Best-in-class large and mid-sized employers are able to more effectively control their health care costs and better manage HR functions, as measured by lower turnover and higher employee satisfaction, according to two Gallagher Best-in-Class Benchmarking Analysis reports, based on employer responses to Gallagher’s 2017 Benefits Strategy & Benchmarking Survey.
Best-in-class large employers with 1,000 or more full-time employees achieved at least one of the following metrics for premium cost increases in the past three years: 3.9 percent or less for the last three years; 0.9 percent or less for two of those years; or 0.9 percent or less for one year plus 3.9 percent or less for another year.
One way they achieve this is by spending less — 62 percent best-in-class large employers spend under $10,000 on employer-paid benefits per eligible employee, compared to 42 percent of other large employers. To make sure eligible workers are enrolled in the appropriate plans, 68 percent of the best-in-class perform audits, compared to 47 percent of their peers. In addition, they have a greater tendency to self-administer maternity leave (83 percent vs. 71 percent).
“While employers may contain costs by using these spending approaches, they risk possible consequences from shifting more financial responsibility to employees — including impacting employee health and talent recruiting and retention,” the authors write. “For this reason, best-in-class employers for human resource management and the best of the best tend to avoid these tactics.”
The “best-of-the best” – those who excell in both categories – are more inclined than other large employees to consider compensation and benefits as investments in maximizing workforce performance to achieve business outcomes (50 percent vs. 26 percent) — instead of simply the costs of doing business (4 percent vs. 17 percent).
More than half (54 percent) of the best-of-the-best execute multi-year benefit strategies, compared 30 percent of other large employers, and are more likely to integrate health and disability management programs (54 percent vs. 32 percent). In addition, 42 percent of the best-of-the-best
carve out their pharmacy benefit from their health plan in an effort to better manage costs, compared to 20 percent of their peers.
“Together, these practices support a more proactive, aligned and comprehensive approach to total compensation,” the authors write.
Gallagher also compared the metrics for mid-sized employers with 100 to 999 full-time employees. Best-in-class mid-sized employers are less likely to increase employee contributions to health plan premiums (43 percent vs. 57 percent), or add to employee expenses through benefit plan design changes such as higher deductibles, copays or coinsurance (41 percent vs. 55 percent). And fewer are considering defined contribution as a cost-control method (7 percent vs. 14 percent).
Options like self-insured medical plans are more common among best-in-class employers (62 percent vs. 41 percent).
“In return for claims that pose a higher financial risk under this funding arrangement, they gain lower health plan fees, greater control over healthcare costs and — if costs are managed well — possible savings,” the authors write.
The best-in-class mid-sized employers more frequently use health programs and services to control costs than their peers do — including wellness (63 percent vs. 54 percent) and disease management (45 percent vs. 31 percent). They also extensively integrate their health and disability management programs (26 percent vs. 18 percent).
“This more sophisticated, proactive approach focuses on maintaining employee health and wellbeing,” the authors write. “The goal is to give management the tools they need to keep employees actively at work, in spite of injuries or illnesses.”
The best-in-class mid-sized employers for human resource management have a greater financial stake in their benefits, with 56 percent reporting a higher average cost of employer-paid benefits per eligible employee — $10,000 or more — compared to 46 percent for their peers. Their annual health plan deductibles tend to be lower — they’re less likely to offer in-network deductibles above $2,000 for individual coverage (16 percent vs. 27 percent) or above $4,500 for family coverage (18 percent vs. 28 percent).
Still, they report a better balance of wages and bonuses compared to benefits spending (83 percent vs. 75 percent). A possible contributor may be their higher rates of multi-year labor cost modeling used for compensation planning (24 percent vs. 19 percent)
“This ability to proactively plan instead of reactively respond helps them apply a more strategic and integrated approach to benefits management and cost control,” the authors write.