Employers and benefits managers struggle to balance competitive benefits packages and out-of-control costs. And, experts at Colonial Life say, public sector employers face additional obstacles from revenue shortfalls and increased public scrutiny of government spending.
In a new white paper, the benefits provider examines five strategies that have been proven to help with cost containment. Those include:
- Wellness initiatives
- Pretaxing benefits/Section 125 participation
- Benefits communication and education
- Voluntary benefits
- Dependent verification
According to Colonial Life, government employers who implemented strategies such as these report significant savings in their employee health care benefits. More than half — 55 percent — of participants in the government financial officers study saved at least 6 percent, and 40 percent of them saved more than 10 percent. Other studies show employer return on investment for wellness initiatives ranging from $3 to $6 for every dollar spent.
Click through to examine whether these strategies are actually helping the bottom line while minimizing the impact on employees >>
Wellness initiatives were among the top cost-control strategies implemented by employers in a recent survey of government financial officers, Colonial says.
Nearly 80 percent of survey respondents have added wellness initiatives to their benefits program, and 90 percent of those recommend them to others; nearly two-thirds recommend them strongly. That aligns with a Society for Human Resource Management report showing 75 percent of employers supply their work force with wellness resources and information.
While their popularity has gained, studies have shown return on investment measurements may be purely speculative. According to Corporate Wellness Magazine, 62 percent of employers say their organizations analyze the cost effectiveness, cost savings and return on investment of their corporate wellness programs. Employee participation is the most tracked metric.
Although 87 percent of respondents state their program tracks participation, only 63 percent say their organization regularly monitors employee satisfaction, only 61 percent say organizations assess changes in biometric measures, and 55 percent say their organization assesses and monitors the health status of at-risk employees.
Few respondents state they are tracking productivity metrics – 34 percent do not measure absenteeism, turnover, morale or productivity at all. Only 29 percent monitor the impact on absenteeism, and a mere 18 percent monitor the impact on employee turnover, morale or productivity.
Colonial's research, however, states that estimates from different studies vary but consistently show a return of three-to-one or higher for every dollar invested in a wellness program. According to the white paper, one study of ROI for large employers with more than 1,000 employees showed an average return of $3.27 over a three-year period for every dollar spent. Another study showed employer savings on health insurance costs as high as $6 per dollar invested.
“Public employers clearly see benefits that help them maintain a healthy and productive workforce can also be effective strategies for controlling their benefits costs,” said Anne Spray Kinney, director of research and consulting for the Government Finance Officers Association.
Which programs offer the best ROI?
Health Fairs Direct, a corporate health and wellness events provider, released a report last year based on research articles on wellness studies performaned at organizations like Johnson and Johnson, Bank of America and The California Public Retirees System.
Below, each value in the table is the amount earned for every $1 spent on the program:
- Health risk assessments: $6.04
- Fitness programs: $4.90
- Wellness coaching: $4.90
- Smoking cessation: $3.50
- Flu shots: $2.10
- Obesity management: $1.17
What makes a wellness initiative work?
Two factors can help make wellness programs successful in the workplace, according to Colonial Life:
Good fit: Employers should first assess the particular health risks of their work force. Biometric evaluations, claims analysis and employee surveys should provide a window into what types of health risks any wellness initiative needs to address. After examining the most common types of claims, most common predictive factors and highest-cost diseases, employers can then develop a focused program designed to reduce the occurrences of these targeted health claims.
Communication: Employers can partner with workplace benefits providers that have the experience and skills to effectively communicate with and educate the workforce about wellness initiatives. This drives up participation rates and generates the enthusiasm needed for the program’s success.
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Pretaxing benefits/Section 125 participation
Colonial Life says establishing Section 125 plans and maximizing employees' participation in pretax benefit programs is just as highly implemented and recommended as wellness initiatives. More than three quarters — 77 percent — of employers in the government financial officers survey say they offer pretax benefit plans, and 86 percent of those recommend this option. In fact, at 73 percent highly recommended, it was the most enthusiastically endorsed strategy of the survey options, and only 3 percent were unlikely to recommend it.
Pretaxing benefits gives employees the option to buy qualified insurance coverage with before-tax dollars. This has the effect of making coverage more affordable by reducing the taxable portion of employees’ pay, so they pay lower income taxes.
According to a case study included in the white paper, a North Carolina community college with about 1,000 employees streamlined its benefits enrollment and enhanced communication of its flexible spending account, increasing participation by 68 percent. This created more than $100,000 in tax savings for employees and $26,000 in FICA savings for the college.
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Benefits communication and education
Employers can transfer the cost of benefits plan communication to their benefits suppliers and can outsource an enrollment system and open enrollment management rather than maintaining these responsibilities in-house, according to Colonial Life.
Although this shift in benefits communication and enrollment responsibilities is well-recommended by those using it, it’s not yet widely implemented. In the government financial officers survey, only 31 percent of employers were using an external service provider for benefits enrollment and 52 percent had shifted benefits education and communication expense to suppliers. However, 78 percent of those who outsourced enrollment would recommend it, and 84 percent recommended using a benefits carrier to handle benefits education and communication.
[Next: Voluntary benefits]
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One underutilized solution to the benefits cost problem is to move noncore benefits to employee-paid voluntary benefits.
This strategy is another example of a change that fewer public sector employers have yet to implement, but those who do give it very high marks. Only about a third of employers in the government financial officers study said they have moved noncore benefits to employee-paid voluntary coverage. However, 87 percent of those employers recommended this strategy, and 70 percent recommended it strongly.
[Next: Dependent verification]
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Providing insurance coverage for dependents who are no longer eligible drives up benefits costs for employers. Health plan audits can reveal a significant number of ineligible participants, including dependents who are over age or who aren’t a blood relative or a spouse, or former employees who haven’t been removed from the plan. The potential cost savings offered by dependent verification can be considerable, and the service is sometimes available at no cost to the employer.
(photo credit: Ambro/freedigitalphotos.net)