Ancillary benefits

Employers: Benefits Are More Important than You Realize!

That’s what the Seventh Annual Study of Employee Benefits Trends – Findings from the National Survey of Employers and Employees shows. In fact, their data says health benefits are valued by 75 percent of employees, while employer perception is that 59 percent of their workers value health benefits. That’s a pretty big gap … combined with a number that states that well under half of employees (43 percent) actually understand which benefits fit their needs. Yikes!

It’s clear from all the numbers that employees value benefits more this year than in the past. Employees are talking more control of their finances and are increasingly looking to the workplace for help—even if it’s fully employee-paid benefits. Employees are also becoming more aware of their personal risk exposure, which leads to greater appreciation for benefits and company loyalty: Forty percent of employees say benefits play an important role in their decisions about whether to remain with their employer.

Here are some more key figures:

When asked which benefits are an important factor in employee loyalty (2007-2008), “salary/wages” decreased in importance by four percent while “other insurance benefits” (life, dental, disability, vision) climbed in importance by 18 percent (51% to 69%).

41% …

of employees consider workplace benefits to be the foundation of their personal safety net.

51% …

of all employees now state that they obtain most of their financial products through the workplace.

46% …

of employees have expressed greater interest in learning more about the benefits offered through their workplace.

73% …

of employees highly satisfied with their benefits were also satisfied with their jobs.

22% …

of employees not satisfied with their benefits said they were satisfied with their jobs. (Take note, employers!)

33% …

of employees expressed concern that their employer may reduce or cut benefit expenses in the next 12 months because of the economy.

90% …

of Americans believe that it is important for companies to continue to offer benefits, even if they must pay most or all of the cost!

Employer objectives and employee priorities seem to intersect, but they do not fully align. This, in our opinion, opens up opportunities to potential new benefit offerings.

If you’re surprised by any of these numbers—especially if you’re an employer—feel free to contact us at Stephenson Welsh Insurance Services to see if changes in your benefit offerings would better serve your employees while better positioning your company for retention and growth.

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Recent Survey: Health Benefits Not on the Chopping Block

According to a recent survey by Workscape, the vast majority of employers are not reducing health care benefits or forcing workers to shoulder more costs despite the state of the economy. Only 20 percent of responding companies reported a reduction or reconstitution of benefit offerings.

The fact that most companies are not decreasing their commitment to employer-sponsored health benefits, even though they are often the costliest of benefits, underscores the critical role of such plans in the overall compensation mix,” said Tim Clifford, President and CEO of Workscape. “Most organizations realize that in order to survive the recession and be poised for growth when the economy rebounds, employees must remain healthy and have peace of mind knowing that their families are protected.”

This is clearly good news for the industry and good news for most small businesses and employers. One way or another, employers are finding a way to make this work and doing everything possible to not cut health benefits. Forty-four percent of companies responding to the Workscape survey are opting for high deductible plans to offset costs, but all indications are they’re still funding those plans at 100 percent for employees. Some employers are taking steps to cut 401(k) or disability benefits. A small percentage of employers are going to higher employee contributions to pay for their benefits, although the vast majority are not.

The bottom line is to this point, employees’ health benefits are still sacred.

While disability and 401(k) plans as well as ancillary products may suffer cuts in the short term, that’s much better than the early predictions about how the steep recession would impact the health care sector. Instead of a catastrophic impact, this survey shows that employer-sponsored health benefits have withstood the economic downturn and are, in essence, considered the very last to go when a company is struggling financially.

As brokers, we think that’s absolutely the right decision. Health insurance is critically tied to employee satisfaction and is necessary for sustainability. In most industries, benefits are a retention tool. Most employers realize they need to offer quality health insurance to attract and retain quality employees. When considering two jobs that are of equal interest, a savvy talent will usually gravitate toward the superior benefit package. This is especially true in the small- to mid-market space and the technology sector.

When one employer offers quality benefits and another doesn’t, that makes the decision for the sought-after talent rather easy. There’s no way you’re going to recruit someone away from another organization without offering a quality benefits package, and there’s little chance of holding onto a top talent for long without benefits good enough to keep him or her put.

Our job as brokers is to work with clients to make sure offered benefits fit within their budget while still attracting or retaining key personnel. It makes little sense to offer an overly rich benefits package that you can’t afford. But it makes a great deal of sense to offer a solid health insurance plan to your employees at a fair price. There are high-quality yet value-priced health care options out there that are still going to make your employees happy. That’s what a good broker helps you achieve as part of the broker-client partnership.

Make sure you can have open, honest communication with your broker to say something like: “Hey, times are tough and we need to tighten our belt. What other strategies can we utilize to not break the bank while still offering good benefits?”

If you’re an employee considering a new company, talk to an experienced broker or experienced professional who can help you determine which benefit offering will best serve you.

If you’re an employer or small business owner, don’t destroy your business offering unaffordable, unsustainable benefits. There are affordable alternatives out there that will allow you to still offer quality benefits and retain top talent without breaking the bank. And if you don’t have an experienced HR department or have offered the exact same benefits to your employees for years, you better have a good broker take a look under the hood. Chances are you’re paying much more than is necessary, and without a sound strategy in place you’ll suffer though huge premium increases on outdated offerings.

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During Insurance Plan Changes, Communication is Key

Changing plans or cutting programs can be treacherous territory for an employer. Workers can react automatically with a “change is bad” mentality—especially if it looks like something is being taken away. This can happen even when the benefits of the new approach are seemingly clear (because it pushes people outside their comfort zone).

Meanwhile, competing companies in the same situation succeed in making the same changes without a hitch. But how?

There’s one essential difference between damaging employee morale and sailing smooth into a more affordable health care scenario: effective communication.

As insurance brokers, we see it as our job to help companies successfully communicate the rationale behind changes. Employees need to understand why changes are happening, what it means for them and how they can get the most out of their new plan or situation.

Sometimes that means sitting down with workers one-on-one to go through the reasons why a change makes sense and answering questions about what comes next. That’s okay. We’re happy to do that because we know how crucial it is to a fruitful transition for all involved.

Recently a client made a group change to a high-deductible, HSA-compatible health care plan. We went to their offices in Portland, Seattle and San Francisco to talk to the affected employees face-to-face. After the initial talks and presentations, only two employees out of 50 still objected to the switch. We listened, answered questions and explained benefits. Once those two fully understood how their new plan worked (that they were still in a rich PPO with the same carrier and vastly improved preventative care), even those two people warmed up.

It’s all about the quality of communication.

But if that’s all it takes, why doesn’t it happen more? Honestly, it’s because quality communication takes time. A broker can’t do it with an e-mail blast or ditto sheet. There’s substantial energy involved, and not all brokers are willing to make the commitment.

So if you’re making changes, be sure your broker is going to be willing to put in the necessary effort to make sure your employees “get it.”

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Three Overlooked Strategies All Employers Should Know

In a recent post, we talked about strategies for scaling back benefits when a rough economy forces reductions. This time, we’re going focus on how to find affordable alternatives for employees when a program must be cut entirely.

There are three different paths a thoughtful employer can go down in order to save the necessary money while still putting its employees in the best possible position: The company can make a previously funded product voluntary. The company can switch to an HSA-compatible plan that is capable of compensating for the loss of ancillary benefits. Or, the company can replace a product with a different, less expensive one (e.g. cutting dental but adding or boosting life insurance).

Let’s take a look at the options one at a time:

Making Products Voluntary

There’s an essential difference between dropping a program completely and keeping it on a voluntary basis (where if the employee really wants it, he or she can pay for 100 percent of it). Many families feel more secure with life or disability insurance and will keep that benefit alive … if given the opportunity. And allowing employees to “opt in” means they’ll pay pennies on the dollar through the group rate rather than paying top dollar on the open market.

Before, the company paid for the benefit. Now, the employee will need to have $6 or $7 taken out of their paycheck to keep the benefit in place. But at least it’s still in place. Some workers would never otherwise be able to afford that product, while others might not have an option at all. If an employee has an existing condition, life insurance at the current coverage level might be an impossibility.

In many cases an employee could keep a life and disability product on a voluntary basis for less than $10 a month. It’s a huge benefit to the employee to have the option open, and the employer has been able to save the money.

No employee wants to hear that a financial burden will fall to them. But that’s nothing compared to the reaction to having a safety net completely yanked and learning they’ll have to take their chances on the open market.

The HSA-Compatible Approach

Ancillary products are extremely valuable to employees and help companies attract and retain talent. Still, employers will cut out those programs when financially against the wall. Medical, however, is always critical. That company is most likely never going to do away with its medical plan. And certain medical plans can help pick up the slack when other products are cut.

The old standard for a company offering is medical-dental-vision. But you don’t need dental and vision if you’ve got a good HSA-compatible plan. You can use tax-free dollars to pay for dental and vision costs and save the premium dollars.

We recently ran an analysis on a 20-employee group and found that not one person used the dental insurance in-network in the past year. The company was paying     $15,000 on an annual basis for this top-notch dental plan, but nobody was really using it!

One option in such a situation is to phase out the dental plan and take that cost savings and put $500 tax-free dollars into each employee’s HSA account to pay for dental out-of-pocket expenses. (They were paying for it out-of-pocket anyway since they weren’t using their in-network coverage).

When a company must cut costs and programs, having an HSA plan in place will at least give employees have a tax-free way to fund their out-of-pocket dental and vision expenses.

Giving While Taking Away

Let’s say a company is offering a medical and dental plan, but it’s struggling to make ends meet. That employer could cut dental while switching to a high-deductible, HSA-compatible plan (described above) and add an inexpensive life or disability product.

In this case, the employer could say, “Everyone, we unfortunately have to eliminate the dental plan, but in return we’re going to put a $25,000 life plan in place.”

For the employer, this could result in paying approximately $85/month per employee down to $4.75/month (because a life product is so affordable). And yet that company is still offering something to the employee. It’s more than just an olive branch; it’s a tangible, valuable benefit.

Any of the approaches described above could result in thousands of dollars in annual savings. That’s potentially enough to keep an employee from being fired during budget cuts. Our job as brokers during an economic downturn is to craft the best possible cost-saving strategy for our clients—and many of those approaches can save employee benefits (or even employee jobs).

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How to Trim Ancillary Benefits While Protecting Employee Morale

In tough economic times, sometimes annual reviews reveal a pressing need for benefit cuts. When companies are forced to scale back the benefits employees enjoy, ancillary products are always the first to be affected. It’s in dental or disability or life insurance that employers first look to make reductions. And in just about every case, there’s a deep concern that “taking anything away” from employees will be perceived as a harsh negative that can have widespread ramifications.

Our job as brokers is to help groups figure out where they save money—while still keeping employees satisfied.

Sometimes it’s as simple as doing a review and switching carriers to get a better rate. Sometimes, it’s changing contribution amounts to be able to keep the benefit. The reality is there are a number of things a broker can do to help a company not lose an ancillary benefit entirely even when facing severe budget restrictions.

A lot of it just comes down to strategy.

It comes down to having a good relationship with your broker where you can sit down and truly be honest about the situation. That can be a tough conversation for people to have—to admit it’s a tight time where they need to save money. But those are the conversations you need to be able to have with your broker. That’s because there’s not just one or two options a broker can give you. There are a whole slew of things that can be looked at to improve the situation without eliminating benefits. If the benefit can be saved, it will continue to be an employee retention tool.

A great example is with dental benefits. As a broker, we can run usage model analyses for groups. With the information we obtain, we can find alternatives that don’t disrupt employee benefits while still saving the employer money.

Perhaps a group has a $2,000 annual maximum on its dental plan, but nobody is using more than a thousand dollars. So, we reduce that down and there’s a cost savings. But that reduction has zero negative impact on employees because no one was using that second thousand anyway.

It’s rare to find a scenario without multiple solutions. The unfortunate truth is many brokers just don’t have the incentive to find those answers, while others haven’t adapted to the times and aren’t aware of them. It takes a lot of effort to really talk with a client, do a thorough review and research other carriers. Many brokers would rather keep things status quo rather than look out for a client’s best interests by being more aggressive and forthcoming.

The problem in the small group space is clients are not getting the attention from their broker that they should, in most cases. They’re just a file in the drawer. When renewal comes up, they get their token letter or e-mail, but there’s no outreach. There’s no push for something else—something better or more appropriate—because either the broker hasn’t stayed up with current trends or is only reactive (instead of proactive). Often it’s in the client’s best interest to make changes, but regrettably in the small group space often that client isn’t aware of what the options are.

No employer wants to go back to its employees and say, “We’re cutting benefits.” It’s hard to do. But when it’s essential to make cuts to important programs, your broker should be engaged and helpful in keeping benefits as rich as possible.

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