There has been a lot of talk of late about employers getting out of the business of offering benefits, or at least the medical insurance business. You’ve probably seen studies such as the McKinsey & Co. study that found 30 percent of all employers will “definitely” or “probably” stop offering their workers health insurance when mandates take effect in 2014.
Yet, other studies, such as the one performed by Workforce Management and Business Insurance, have found that most employers won’t drop their health insurance. Their survey found that 52.5 percent strongly disagreed that dropping coverage (and accepting the $2,000 per year per full-time worker fine) would be the right strategy—with another 15.3 percent somewhat disagreeing.
Most employers are evaluating their decision based on two factors:
- Will it be cheaper for me to continue to provide medical insurance or pay the fines?
- Do I have the resources and understanding to deal with the increased compliance issues that will result?
Both of the questions are opportunities for you to help guide your clients and prospects to the answers that are right for them. However, be sure you are able to give unbiased advice and not drive them to the decision that works best for you. (If you are dependent on the commissions from the medical insurance, it is unlikely you can truly offer unbiased advice. If you don’t have opportunities to generate revenue from offerings other than insurance and aren’t moving to a fee-based compensation model, start moving in that direction now before your clients have to make their final decision.)
Let’s start with the second issue—employers’ lack of understanding about how the legislation will likely impact them. I say “likely” because it will continue to be a moving target. If you take the simple strategy of communicating the following to your clients, you will be delivering great peace of mind (or at least they will know specifically why they should be upset).
- What has already taken place
- What will happen next
- What is a little further down the road
- How it impacts them
- What they should be doing
Now, back to the first issue, whether it will be less expensive to pay the fines or offer insurance. This is a much more difficult question to answer than it may first appear. Sure, it’s easy to make a calculation of the applicable fines and compare that to the price of the insurance, but this comparison doesn’t come anywhere close to identifying the true “cost” of the decision. Obviously, cost includes many things beyond the dollars and cents.
Attracting and retaining the best of the best will be more critical than ever to the success of every organization.
Out on the horizon is what I call “employee free agency”. We are at the very beginning of a decade that will have 65 million baby boomers moving into retirement and taking a whole lot of talent, knowledge and leadership with them. Top talent will be at a premium and employers better have a strong value proposition if they want to win the competition. Those who do will have a huge competitive advantage.
And its not just about being attractive to a shrinking labor pool, it’s about being attractive to the best of the best in that pool. Businesses will continue to run leaner than ever, making the “critical few employees” just that: critical. The only way to do more with less is if you possess the absolute highest levels of talent.
Top talent is always in demand and will always be the target of aggressive employers. With recent surveys indicating that 60 percent of high performers are hoping to be working somewhere else in the next 12 months, employers have to figure out how they are going to keep the talent they already have as well as how to attract the talent that is currently working for the competition.
The right benefit program is a big part of the answer. And it’s becoming more important than ever to offer a robust, innovative and competitive program to attract and retain talented employees who are able to help drive business success.
Life is busy and people want help managing it. Employees want the convenience of accessing all sorts of services, information and resources through their employer, even if they have to pay for it themselves.
With technology, everything is more accessible, but we seem to have less time to do so. On top of that, the technology can be a double-edged sword, offering an overwhelming number of options. For so many things employees want and need, they don’t need the absolute best solution, they just need a solution that will work and is easy to access. Yes, this could include voluntary benefits, but maybe it’s also help finding adult day care, personal financial planning, access to legal assistance to create a will, or even a vetted list of home repair specialists. Employees are willing to pay for these services; it’s finding the right provider/service in the first place that’s the challenge. An employer willing to take on that responsibility will definitely earn the appreciation of their employees.
If employers, with the resources they have at their disposal, are intimidated by finding the right answers, imagine how overwhelming it is for the average employee. Nothing endears you to someone like genuine interest in helping him or her feel safe and secure. At a time when employers should be thinking more creatively about their benefits offering, does it make sense to be dropping such an important part of the program? And doesn’t it make sense that employees will feel abandoned by employers who have opted to pay a fine and leave them to fend for themselves?
Benefit programs are one of the largest drivers of employee loyalty
The 2009 MetLife Employee Benefits Trend Study clearly demonstrates just how critical a benefit program is to creating loyal employees. From their survey:
- When employees are highly satisfied with their benefit program, 75 percent report being satisfied with their job (compared to just 25 percent with a low level of benefits satisfaction).
- When employers take the time to effectively communicate the benefit program, the percentage of those satisfied with their benefits goes from 9 to 71 percent, those satisfied with their job jumps from 27 to 75 percent, and those who are loyal to their employer moves an impressive 45 points from 25 to 70 percent.
- Forty-one percent of employees say that benefits affect their decision to remain with an employer.
Healthy employees = productive employees
Think about yourself. When you show up for work and you are feeling healthy and happy, you are more productive at your job. It’s the same for all employees. Yes, a healthy employee does start with physical health, but it also includes a healthy work environment, engagement with their job and confidence that they work for someone who is looking out for their wellbeing. Providing the right resources for employees helps ensure that they show up each day ready to be productive.
From the same benefits study cited above:
- For each dollar invested in wellness, there is a savings of $3.48 in medical costs and $5.82 in absenteeism.
- Twenty-six percent of employees miss fewer days of work because they participate in wellness programs.
Sure, with the confusion of what health care reform really means and the temptation to make a decision on price versus true cost, it’s understandable why some of your clients may be considering getting out of the “benefits business.” That’s why they need you to help explain why the need for the right benefits program is more critical than ever.
Even for employers who may opt to pay the fine but maintain the non-medical parts of their benefit program, the cost of their decision will be high—even counting the savings from dropping the medical benefits. Taking away the insurance is bad enough, but also add the burdens to employees to find and self-service their own insurance, and your value proposition to employees drops significantly. I think it’s also safe to say that any employer willing to shift those burdens to the employees will be less than effective with whatever remains of their benefit program.
You have a responsibility (and an unbelievable opportunity) to take away the anxiety your clients feel because of all of the unknowns. You also have a responsibility (and opportunity) to help them understand the real costs that would be paid by deciding to get out of the benefits business. Help them look at themselves through the eyes of their employees—employees who, because of the impending free agency, will now possess more power, be more selective and have higher expectations than ever before. Given the state of the current economy, this may be a hard vision to buy into, but it’s out there and it’s not that far away.
The price of the fine is easy to determine, the cost of abandonment not so much.
Originally published in Rough Notes Magazine, January 2012
Editor’s note: for more information about how to move to a fee-based model, see Dave O’Brien’s recent blog.