Wellness programs and initiatives are evolving as employers realize healthier employees give them a competitive edge.
“It’s an issue of creating a high-performing, competitive work force,” says Nancy Pokorny, managing consultant with Findley Davies. “Currently, many companies hang their hat on being world-class safety organizations. They know that maintaining a safe work environment is good for business. As we move forward, companies will be known as ‘healthy organizations,’ too.”
Smart Business spoke with Pokorny about the evolution of wellness programs.
How have wellness programs evolved in recent years?
In the recent past, company HR leaders or benefits staffs initiated wellness programs, but now executive teams are driving strategic wellness initiatives. We prefer ‘wellness initiatives’ because programs tend to have a beginning and an end. Initiatives are much more strategic and imply that wellness is one component of the overall business strategy.
For example, a Fortune 500 Cleveland manufacturer underwent a global HR system implementation that required a year-long, intense work schedule for members of HR, IT and project management teams. Prior to launch, project team members gathered for wellness training. They were given free access to health management tools so that they could manage their health throughout the rigorous project. The focus was not on benefits cost reduction; it was on achieving peak performance.
Additionally, employers are integrating multiple initiatives, such as wellness, benefit plan design, health and safety, and onsite clinics to improve employee health. And research supports the interconnectivity of these various initiatives.
A National Council on Compensation Insurance Inc. study shows a link between obesity and higher workers’ compensation costs, finding that obese injured workers received an average of 75 treatments for an injury versus an average of four treatments for those deemed to be nonobese.
What are the most important components of a wellness initiative?
There are three: leadership, permanent commitment to change and accountability. Let’s look at each one, starting with leadership. Too often, leaders provide verbal support, and maybe even financial support through the allocation of a wellness budget, but they have no real role in the initiative. The organization’s leaders and key influencers must have clearly stated roles, just as they would with a new sales, marketing or reorganization initiative.
Second, in order for wellness to become a permanent part of an organization’s culture, wellness should not be something you ‘do,’ it should become a part of who you are as an organization.
Research from Cornell University’s Food and Brand Lab indicates we make approximately 200 decisions daily related to food alone. For the eight to 12 hours a day an employee is at work, it provides a great opportunity to enable good decision-making. This includes food and beverage choices and areas for movement, such as open stairwells.
Finally, as with any change management process, there needs to be accountability for change. We are seeing the use of incentives for health management activities and outcomes. We recommend that these incentives apply not only to those who are enrolled in the corporate benefit plans but to all employees.
One caution about incentives — they are good tools for jumpstarting initiatives but they do not change behavior in the long term. That’s where leadership and permanent culture change come in.
How can you tell if a wellness initiative is working?
With expert help and use of a third party to protect employee privacy, there are several steps you can take to measure the impact of your wellness initiative.
- Categorize your employee population by health risk group through a health screening and measure the movement between risk categories.
- Determine the number of employees with one or more chronic conditions such as high blood pressure, high cholesterol, diabetes, etc. How many are actively managing chronic conditions through medications and lifestyle changes? Are they reversing their conditions by working with a health coach, an onsite health center or personal physician?
- Look at change in attitude toward health from year to year, via employee engagement surveys, culture surveys or wellness surveys.
- Measure the advancement of the physical work environment. Is the cafeteria or vending area seeing an increase in the sale of healthy products versus nonhealthy products?
- Analyze aggregate information from benefit programs to find changes in utilization and other patterns, such as if the percentage of employees receiving preventive care exams increases or the percentage of employees visiting the ER decreases.
By using this type of ‘wellness dashboard,’ you can determine which efforts are working and allocate resources to those making the greatest impact.
Are wellness initiatives relevant only to those companies that offer health care benefits?
No. If you focus only on the employees in your benefit plan, wellness initiatives appear to be more about saving money for the company than creating and maintaining a healthy, productive work force. Similar to the efforts in establishing a safe work environment, efforts to create a healthy work environment are here to stay. A healthy work force will outperform an unhealthy one because there is a greater energy and capacity for work.
Nancy Pokorny is a managing consultant at Findley Davies. Reach her at (216) 875-1939 or firstname.lastname@example.org.
Insights Human Capital is brought to you by Findley Davies Inc.
Health care providers such as hospitals — particularly the more enlightened ones — started to reform years prior to the Patient Protection and Affordable Care Act (PPACA). Although the law crystallized the industry’s direction, health care systems faced pressure to reinvent themselves long before the act. This reinvention has not only affected the delivery model but also the human capital requirements within the health care system.
“There’s a big shift to outcome-based rewards as opposed to transaction-based rewards,” says Rob Rogers, a principal and health care industry leader at Findley Davies, Inc. “In other words, what is the quality of care provided as opposed to how many units of X were done in the fiscal year.”
Smart Business spoke with Rogers about the outlook for hospitals and health systems, and what this means for business owners.
How will reform affect revenue and other financials for hospitals and health care providers?
The topline or gross revenue for health care systems — which can either be an integrated network comprising multiple hospitals, physicians, clinics and outpatient treatment centers, or an independent community hospital — is going to jump. In particular, hospitals will have more patients as result of 30 million people now being covered under an ‘insured’ delivery system. Providers face the challenge of bolstering staff while facing a shortage of nurses and physicians.
Despite volume increases, net revenue will come under a lot of pressure as reimbursement levels from insurance carriers and Medicare and Medicaid continue to decline. Health care providers are being forced to scrutinize operating expenses to ensure they are providing care as efficiently as possible.
How will patient care be impacted?
More focus on clinical outcomes is one good thing occurring through reform — not necessarily the governmental legislative act, but the whole process. The health care system has recognized, based on internal pressure and pressure from employers covering health care costs, that patients and plan sponsors aren’t interested in paying for the volume of diagnostics. The reform focuses on keeping people healthy. If there are health problems, then the attention shifts to measuring outcomes such as the success rate of treatments, morbidity rate, length of hospital stay, patient satisfaction, etc. Health care systems must learn to cope with the continuous challenge of providing the right mix of care while, at the same time, getting paid for it.
What kind of consolidation and collaboration do you expect?
More collaboration among providers and consolidation of various related-care entities have already started. Some think only large health care systems will be able to operate in this new environment because they have enough volume to manage the margins better. However, while community hospitals will continue to operate independently, there will be pressure for them to partner with other community hospitals or to create alliances with the larger hospital networks.
Physicians are also building more partnerships. In 2010, for the first time, more physicians were employed by organizations such as hospitals and other related entities than were in private practice, though many independent physician groups exist in Ohio.
Health care reform works to eliminate silos of treatment. So we’re seeing the development of an integrated delivery model, with numerous entities working together under one umbrella to provide more efficient and better quality care. To remain competitive, physicians are creating alliances with patient care providers such as hospitals and nursing homes.
How will the operating procedures for health care providers differ?
Health care systems are taking a more proactive role in physician and nurse development and recruitment by providing financial assistance to university students in exchange for employment arrangements. With the assistance of experts to provide strategy, hospitals are looking at how they attract, retain and reward physicians, senior leadership and nurses to ensure staff is highly motivated and delivering quality care.
Most health care systems and hospitals are not-for-profit, tax-exempt organizations. As pressure increases from the public, Congress and state legislators, most health care providers are paying close attention to transparency in everything they do from audits, executive compensation and governance. More and more tax-exempt organizations are operating like public companies, which must comply with Sarbanes-Oxley requirements.
There isn’t a more public entity than a tax-exempt organization — the general public is the taxpayers. Rules governing the reasonableness of executive compensation and benefits under intermediate sanctions statutes are creating added pressure on health systems to ensure transparency and objectivity when dealing with executive rewards.
How might these changes impact business owners who provide health care plans?
The reform, apart from PPACA, is going to be mostly positive for business owners. While there may be additional costs associated with reform, the system will be more efficient with more focus on preventive care and wellness, which are steps in the right direction. There will be more integration with fewer silos of care. There’s more concern with helping the patient get from A to B to C without jumping through hoops. It will be less costly, more efficient and the outcomes will be better, which will make employees healthier.
The health care industry is rapidly changing. As health care providers work to deliver more efficient, better quality care, employers and employees both should be able to reap the benefits.
Rob Rogers is a principal and health care industry leader at Findley Davies, Inc. Reach him at (216) 875-1926 or email@example.com.
Insights Human Capital is brought to you by Findley Davies Inc.
On June 28, the U.S. Supreme Court upheld the majority of the Patient Protection and Affordable Care Act with a 5-4 ruling. As both sides of the political spectrum use the decision on the controversial law to win support for their own policies, employers may be wondering where this leaves them.
“The decision provides some necessary clarity that can lead to more decisive health benefits planning,” says Bruce Davis, principal and leader of Health and Group Benefits Consulting at Findley Davies.
At the same time, Davis warns this ruling isn’t the end of the matter. Some health care issues are unlikely to be resolved until after the November election and the health care exchanges smaller Ohio employers were counting on will be operated by the Department of Health and Human Services.
Smart Business spoke with Davis about what the Supreme Court’s decision means for employers now and in the future.
How does the Supreme Court’s decision impact employers?
Employers now know what they need to do this fall as they head into open enrollment. They need to:
- Comply with the new Summary Benefit Coverage requirements by modifying open enrollment materials to include new coverage examples with help from health insurance carriers or third-party administrators and professional advisers.
- Work with payroll vendors, IT staff and human resources to ensure they can report the aggregate cost of their employer-sponsored health coverage on employees’ W-2s to be issued in January if they have more than 250 employees.
- For plan years beginning on or after Aug. 1, provide expanded coverage for eight categories of women’s preventive care without cost sharing if they are nongrandfathered under the PPACA.
What might this mean in terms of cost?
For 2013, businesses can examine their demographics to understand what expanded women’s preventive care requirements mean in terms of increased claims costs, but generally, Findley Davies believes it will be approximately 1 percent. Other costs, such as coverage for children up to age 26 and general adult/child preventive care requirements had already gone into effect.
Cost increases may elicit new work force strategies. For example, employers with more than 50 employees will be penalized for not offering essential health benefits or offering benefits deemed unaffordable. However, those requirements apply to full-time employees — those working an average of 30 or more hours weekly. Employers in some industries may begin using part-time employees or independent contractors to a much higher degree.
What parts of the Affordable Care Act remain undecided?
In July 2012, Ohio and several other states decided not to participate in expanded Medicaid, which was permitted in the Supreme Court decision, and will not establish a state-based health insurance exchange. HHS will operate the exchange in Ohio in 2014 to serve individuals and employers with fewer than 100 employees. Smaller employers were investigating the idea of moving toward a defined benefit contribution model and letting employees use the exchange to choose their own coverage based on their risk tolerance.
If you have fewer than 100 employees, you’ll need to follow the developments in each of the states in which you do business to determine whether they will move ahead with a health insurance exchange for 2014. It won’t be clear for another year which carriers will participate in each exchange, which plans will be offered and their costs.
Further, the first comparative effectiveness research fees are due July 2013. Employers will remit the $1 per member fees using IRS Form 720, but the IRS has not yet revised that form to take these fees into account. There also are several requirements where the federal government should be issuing guidance in 2012, such as how to file a quality of health care report and how non-discrimination rules apply to insured plans that favor highly compensated employees.
How does politics play into what happens next?
This will be a huge issue for the November election. For example, if the Democratic majority in the Senate changes, then some smaller measures might pass, such as restoring the ability to pay for over-the-counter medicines under flexible spending or health savings accounts.
However, employers cannot wait for the election results. Even if Republican candidate Mitt Romney is elected, the inauguration won’t happen until Jan. 20, well after businesses must comply with some of the act’s provisions.
What should employers tell their employees?
The decision relieved some anxiety and provided clarity, but employers need to begin communicating to their employees. Take advantage of this opportunity and reinforce your commitment to providing a competitive, affordable health plan as you work to comply with the new PPACA requirements.
Employers also need to be ready for questions from their female employees. Health care flexible spending accounts will become limited to $2,500 in January, which needs to be explained in upcoming open enrollment materials. In addition, there’s the misconception that reporting the value of health care coverage on a W-2 means it is taxable. Employers need to be proactive in explaining that this is information gathered for the federal government so it can administer the premium subsidies under the health insurance exchange programs.
Health benefits remain a very important part of employees’ total compensation. Employers will want to drive that message, as well as demonstrate how these benefits fit into the overall value proposition of what it means to work for their organization.
Bruce Davis is principal and leader of Health and Group Benefits Consulting at Findley Davies. Reach him at (419) 327-4133 or firstname.lastname@example.org.
Insights Human Capital is brought to you by Findley Davies, Inc.
The Patient Protection and Affordable Care Act (PPACA) has had a bumpy ride since before it became a law, but it might be facing its biggest challenge yet from the U.S. Supreme Court.
With the possibility that the court will strike down the entire act this summer, businesses need to start thinking now about how they will handle their health care coverage if that happens.
“I think people will be scrambling to figure out what this all means if the act were to be struck down,” says Bruce Davis, principal and leader of Health and Group Benefits at Findley Davies. “Employers need to take the time now to ask themselves, ‘What would we do Jan. 1, 2013, if the act is stuck down. What changes would we make?’”
Smart Business spoke with Davis about what challenges business face and how they should prepare if the Affordable Care Act is ruled unconstitutional.
What’s the current situation with the Affordable Care Act?
Everyone is waiting for the Supreme Court to render its opinion. Oral arguments were held in March, and the justices have indicated that they will render their opinion by July. It’s widely felt that the court will strike down the individual mandate within the act, which is the requirement that each citizen purchase health insurance. However, now there is a higher probability that the entire act will be struck down.
The American Benefits Council and the Blue Cross and Blue Shield Association filed briefs prior to oral arguments laying out strong cases that the individual mandate is so closely linked to the employer-shared responsibility (i.e. pay or play) provisions and insurance market reforms that the individual mandate can’t be excluded without striking those other parts, as well. In addition, some justices, such as Justice Antonin Scalia, have signaled their reluctance to wade through 2,700 pages of the law to figure out what should stand and what should go.
What are some of the challenges employers face if the entire act is struck down?
Companies have started planning for new health care reform requirements that will begin soon, such as the new communication requirements for summaries of benefit coverage, or determining how to report the aggregate value of employer-sponsored health coverage on their 2012 W2s.
Employers need to go beyond this to consider what they will do if certain PPACA coverage requirements no longer exist. For example, any organization that decided to forfeit its grandfathered status by increasing employee cost-sharing beyond specified limits would have to pay 100 percent for a comprehensive set of preventive care services, including contraceptive and sterilization services that concerned many religious employers.
If the Affordable Care Act is struck down, employers will have to balance the need to contain their health care expenses through cost sharing with the idea of sending employees messages that emphasize wellness and prevention.
Another consideration is that, under the act, employers aren’t able to cover over-the-counter prescription drugs through a Flexible Spending Account (FSA), health reimbursement arrangement, or Health Savings Account (HSA). Without the act, an employer might want to give employees incentives to use less costly over-the-counter medication.
It gets more complicated when employers start to unravel provisions they’ve already implemented. For example, under the Affordable Care Act, employers were able to extend coverage to dependent children up to age 26. If the act is struck down, will employers revert to pre-Affordable Care Act definitions of dependent children, such as to age 19, or to age 23 if a full-time student? Some employers might be uncomfortable with taking such coverage away, but without the act, that coverage will no longer be non-taxable.
Another example is the early retiree reinsurance insurance program (ERRP), in which the federal government paid out $5 billion to help employers sustain their retiree medical plans. Much of the ERRP was paid to state governments and to union health and welfare plans. If the Affordable Care Act were struck down, would a Republican-controlled House want that $5 billion back?
The Supreme Court is unlikely to provide any kind of transition rules or remedies if the act is struck down. While it’s possible the Obama administration would provide some direction, it’s unclear how the U.S. House will react. It’s anybody’s guess. Employers need to be prepared and start thinking about this.
What can employers do to prepare ahead of the court’s decision?
Employers need to take the time now to think about what they would or would not do as of Jan. 1, 2013, in the event the act is struck down. Many employers assume the act will remain in place, but it’s best to consider the opposite possibility and think about how such a verdict impacts the direction of their health plan and its cost-sharing features in terms of employee contributions, deductibles, co-pays or out-of-pocket maximums.
Employers should start having conversations among their leadership teams, especially human resources and finance, because there might be some tension between those two groups. For example, human resources may be inclined to leave things as they are to minimize concern on the part of their employees, while finance will be looking at all options to restrain growth in health benefit costs.
Bruce Davis is a principal and leader of Health and Group Benefits at Findley Davies. Reach him at (419) 327-4133 or email@example.com.
Insights Human Capital is brought to you by Findley Davies
Although the stock market has rebounded, most defined benefit pension plans are still facing difficult decisions related to their retirement philosophy and related workforce strategy. General Motors, Sears and Bank of America are a few of the companies that have recently announced major plan changes, but even small and mid-size companies are reviewing their retirement strategy.
The underfunding and asset-liability mismatch continues to challenge plan sponsors. According to the 2012 MetLife U.S. Pension Risk Behavior Index Study, plan sponsors no longer believe they can rely on traditional portfolio diversification alone to meet future obligations; many are considering changes.
“Despite on-going cash funding of pension plans over the past 10 years, many plan sponsors still find their plans underfunded due to market volatility and low interest rates,” says Steve Parsons, FCA, MAAA, and principal with Findley Davies, Inc. “This situation has resulted in employers reevaluating their pension strategies. This evaluation process includes a review of potential changes to plan design, funding, and asset allocation strategies. Several have reduced their commitment via plan changes, plan freezing, or terminating a defined benefit pension plan.”
Smart Business spoke with Parsons about the current pension underfunding crisis and the possible solutions for plan sponsors.
Why has pension underfunding reached a crisis point?
Although pension portfolios took a hit during the 2008 market correction, the current crisis has really been brewing over the last 10 years. Marketplace volatility, low interest rates and changes in accounting procedures and cash funding rules have converged and boosted the number of companies with underfunded plans by 20 to 30 percent. The Pension Protection Act of 2006 reduced the opportunity for employers to have funding strategy options and now requires them to fund shortfalls over a seven-year period. The bottom line is that companies have taken this opportunity to reevaluate their retirement strategy and philosophy. As a result, employers tended to elect one of three paths: maintain their commitment to the current plan, keep their current plan with a reduced formula, or freeze their pension plan and shift to a 401(k) strategy.
When is freezing a plan a viable solution?
Defining options and strategy can empower an employer to properly align market competitiveness, cash funding strategies, and strategic work force plan. When evaluating a freeze to the pension plan, an employer should consider how the decision to freeze its defined benefit pension plan will impact talent acquisition, morale and retention down the road.
Freezing the pension plan can be accomplished several ways, including closing the plan to new participants, partially freezing the plan that protects older participants, or a hard freeze impacting all participants.
A soft freeze allows companies to grandfather the current plan for older employees based on age and/or service and move everyone else to a 401(k) plan. A hard freeze shifts the risk to all employees via a defined contribution plan from the plan freeze date forward. The transition may cost the employer more to shift to a 401(k) plan in the interim years as the employer continues to fund the pension plan while contributing to the new 401(k) strategy.
What are employers doing to target plan termination in the future?
Terminating the plan and providing a lump-sum payment or purchasing annuities with the proceeds is certainly an option for participants. But given today’s low interest rates, most companies need to provide additional funding to purchase annuities that fulfill their long-term pension obligations. The key is connecting your actuary, financial staff, and investment advisors, defining the glide path and seeing when it might be advantageous to pull the trigger. We could see higher interest rates or get regulatory relief down the road, impacting the timing of the decision. As of now, about a third of our clients are committed to their current plans, a third have frozen their plans and shifted the risk of retirement planning to employees, and a third are still considering whether to freeze or terminate their defined benefit plan in the future.
Should employers be considering other solutions?
Employers should redefine their pension strategy in relation to total rewards and how they want to allocate internal resources in the future. For example, administrating a frozen plan may not be the optimal use of internal staff and resources. They will also need a comprehensive communications plan to explain pension plan changes to current staff and retirees. If stakeholders will be assuming responsibility for selecting investments and planning for retirement, they should be given the opportunity to provide feedback through a compression planning process. All of these issues must be considered and addressed before a company decides to freeze or terminate their defined benefit pension plan.
What’s the best way to evaluate the various options and select the right solution?
Consider how each option will impact the company and employees both short-term and down the road, because among other things, companies may no longer be able to control turnover or the timing of employee retirements if they switch to a defined contribution plan. Examine the impact of the change on administrative policies and procedures to determine the cost benefit of internal versus external management to minimize cost and liability. For a frozen or terminated plan, allow sufficient time for the transition, because employees will need considerable education before they’re ready to take the reigns of their retirement planning process. Finally, don’t be hasty. The solution to the pension plan crisis is different for everyone and changes can be reevaluated down the road if the pension plan is maintained in either an active or frozen state. This will give employers options for future work force issues and strategies.
Steve Parsons, FCA, MAAA, is a principal with Findley Davies, Inc. Reach him at (216) 875-1924 or SParsons@findleydavies.com
Insights Human Capital is brought to you by Findley Davies, Inc.
Beginning in May, approximately 60 million people will discover some new information in their 401(k) statements. Not only will they find out whether they made or lost money, for the first time, many will see how much they paid in plan fees and expenses.
Of course, plan sponsors not only have to comply with the new regulations and meet their fiduciary responsibilities, but they also have to justify the plan’s administrative costs to participants, who have been resorting to class action lawsuits after enduring more than a decade of lackluster returns.
“Plan sponsors may face a tsunami of anger and questions from participants unless they get out in front of this change,” says Kyle Pifher, principal, retirement plan services for Findley Davies. “Otherwise, some participants may be shocked to discover how much they’re paying in plan fees.”
Smart Business spoke with Pifher about the impact of the new disclosure regulations and why plan sponsors need to take proactive steps to address employee concerns.
What are the new mandates?
There are two critical components in the new regulations. First, beginning in April 2012, third party providers and recordkeepers must disclose a detailed summary of all fees and charges that exceed $1,000 to plan sponsors as mandated by 408(b)(2). Then starting May 31, individual participants will see their portion of those fees on their plan statements as mandated by ERISA Section 404(a)(5).
Why did the DOL propose new regulations?
The need for greater transparency became apparent following the market correction in 2008, when participants openly questioned fees as their account balances plummeted. Essentially, there was no consistency in the way fees were assessed or disclosed, making it difficult for plan sponsors to uphold their fiduciary responsibilities, which include prudent selection of service providers, monitoring fees and ensuring that reasonable compensation is paid for services to maintain the plan. In other words, the DOL is simply responding to the long-standing need to disclose a detailed break-out of fees and expenses that were often consolidated into a single charge or hidden in the fine print.
How do the changes shift or alter the duties and responsibilities of plan sponsors?
The fiduciary responsibilities of plan sponsors are essentially the same, but the new laws and detailed fee disclosures will certainly illuminate their rigor and performance. For example, participants may wonder whether the fees are reasonable given the plan’s risk and returns, since fiduciaries have an obligation to act prudently and solely in the interest of participants by monitoring plan fees and ensuring that the charges aren’t excessive. So, sponsors will need to show how they benchmark third party fees and be prepared to explain their selection and oversight methodology. Participants may also question their investment choices.
What are the benefits for plan sponsors and the possible drawbacks or unintended consequences?
Certainly the increased transparency will help sponsors benchmark and compare fees across companies and industries and negotiate every charge, which could ultimately lower the total cost of the plan. The good news is that the fee disclosures may encourage participants to read their statements and manage their investments, because optimizing retirement plan returns benefits everyone in the organization. On the negative side, this could create animosity toward the employer if fees have not been disclosed and employees feel as if they have been left in the dark. And we’re seeing more class action lawsuits from disenchanted participants, who are protected by the prudent man rule, which states that trustees must manage another’s money using skill and care.
How are companies using this new information to assess service provider fees?
We’re seeing more companies engage an outside consultant to conduct plan reviews and side-by-side fee comparisons along with a greater desire to benchmark current fees against industry standards. As a result, more companies are soliciting bids and changing providers, especially if they feel that plan providers aren’t charging reasonable fees or delivering value.
How can plan sponsors head off problems before they occur?
Follow these steps to head off problems before they occur.
- Review third party fees and expenses: Know where you stand before participants receive their May or June statements, so you can anticipate their concerns and negotiate fee reductions or even change providers. It’s also prudent to review your plan’s investment choices to see if they are aligned with your employees’ risk tolerance and desired rate of return based upon the current needs and demographics of your employee population.
- Communicate transparently and proactively: Fully disclose all service fees using language and terms that resonate with your employee base. Describe the services they provide and how your current fees compare to those charged by other providers.
- Provide education: Offer educational meetings, brochures and call center support, so employees understand the role of plan providers and how they develop their fees. In fact, this is the perfect time to review retirement plan fundamentals and the current investment options; because your 401(k) isn’t a benefit unless it actually helps your employees meet their retirement goals.
Kyle Pifher is principal, retirement plan services at Findley Davies. Reach him at KPifher@findleydavies.com or (614) 458-4651.
Between blogs, e-mails, tweets and text messages, experts estimate the average person is bombarded by a staggering 100 kilobytes of textual information each day. The resulting overload can cause employees to ignore vital messages that have a direct impact on their well-being as well as the bottom line. Instead of using read receipts or daily reminders to chide employees into reading critical communications, innovative leaders are finding that a picture is worth a thousand words.
“Cartoons are effective because they evoke emotions and people remember them,” says Denise Reynolds, senior communications consultant. “It’s a simple, cost-effective way to grab someone’s attention in a crowded digital world.”
Smart Business spoke with Reynolds about the benefits of using cartoons to convey critical messages.
Why are cartoons an effective way to communicate key messages?
Cartoons not only stand out from traditional communications — they’re concise. It can take hundreds of words to convey the ideas contained in a single image. For example, getting employees to read wellness and benefits literature was a constant struggle at Jergens. So we suggested that the small manufacturing company create mascots and use cartoons to encourage health screenings and educate employees about preventative care. Within days of e-mailing the cartoons and projecting them on the Jumbotron in the manufacturing plant, everyone in the company was talking about Chip and Scrap. Employees said they were previously unaware of many stress-reducing benefit programs like EAPs (employee assistance programs). The company is even considering using them in an upcoming sales and marketing campaign.
Are some topics better suited to cartoons than others?
Consider using cartoons to simplify complex messages or to lighten up drab, but important topics. Retirement planning, pension vesting and safety are good examples, because it’s easier to understand a complex vesting process if it’s broken down into steps in a cartoon panel. The key to garnering interest is creating characters that will resonate with employees. For instance, Jergens’ employees can relate to Chip and Scrap, because they’re based on real products that are part of the company’s manufacturing process.
What are the best practices for incorporating cartoons into a communications campaign?
- Let the characters do the talking. Let the characters convey your messages and display their unique personalities. For example, Chip is usually on his game while Scrap frequently makes mistakes and could use coaching.
- Inject the characters into various media. Inject your mascots into brochures, training videos and blogs so employees become familiar with them and learn to pay attention to their messages. You can even use them on your Facebook page or ask your employees to follow them on Twitter.
- Be patient and persistent. Tailor your messages toward your employee population and repeat them for several months, because any type of marketing campaign is more effective over time.
- Measure ROI. Compare the cost and effectiveness of brochures, letters and memos to cartoons and, most importantly, measure the impact of various media on employee behaviors and the bottom line.
- Make them interactive. Include pop-up messages and links to external videos, Web sites or brochures in each cartoon so employees can source additional information.
- Have fun. It’s OK to have fun and laugh at ourselves, especially in today’s difficult climate. You may find cartoons lift the mood of the company and even inspire creativity.
How can executives and HR leaders measure the effectiveness of creative campaigns?
Initially, you can judge campaign effectiveness by measuring the growth in hits, click-throughs and the amount of time employees spend viewing each cartoon, but, over time, you should see improvements in tangible measures like adoption rates, lower health care costs and changes in employee behaviors. Campaigns can be built to match each company’s budget and you can test pilot a few cartoons without making a big financial commitment. One company saw an immediate jump in health screenings after sending out just one cartoon. Another saw half of its employee population participated in open enrollment during the first five days of the period. It’s also important to gather feedback through employee surveys and focus groups to make sure they’re getting the message and fine tune your campaign.
For more information, contact Susan Riffle, the marketing manager with Findley Davies. Reach her at firstname.lastname@example.org or at (216) 875-1908.
HR professionals haven’t seen a need to revise their company’s health care strategy. After all, they’ve been busy with staff reductions and taking steps to offset rising health care costs, while waiting for a government committee to clarify the murky details of health care reform.
But it’s time to stop procrastinating and get back to the drawing board, because employer health care costs are projected to rise by 7 percent in 2012 and insurance carriers are reporting an increase in employee claims for illnesses related to post-recession stress.
“It’s easy to avoid change in times of uncertainty, but at some point it only puts you further behind,” says Bruce Davis, principal and national practice leader for Health & Group Benefits at Findley Davies. “Employers should continue introducing purposeful changes to their health care plan within the context of a clearly conceived strategy.”
Smart Business spoke with Davis about the latest health care trends and how employers are using the information to make plan changes and update their current strategy.
Is cost shifting the new reality?
Surveys show that companies will continue shifting costs onto employees, who are already stressed because they’re working longer hours and haven’t received a substantial raise since the start of the recession. So this is the perfect time to revisit your basic contribution philosophy. For example, it might make sense to shift costs for dependents and part-time workers instead of reducing the health care subsidy for full-time employees. If you communicate a new pricing structure and reinforce the eligibility requirements before open enrollment begins, employees may voluntarily lower costs by removing ineligible dependents or transitioning to a less expensive plan. If your plan costs are still too high, consider conducting a dependent audit or changing the spousal requirements, because you may be able to avoid additional cost shifting.
Is wellness really the solution to rising costs?
Employees receiving short-term disability benefits may be responsible for more than 50 percent of an employer’s health claims. Furthermore, new studies indicate obese workers have greater incidence of workers compensation claims and a longer/more expensive duration of treatment.
Also, working long hours while caring for an aging relative creates so much stress that employees often use the Federal Medical Leave Act to take time off and are less productive when they finally return to work. Savvy employers are starting to understand the connection between work-related absences, family issues, depression and disability claims, so they’re taking a holistic approach to wellness by bundling health incentives with workplace safety programs. They’re also offering stress-reducing benefits like EAP and elder care resources in an attempt to control the entire spectrum of health-related costs.
Will employers continue migrating toward high deductible health plans and HSAs?
High deductible plans and HSAs are not a magic bullet for rising health care costs. In fact, data show that education and market-driven plan changes may yield similar results. One company with a zero deductible plan substantially lowered its costs by educating employees and helping them become smarter health care consumers. Generic drugs already accounted for 40 percent to 50 percent of this company’s filled prescriptions, but teaching employees to request less costly alternatives from physicians and pharmacists increased generics to 70 percent. Employees have a vested interest in maintaining their coverage, so don’t underestimate their desire or ability to help the company save money.
How are employers handling health care reform?
While some employers have been reluctant to change their current plans and forgo grandfathered status, because they would have to comply with additional requirements, other HR professionals have been concerned about the excise tax on ‘Cadillac plans,’ so they have been tweaking their plans to stay below that tax threshold. They’re initiating changes to control costs, like adjusting co-pays on prescription drugs, changing contribution levels and encouraging employees to proactively manage their health by offering incentives to complete a risk assessment.
How should employers approach this year’s open enrollment period?
Many are using this year’s open enrollment period to educate employees, scrub ineligible members from the program and introduce outcome-based incentives. Several of our clients are using inducements to increase participation in programs that help employees manage chronic conditions, as the majority of health care claims emanate from illnesses like diabetes and hypertension. The use of onsite medical clinics is also increasing, especially for employee assessments and health care screenings. These clinics have been successful because fewer families have a regular physician and employees are more inclined to proactively manage their health when they have convenient access to a doctor.
What else can employers do to manage health care costs in this era of uncertainty?
Employers are leveraging their purchasing power to lower costs by joining prescription drug collaboratives and purchasing groups. They’re also excluding certain pharmacies to improve overall ingredient cost discounts and eliminating coverage for expensive brands that have generic or over-the-counter alternatives. In addition, employers are re-considering the use of more narrow networks of hospitals and physicians to optimize discounts while preserving quality and access. Also, the competitive market for life and disability coverage has let companies request bids and apply the savings to health care. Overall, it’s not a time for rash decisions, but there’s never been a better time to institute small changes and revisit your health care strategy.
Bruce Davis is a principal and national practice leader for Health & Group Benefits at Findley Davies. Reach him at (419) 327-4133 or email@example.com.
The business world is filled with reports of vibrant companies that persevered through change and fleeting memories of defunct organizations that couldn’t adapt to shifting market conditions. In fact, D&B reports that over 96,000 U.S. businesses failed during 2009 and more than 80,000 failed in 2010, proving that a lack of change management is a risky proposition.
Unless executives provide employees with a model of the future state and a roadmap leading to the goal, workers may resist change or languish amid uncertainty.
“You can’t guide an organization through change by winging it,” says Kimberlie England, principal and national practice leader of Communication and Change Management at Findley Davies. “Executives need a strategic plan that moves people from being aware of change to embracing it, by weaving new ideas into the organization’s culture.”
Smart Business spoke with England about her reliable methodology for driving organizational change in today’s turbulent business climate.
What’s the first step toward effective change management?
Executives must anticipate change and follow a series of sequential steps to shepherd their company through any transformation. First, they should assess the organization’s current state and readiness for change, using surveys or focus groups. This evaluation process pinpoints the underlying causes of employee fear or reluctance and allows leaders to proactively eliminate potential barriers to change by introducing targeted solutions. Don’t make assumptions when assessing your organization’s readiness for change; rather, review fresh data and devise innovative solutions.
How can executives bolster support for change?
Unless leaders openly embrace change, employees never will. Executives must build the case for change and help employees connect with new ideas by modeling the way. In fact, the perception of a double standard can foster an unhealthy ‘us versus them’ mentality and cause employees to resist a beneficial change.
For example, a CEO can’t announce a new wellness initiative and expect employees to modify their habits. He or she has to emphasize the benefits of a healthy lifestyle, lead by example, and outline a host of tantalizing rewards to motivate employees. Remember that line managers and stakeholders play a critical role in fostering organizational change, so make sure they’re committed to your plan before launching a major initiative. Finally, be sure to stop at critical junctures to measure your team’s progress. Otherwise, you may lose people along the way and never reach your final destination.
How can executives create a future vision?
Employees will respond favorably to change if they know where they’re headed, and because most people are visual learners, use a model to communicate your vision in addition to words. Paint a picture of the future state and provide a roadmap with milestones leading to the desired goal, so employees can chart the company’s progress and stay focused, especially during a complex change that may take months. Knowing where you want to go also benefits leaders, because it helps them develop a strategy for achieving their vision. Finally, support employees during the journey by acknowledging each milestone achieved and continually reinforcing the benefits of the change.
What constitutes a successful strategy?
A successful change strategy includes these critical elements.
- Stakeholder involvement: Include key stakeholders during the planning phase so they embrace ideas, become advocates for change, and help push the company forward during the implementation phase.
- Quantifiable objectives: Define the specific objectives of the initiative along with a series of interim milestones, so employees can use the plan as a roadmap to chart their progress.
- Defined audiences: Identify groups of key influencers, such as line managers and union leaders, and use targeted messages and tailored benefits so they fully understand and endorse your plan.
- Targeted communications: A successful strategy should define the specific communication channels for reaching various audiences. Consider e-mail, blogs, webinars, online chat, and social media to invite an open dialogue about the proposed change.
How can executives author specific goals or metrics to measure interim progress?
Consider the steps that lead to the ultimate goal and how the change will look and feel to establish interim measures during the strategic planning process. For example, you’d expect to see an increase in visits to a new website when the company announces a transition to self-service benefits. Next, move to more sophisticated measures, like an increase in employee registrations and growth in online claims to chart your actual progress. Change is not a linear process, so employees may slip back or temporarily revert to old habits, but executives can persevere by reinforcing the need for change and providing additional motivation until the transformation is complete.
What are the final steps?
Continue to reward and recognize new behaviors when you reach the implementation phase, but don’t get lost in the minutia. Focus on the final goal and stick with the strategy. Use testimonials to cite examples of success and illuminate the path toward the new state by providing frequent updates and noting when employees pass important landmarks. You’ll know you’ve reached your final destination when the plan is no longer an idea and becomes an integral part of the organization’s culture.
Kimberlie England is a principal and the national practice leader of Communication and Change Management at Findley Davies. Reach her at (419) 327-4109 or firstname.lastname@example.org.
Plan sponsors have probably heard about the plight of baby boomers who haven’t saved enough for retirement or don’t understand the long-term impact of under-performing funds on retirement plan account balances. Unless sponsors wake up and address these issues, they could be blind-sided by a slew of new regulations or a class action lawsuit, since plan sponsors, as fiduciaries, are legally responsible for acting prudently and solely in the interest of the plan’s participants.
Despite the good intentions of plan sponsors, many participants are struggling to manage their investments and meet their savings objectives. So, savvy sponsors are simplifying plan design and investment options to make it easier for employees to participate in the plan, save more and make prudent choices.
“Employers not only have a moral and legal obligation to help employees retire with financial security, but fiduciaries and trustees can be held personally liable,” says Kyle Pifher, Principal and Practice Leader for Recordkeeping and Administration at Findley Davies. “Unless plan sponsors embrace their responsibilities and take action, they’re going to be bombarded by tough questions from their participants, particularly with respect to the new fee disclosure regulations coming out soon.”
Smart Business spoke with Pifher about the regulations affecting plan sponsors and how simplified plan design and tools can help employees meet their financial goals and retire with financial security.
What precipitated the new fee disclosure regulations?
Most plan sponsors, along with their participants, were challenged with determining the overall cost of the plan, both at the plan level and at the individual participant level. The Department of Labor’s ERISA Section 408(b)(2) regulations require providers of certain services (known as ‘covered service providers’) to disclose to plan fiduciaries certain information concerning the services and related compensation. In essence, the law requires covered service providers and employers to close the communication gap and provide greater transparency around the costs related to investments, recordkeeping and administration, trust and custody, investment advisory, and other plan-related fees and administrative charges associated with defined contribution plans.
How can plan sponsors improve communications and close the gap?
Companies can begin by instituting a retirement plan committee comprised of HR and finance representatives, outside experts, select executives and perhaps a diverse group of associates. The committee’s charter is to make decisions that are in the best interest of the plan participants. Responsibilities include oversight of plan operation, plan design, investment selection and monitoring, participant education, and overall compliance with the rules and regulations that govern retirement plans. The ultimate goal of the plan sponsor and committee should be to help their employees reach a secure retirement. Like anything else, a communication and education campaign should begin with a focused strategy based on the demographics of the company.
How can employers promote financial literacy and ease investment decisions for employees?
Many employees don’t have the time, interest, or knowledge to engage in an educational process, particularly involving investments. Many sponsors are now simplifying investment options and leveraging planning tools that don’t require a lot of action from employees. Many sponsors are regularly reviewing fund performance and altering investment options, and many are promoting the use of retirement date-based and risk-based models, thereby simplifying the decision-making process for employees. Plan sponsors should place a great emphasis on the appropriate savings rate for the individual, achieving a realistic rate of return based on their risk level, understanding the gap that may exist between their current situation and their retirement goal, and what steps can be taken to close or eliminate that gap.
How can plan design encourage savings and promote financial independence?
Many employers have implemented automatic enrollment and automatic escalation of employee deferrals to boost participation and employee savings rates, since history shows that few employees opt out once they’re automatically enrolled in the plan. In fact, some experts speculate that enrollment and deferral rates may be regulated or mandated in the future. Statistics show that matching contributions also influence employee deferral rates. During 2008 and 2009 when some sponsors suspended their matching program, many participants ceased their deferrals. Since it’s clear that employers have a legal and moral obligation to help employees plan for their retirement, a continuous review of your plan’s design and employer contribution rates should be conducted to encourage positive behaviors.
What else can employers do to help employees retire with dignity?
Employees must understand the importance of saving early for retirement at a level that helps them reach their goal. Plan sponsors with successful retirement programs are proactive in communicating to their employees, and often leverage the expertise of professionals that deliver these services. Many employers engage independent investment advisers, retirement plan consultants, and communication specialists to design a communication and education program specific to their retirement plan. In addition, personalized communications can help tailor those messages for each employee to show them exactly what their retirement savings strategy means for them.
Kyle Pifher is a Principal and Practice Leader for Recordkeeping and Administration at Findley Davies, Inc. Reach him at (614) 458-1869 or email@example.com.