives. Here’s Ed Kaplan, Segal’s national health practice leader:

Although it remains to be seen if the deceleration of projected trend data is influenced by short-term economic forces, the influence of the Affordable Care Act, improved efforts around lifestyle changes such as weight loss and smoking cessation, early detection of disease, or some factor not yet identified, there continue to be changes in the system that could have long-term implications for healthcare costs.”

The Segal report notes that provider reimbursement arrangements are beginning to shift from fee-for-service to alternative payment models such as bundled payments, that participants are becoming more educated consumers and that costs are becoming more transparent.

PwC says the slow recovery and decreased personal wealth has reduced some of the demand for healthcare and has resulted in a ”new normal” in healthcare spending patterns. It notes that individual consumers, who are bearing more responsibility than ever for their own healthcare costs, are questioning the need for and sometimes delaying procedures, imaging and elective services. Hospitals are working hard to hold down expensive readmissions (and thus avoid getting hit by the ACA’s penalties in that area) while employers are creating high-performance health networks for major procedures such as heart surgery and spinal fusion, in which employees travel to select providers for these specialized services. Companies expect these high-performance networks to save them money, even with travel costs factored in.

However, there’s no reason for complacency: Both reports note that other trends will exert upward pressure on health costs in the near future. These trends include ongoing consolidation among hospitals and clinics, PwC notes. The rate of consolidation among providers has increased by 50 percent since 2009, which can lead to price increases of up to 20 percent or more, according to the report. Expensive and complex biologic drugs may also push up costs, as more new drugs continue to be introduced to the market, says PwC. Segal’s Kaplan notes that although cost trends continue to decelerate, overall health plan costs are still on the rise. “Plan sponsors must be ready to implement new requirements introduced by the ACA, and will need to play an active role to continue to get the most for their benefit dollars.”

Saving For the ‘Future You’

Future YouA new report from Mercer and Stanford University’s Center on Longevity finds that when it comes to encouraging folks to save more for retirement, one picture can be worth far more than 1,000 words in a retirement brochure—”picture” referring specifically to age-enhanced photos of the participants. The report’s authors note that getting retirement-plan participants to making an “emotional connection” with their future selves can be an effective way to improve savings behavior. They found that people who saw an age-enhanced photo of themselves were willing to put an average of 6.8 percent of their pay into their 401(k) plans. Participants in a control group who were not shown such photos were willing to contribute an average of only 5.2 percent of their pay.

The importance of participating in a defined-contribution plan is underlined by a new study from the Employee Benefits Research Institute, which finds that the current levels of Social Security, coupled with at least 30 years of participating in a 401(k) plan, could provide most workers with at least 60 percent of their pre-retirement pay on an inflation-adjusted basis. Between 83 to 86 percent of workers should be able to replace 60 percent of their age-64 pre-retirement wages and salary with these sources, EBRI found, while 73 to 76 percent of workers should be able to replace 70 percent of their pre-retirement income. (Most retirement experts say a person needs to be able to replace between 70 percent and 80 percent of their final salary for an adequate retirement.)

These findings underscore the importance of Social Security income during retirement—especially for lower-income workers, says EBRI research director Jack VanDerhei:

“If, for example, we assume that a proportional 24-percent reduction would be applied to Social Security retirement benefits for all simulated workers, the percentage of the lowest-income quartile under voluntary enrollment 401(k) plans with an 80 percent replacement threshold drops 17 percentage points, from 67 percent to 50 percent, while the highest-income quartile —which receives less proportionate benefits from Social Security—drops by only 9 percentage points, from 59 percent to 50 percent.”

Boasting About Benefits

boasting about benefitsHere are a few statistics to digest as you think about how to attract and hang on to top talent in 2014.

In its six-part State of Employee Benefits in the Workplace survey of 440 randomly selected HR professionals, the Alexandria, Va.-based Society for Human Resource Management asked respondents about how (or if) they use their workplace benefits programs to help recruit employees. Only 25 percent of organizations indicated they use their workplace benefits to help recruit employees.

In addition, just 30 percent said they’re leveraging their benefits programs specifically to recruit in-demand workers, despite half of the participants in SHRM’s poll reporting difficulty in recruiting highly-skilled employees. Even fewer employers—less than one in five—report touting the value of their benefits programs to retain current employees.

Among those that do promote their benefits packages as part of their recruitment and retention strategies, healthcare and retirement savings are the most talked-about benefits, followed by leave benefits and professional- and career-development benefits.

Employers may be wise to spend a bit more time talking up these types of benefits, especially at a time when companies can’t necessarily offer top-dollar salaries as a way to reel in and retain top-dollar talent, says Joseph Coombs, SHRM’s senior analyst for workforce trends.

“Considering that wage growth has been very weak in the post-recession economy, HR professionals frequently cannot use higher salaries as a draw for attracting and keeping talent,” said Coombs, in a statement. “Many recruiters now advocate using a ‘total rewards’ approach to recruitment and retention, leveraging an employer’s benefit package as part of that strategy.”

Giving Ikea Workers Another Reason to Stay

As you probably already know, Swedish home-furnishing retailer Ikea came under fire earlier this week for allegations that its French unit had “spied on” employees who were suspected of wrongdoing. The firm is also accused of spying on disgruntled customers in France.

I’m sure it’s just a coincidence, but there’s no denying that the furniture maker’s timing in announcing a new initiative called “Tack!” should help the retailer finish the week on a more positive note.

180px-Ikea_SouthamptonIn what’s an increasingly rare move these days, Ikea announced plans to provide an annual contribution to the individual retirements accounts of those workers who have been with the firm for five years or more. Ikea is starting with an initial global fund of $137 million, with the first distribution slated for next autumn. Payments are contingent upon certain “pre-agreed public targets” being made.

In January, Ikea will also be increasing its 401(k) match to 100 percent on the first 4 percent and 50 percent on the next 2 percent.

In announcing the lump-sum contribution, here’s what CEO and President Peter Agnefjäll said:

Tack! is the Swedish word for “thank you” and we want to show appreciation and gratitude for our co-workers’ loyalty and contribution. The program is inspired by [Ikea's Founder] Ingvar Kamprad’s wish to share success with all IKEA co-workers. All of them, no matter what position they hold, contribute and are important for our continued growth.”

Under the program, full-time employees will receive the same amount, regardless of their department, position or salary. Part-time workers will receive a proportional amount dependent on their hours. In the United States, more than 44 percent of Ikea’s employees (roughly 5,700 of them) have more than five years of experience. (Globally, Ikea has 136,000 employees in 26 countries.)

Commenting on the Ikea announcement, Dave Boucher, a partner with Longfellow Advisors in Boston, told me that Ikea’s move is fairly rare these days. “Ten years ago, profit-sharing plans like these weren’t out of the norm, but there’s a reluctance today to bring back employer contributions. So, from at least that standpoint, Ikea is raising the bar.”

But for many workers at Ikea and elsewhere, Boucher added, it could be a case of too little, too late. “Some large employer had to put their foot in the puddle first,” he said, “because we’re heading down a path where pension plans have dissolved, Social Security is under attack and if all I can afford is 3 percent or 4 percent in my 401(k) with an employer match, there’s not going to be enough money to retire on.”

In an era when companies are passing on more and more of the retirement burden to employees, it’s refreshing to see a large employer like Ikea recognize the retirement challenges that lie ahead for its employees and take a meaningful step in a different direction.  Time will tell, but I have to think the move could ultimately pay a nice dividend for the organization as far as talent retention is concerned.