2010 Employer Survey

Yet another survey from the International Foundation of Employee Benefit Plans figures about 87 percent of organizations will continue to offer health care benefits, because of the obvious --- they are critical to remaining competitive, and to employee recruiting and retention.

But one critical question continues to persist - will employers opt to provide certain benefits over others?

Not necessarily. One LIMRA study suggests most employers still place value on offering comprehensive benefits to employees.

"Employees still really value offering comprehensive benefits," associate analyst Kimberly Landry says. "This is counter to what a lot of people were saying last year. Since companies have been wanting to cut costs, there was an assumption they would be cutting benefits, too. So it was surprising to find they still want to offer benefits."

However, she adds, it's getting more difficult for employers to do so, because of things such as rising costs and increased complexity. Toss in multifaceted demands from a diverse work force, and many employers want workers to help out by taking more responsibility for their own benefits decisions.

In addition, employers now consider benefits to be less crucial for attracting and retaining employees than they were a few years ago. Employers remain uncertain how health reform legislation will hamper their ability to offer benefits.

"We asked which benefits are necessary to attract and retain employees," Landry continues. "We asked the same question four years ago. This time, we saw a huge decline in the number of benefits employers said were necessary."

Health insurance is still the highest, with 81 percent of employers saying it is necessary to attract and retain employees. But that was down 13 percent from four years ago, when 94 percent of employers felt that way.

Based on the survey results, Landry sees some implications for brokers and agents."Brokers and agents need to understand the challenges employers are facing," she states. In addition, they need to emphasize the other reasons for offering benefits beyond attraction and retention, such as contributing to health and productivity of the work force and reducing financial stress.

Reaction to health care reform
This isn't our first - and certainly won't be our last - story about how employers are dealing with unprecedented reform. And as Sally Natchek, senior director of research at the International Foundation of Employee Benefit Plans suggests, their latest study is the first of what is going to be a series of surveys, as health care reform is implemented and as employer-offered plans begin to change.

"This survey covers large and small employers," Natchek reports. "Interestingly, there was little difference between the large and small employers in terms of their approaches and the timing of when they were going to make changes."

According to the foundation's study, in terms of dependent coverage, only 20 percent of responding employers plan to change primary medical plan eligibility requirements for employees' adult children up to age 26 before required to do so by law. Two-thirds of employers are not extending coverage to adult children up to age 26 until legally required.

Almost half (45 percent) of responding employers aren't sure how they're going to address cost-sharing for dependent coverage (for their primary medical plan) in light of health care reform changes. Adding new tiers to the cost-sharing structure is a strategy one in 10 employers plans to pursue.

Along the same lines, employers aren't sure yet if they'll change eligibility requirements for dependents on their other plans besides their primary medical plan, such as dental, vision and life. "They are concerned about these costs," she says. "However, it looks as though it might be going in that direction, so that coverage will be consistent with their primary medical plan."

Roughly 42 percent of responding employers plan to extend dental plan coverage to adult children in order to match their medical plan requirements. About 32 percent plan to extend vision benefit coverage to adult children. While 10 percent plan to extend life insurance coverage, and 6 percent plan to extend accidental death/dismemberment coverage to adult children.

Employers that offer medical benefits to retirees also will review these plans, and health care reform will influence the levels of coverage provided to retirees, Natchek says. Almost 40 percent offer medical benefits to retired employees. Of these, 61 percent plan to review their health plan benefit strategies for early retirees (55 to 64 years old) in the next 12 months, and half plan to examine their strategies related to retirees who are 65 and older.

Responses are mixed about whether employers have noticed a jump in the number of participant contacts regarding health care reform. Half of responding employers report an increase in the number of contacts made by employee participants, 44 percent state there hasn't been an increase, and 6 percent cite a specific increase in contacts by retirees.

However, few respondents have begun communicating with participants about health care reform legislation. Most plan to do so during their annual enrollment periods. Communications channels used or planned to reach participants about the new legislation include e-mails (51 percent), special written communication pieces (49 percent), and the organization's website (42 percent).

"Overall, the number and range of plan designs employers will be considering is going to be in a state of flux," Natchek adds. "There also will be a huge focus on cost sharing with plan participants."

Dealing with cost concerns
Certainly, cost pressures are hammering down on the decisions employers will make regarding employee benefit implementation. Controlling benefits costs has risen to the top among benefits objectives for employers, overtaking employee retention, which has led since 2006, a MetLife study reveals.

And, according to an employer opinion survey from United Benefit Advisors, almost all (99.4 percent) of respondents are concerned with the impact health care costs are having or will have on overall corporate costs. Just slightly fewer (97.9 percent) also are concerned with the impact health care costs have on their employees (up almost 20 percent from two years ago). In general, employers feel better prepared to communicate and implement more complex strategies to deal with health benefits.

"More employers are reporting that they are better prepared these days to talk about alternative plan designs, and doing a better job of communicating with their advisors," explains William Stafford, vice president, member services. However, employers are far less prepared to meet the legislative and regulatory requirements being placed on them.

The survey also found employers will continue to shift costs to their employees either through increased contributions (85 percent) or by plan design (52 percent). Incentive-based employee wellness programs and chronic disease management programs, combined with enhanced employee education and communications, are gaining increased use as key cost-containment alternatives.

These changes also are being fueled by the increasing applicability and decreasing cost of Web-based solutions and the growing sophistication of benefit advisors. This is enabling employers are all sizes to have access to tools, services, and programs that were previously available only to very large employers.
A similar study from PricewaterhouseCoopers focuses on general trends in health care-related costs, but does focus specifically on the directions employers are going with their health care plans.

For example, employers are moving network benefits toward pre-managed care benefit design by increasing deductibles and replacing co-pays with coinsurance. By requiring workers to spend more out-of-pocket at the point of care, employers believe they can rein in utilization. "Employers are moving toward plan designs that are more transparent, such as high deductible plans and co-insurance designs, in order to get their members to understand what the actual values and costs are," explains Kathryn Stein, managing director, human resource services group, for PWC.

According to Stein, brokers and agents need to think through some ways to provide innovative thinking to their clients, such as prevention programs.

Facing the retirement crisis
A study conducted this year by MetLife found a few surprising things. For one, employees' concerns and attitudes about their financial security are subsiding, but still significant. Employees appear to be surprisingly optimistic about the future, and have taken steps to address some of their financial inadequacies by beginning to save more and reduce their personal debt. While the raised levels of economic concerns seen in last year's study have somewhat eased, employee concerns about their financial situations are still very high, and employees want help from their employers.

While new employer engagement is emerging for retirement programs, the gap between employer action and employee priorities persists. As the continued interest in companies implementing automatic features in defined contribution plans attests, employers are becoming more involved with their retirement programs. At the same time, employees are looking to their employers to provide more education at an earlier point, as well as more options to help them feel secure enough to retire and to minimize the risk of outliving their retirement money.

Case in point, we reported a couple of months ago that even lawmakers have been busy sketching ways to make more income guarantee options available to retirement plan participants - specifically for the millions of workers enrolled in a 401(k).

"As an industry, our focus has been on the accumulation phase and we've failed to adequately prepare participants for decumulation. Fortunately, that is now changing," contributor Tim Bormann writes. "Providers have been developing a variety of retirement income solutions that can be offered within a retirement plan or as an extension of it."

Among the solutions offered:

• Immediate annuities: an in-plan or external option where the participants purchase income for life at the time of retirement.
• Deferred fixed annuities: an in-plan option where each contribution buys incremental units of guaranteed retirement income. In this option, the money is invested in an account that guarantees principal and pays a fixed rate of interest.
• Deferred variable annuities: an in-plan option where each contribution buys incremental units of guaranteed retirement income. The money is typically invested in asset allocation funds with equity exposure and upside potential.
• Guaranteed minimum withdrawal benefit: an in-plan option that guarantees a minimum lifetime withdrawal rate (typically 5 percent at age 65) of a "benefit base." The benefit base varies by product but usually involves cumulative contributions adjusted by either a set percentage annually or market appreciation. The money typically is invested in asset allocation or balanced funds."

The role of consumer-driven health care
We're keeping a close eye on CDHC trends (check out our bi-weekly e-newsletters), realizing many brokers and employers alike see high-deductible plans get a lot more attention post-reform.

In fact, "About 43 percent of surveyed employers have adopted at least one high-deductible health plan," says Natchek at the International Foundation of Employee Benefit Plans, speaking about their 2010 employer survey. "About 21 percent are planning to add or increase emphasis on HDHPs in the next 12 months."

And who could forget Greg Scandlen's motivated speech in April at Benefits Selling Expo. In a nutshell, according to Scandlen, founder and director of Consumers for Health Care Choices, the health care reform bill was the worst piece of legislation ever to come out of a presidential administration, and at this point CDHC is the answer to end the frustration.

CDHC, to recite our coverage on Scandlen's lecture, is "good for the sick and the healthy, the poor and the wealthy. Consumer-driven plans lower costs, allowing families to plan for the future; they also increase participation in wellness and prevention, and improve compliance and health. A lack of restrictions on what kind of treatment consumers can choose means the plans are good for alternative and innovative care."

Additional reporting by Jenny Ivy.
Sources: MetLife 8th Annual Study of Employee Benefit Trends; "Healthcare Reform: What Employers are Considering" published by the International Foundation of Employee Benefit Plans; "The Best Laid Plans: Will Employers Change Their Philosophy Around Employee Benefits?" published by LIMRA; "2010 Employer Opinion Survey," published by United Benefit Advisors; "Behind the Numbers: Medical Cost Trends for 2011" published by PricewaterhouseCoopers.