Benefits are offered for two primary reasons: recruiting and retaining employees. The best test of a successful benefits program is employee participation level.
Although medical is only one of many benefits that can be offered, it is a core benefit. Over the years, participation in medical plans has slipped from 100 percent down to as low as 50 percent. Most employers have failed in their mission to provide benefits primarily because they are trying to maintain the benefit cost level at the expense of having employees drop their coverage. In addition to losing the core value of retention, groups are in jeopardy of their plans terminating. Most insurance carriers and HMO plans require a minimum of 50 percent participation.
When participation drops, the health risk of the smaller enrolled population is greater, resulting in larger increases at renewal. This cycle is a death spiral that can lead to plan termination. Once you lose an enrollee, it is doubly tough to get them to return to your plan. You will have to offer a substantially better-priced plan than their alternative in order to motivate them to drop their alternative plan and return to your plan.
It is inevitable that we are returning to major medical plans with high deductibles, but most employers are afraid to even offer these plans. Remember one thing employees are more concerned about their payroll deductions than they are about the level of coverage.
Employees don’t know if they will be sick, but they do know that every pay period they will have a payroll deduction for their plan. Eighty percent of plan members use less than $1,000 a year in medical benefits. Forty to 60 percent of the enrolled members use less than $500 a year in medical benefits. The point is that most people are overinsured. Once again, employees are more concerned about their payroll deductions than they are about the level of coverage.
Many people forget that high-deductible plans can still have co-pays for office visits and prescription drugs. High-deductible HMO plans with co-pays are priced less than most HSA plans, and HSA plans cannot have co-pays. Most HSA plans are based on PPO platforms, which by default are more expensive than high-deductible HMO plans with co-pays.
Now that we have beat up medical, lets review your other benefits. Other company-sponsored benefits are becoming as powerful as medical.
These other benefits do not have be a free benefit to the employee. Voluntary benefits continue to gain momentum. Participation on voluntary benefits do not have to be high. The general rule of thumb is that if you can’t get 25 percent participation in a voluntary benefit, then it may not be a strong value proposition.
Getting all or most of your employees to participate in at least one company-sponsored benefit is the ultimate goal.
Voluntary benefits include AFLAC, vision, dental, disability, life insurance, auto and home insurance, and even pet insurance. Although some funding by the employer helps the value proposition, the best voluntary benefits don’t need it.
Group auto and home insurance can be the best voluntary benefit, because employees are already paying for that coverage and the savings are typically 10 percent. The other value of group auto and home insurance is that it is payroll-deducted and does not require the typical 3 month to 6 month initial payment.
One tool employers should use in evaluating the competitiveness of their plans is a survey of other employers’ benefit offerings. Understanding what other employers offer and how much they charge employees can be a powerful tool. Your agent should be the best source for providing benchmarking and survey data.
Bruce Bishop (firstname.lastname@example.org) is director of marketing and managing partner of KYBA Benefits. KYBA Benefits provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 employees to more than 7,000. Reach Bishop at (770) 425-6700 or (800) 874-2244, ext. 205.