Benefiting the workforce

Cash is no longer enough today to recruit and retain top talent in business. Providing an attractive benefits plan is just as important. Three industry experts give HRM an insight into the importance of employee benefits.

“CDHP products offer tangible cost benefits while still providing employees with the flexibility to manage their healthcare needs”
-David Josephs

Today's offering of employee benefits can be the biggest source of confusion for many employees. What is the best way of properly communicating voluntary benefits options to employees?
David Josephs. Communicating early and often, and senior management buy-in are the two keys to communicating any benefit plans to your employee base. A well thought-out communications plan introduced over several months before the actual enrollment period gives employees time to understand the benefits offered, get questions answered and reduces confusion during the busy enrollment season.

The more employees know about their benefits plans and options the more confident they are when it's time to choose one. When we engage with an employer, J.P. Morgan offers a wide variety of educational materials; everything from traditional printed brochures to online interactive tools. Meetings, either in person or by webcast, are another great way for employees to learn and to ask questions. And when senior management take an active role, whether by attending employee meetings or sending personalized letters to employees' homes, it adds a tremendous amount of credibility to the program.

Randy Clarkson. Many factors determine the best strategy in communicating voluntary benefits. Ideally, employees should receive their voluntary benefits information from one source. Equally important though is the employee's education prior to, during, and after enrollment. This is the company's opportunity to provide value to each employee by continuing to engage and remind them of their benefit opportunities. Most importantly, the communication should detail the value provided by the employer for all employee benefits, including voluntary benefits. A company's competitive edge in terms of employee retention and cultivation is a dynamic position and process. Choice is important, and a complete enrollment and communications plan - one that involves the employee - is paramount.

J. Marc Palmer. Clearly, many employees are confused by their benefits offerings and do not understand the significant benefits that healthcare and other tax-advantaged accounts can offer. We feel that this confusion is not the fault of the employees, but is instead due to how these benefits are communicated, which is often based on theory instead of scientific proof.

Contrary to traditional communication methods based on theory and delivery a "one size fits all" message, ConnectYourCare applies scientifically proven methods for better communicating with employees. We deliver a behavior-centric approach to drive enrollment in healthcare accounts and maximize tax savings for both employees and employers. Core to our communications strategy is leveraging groundbreaking Consumerology research conducted by our parent company, Express Scripts, to better understand employees' behavior and communicate to them in a way that helps them understand the benefits of these accounts.

For example, we weave proven behavioral economics principles into our open enrollment materials, which help deliver our customers enrollment increases of up to 30 percent over their previous administrator and corresponding increases in payroll tax savings.

Joel Carter. Daily employees face difficulties choosing the best benefit package in an environment of increasing health care costs and limited support staffing in HR. Offering multi-dimensional communication and enrollment capabilities in a variety of supportive formats serves the best interest of both the employer and the employee.

Employing an online environment that facilitates initial benefit planning based on employee specific data, information and modeling tools will empower employees to find their own answers to HR questions. A true participant advocacy call center is a critical element and provides supportive information and assistance to the employee throughout the process. Leveraging new communication mediums such as webinars, blogging and twitter should be used to engage employees in today's environment. Traditional media continues to be a critical component, so providing compelling print media that is easy to understand and visually appealing is an absolute must.

Implementing supportive enrollment and communication solutions that strike a balance between high-tech and high-touch employee support will best reinforce not only the value of a company's benefit offering, but the value the company places on the employee.

To what extent can the range of employee benefits on offer enable companies to stay competitive in the marketplace in terms of employee engagement and retention?
JMP. With so much public scrutiny on healthcare offerings coupled with tougher economic times, employees are looking more and more at their benefits packages. However, many companies find it difficult to offer rich benefits without breaking the bank. Companies that cannot find that fine balance risk losing talent, which compromises long-term viability.

Healthcare accounts and other tax-advantaged accounts, like transportation accounts, offer employees tax savings without imposing significant costs on the employer. In fact, since payroll taxes are reduced by the amount of the contributions, these accounts actually end up saving employers and employees money in the long run. Many employees are recognizing the long-term benefits of Consumer Directed-Healthcare and seeking CDH plans from their employer.

JC. Too often companies neglect or underestimate the true value of their benefit offerings in a down economy. High performers and top candidates still have options in the marketplace and are arguably in greater demand as employers look to maximize productivity and boost returns. To attract and retain these individuals, companies must focus on communicating the value and overall positive compensation impact of their benefits structure.

According to the Bureau of Labor Statistics, nearly 30 percent of true total compensation is attributed to benefits costs. Unfortunately, most employers neglect to communicate the economic value of these employer contributions to health and welfare, retirement, income protection and work/life plans.

Embracing pre-employment and ongoing total compensation statements as a tool to define and showcase the true value of these benefit offerings has been proven to positively impact employee retention and enhance overall employee satisfaction with the benefit plans and structures provided by a company.

DJ. Offering a range of benefits can certainly help employers remain competitive in the marketplace. However, equally important is ensuring that the choices on offer are responsive to the needs of employees and their loved ones. In our experience managing HSA Programs, we've found that employers who have well-designed programs, including attributes such as differential premiums and employer contributions to HSAs, provide their employees greater control over their healthcare decision-making, something very positive. Employers who take an interest in the wellbeing of their employees over time are demonstrating a long-term commitment to them.

RC. With budgets tightening and workloads increasing, it's important to retain key people whose experience and institutional knowledge keep their business running smoothly. Savvy employers know a good benefits package does more than just support retention. It is key to productivity as well. And, when a company offers a wide range of voluntary, often portable, benefits, immediate perception is favorable for the company's reputation and image. A good benefits package though is only as good as the communication between the employer and benefit advisor. Effective discussions between these two should include a review of past plans, missing coverage, and updated employee information. The employer and benefit advisor should strive to know the workforce. Practical and vital voluntary benefits can elevate a company's reputation, employee perception and increase loyalty.

The healthcare debate has dominated headlines in recent months. How will a potentially changing medical environment affect voluntary benefit schemes?
JC. With the recent shift in the make-up of the Senate, it appears that incremental change to healthcare reform has replaced sweeping global change...at least for now. What the actual make-up of this 'incremental change' will look like will ultimately determine the true impact on the voluntary benefit landscape. However, many in the industry are predicting a greater emphasis on voluntary benefits as a means to enhance not only base levels of coverage but to provide a broader range of supportive offerings for all employees.

One thing all of us can be certain of is that benefit providers will be enhancing their voluntary product offerings and will be presenting them aggressively to the marketplace. Companies must carefully analyze whether these offerings will fit into their overall strategy and must be prepared to invest in communication and support mechanisms to ensure that the true value of these products are communicated to employees.

DJ. With the current uncertainty around healthcare reform it's difficult to say what impact a changed environment will have on voluntary benefits. However, many voluntary benefits, particularly account-based programs, have been shown to meet the expressed goals of healthcare reform: improve outcomes by encouraging preventive care and reduce costs by helping people get more engaged with their healthcare decisions.

RC. The voluntary benefits industry has a history of analyzing the marketplace and expanding product offering to fit employer needs. A look at our evolution demonstrates the point. Traditional individual life products are a cornerstone for voluntary benefits. The industry is responding to employers' interest in supplemental products and has expanded to offer more than fifteen ranging from legal to health, vision and dental. Transamerica Worksite Marketing is a flexible company poised for all healthcare debate outcomes. If the result is broadened benefits for more Americans, there will be an equally increased demand for supplemental benefits to compliment major plans. If there is little or no change after the debate, voluntary benefits will still be viable as employers look to maintain or expand coverage for employees while minimizing cost increases. Regardless of any healthcare reform, any result will cause employers to make decisions they had on pause.

JMP. We think that the changing healthcare environment will not only drive the adoption of consumer-directed healthcare (CDH) accounts as a voluntary benefit, but as an overall benefits strategy. In fact, a new study by Towers Watson predicts that a huge percentage of large companies in the US will move to completely replacing their PPO plans with CDH plans in 2010-11.

However, it is critical that companies choose administrators that are poised to handle any regulatory change. Administrators that cannot quickly adjust to changing regulations will have to invest significantly into their infrastructure, often drawing resources from other parts of the organization and straining operations. Benefits executives should examine their current administrators closely and ask critical questions about their capability to handle possible regulatory changes before renewing contracts for the 2011 plan year.

With the current economic climate being quite tough, many employers have had to consider or even implement cut backs in the benefits they can offer employees. Is this a good idea and what are the alternatives?
DJ. Cutting back on employee benefits or worse, eliminating them entirely, is certainly not something employers want to do. However, reducing benefits is not as detrimental to employee morale as decreasing working hours or eliminating jobs. In a down economy, I think most employees understand the realities of the tough choices and trade-offs employers sometimes have to make to remain in business.

Many companies seeking lower-cost alternatives have adopted a Consumer-Directed Health Plan (CDHP) strategy, which shifts some of the healthcare costs to employees. CDHP products offer tangible cost benefits while still providing employees with the flexibility to manage their healthcare needs. From an employer and individual basis, the expense control that you get from a CDHP product, whether it's an HSA, a Flexible Spending Account or a Health Reimbursement Arrangement is very attractive in today's markets. Premiums tend to be lower and at the same time, they reduce a company's tax liabilities when employees make pretax contributions.

RC. In the face of the current economic environment, it's painful to think of a company having to consider or implement a reduction in their benefits. When faced with that situation, the company must research and weigh its options carefully. The objective will always be to lower premiums without lowering coverage for the employee. Transamerica has developed HealthPak, a product package that addresses this situation. Employers can modify existing medical plan designs and then offer supplemental benefits like critical illness, accident or life to their employees. HealthPak combines these supplemental benefits to help bridge any gaps in coverage. As Newton said, "for every action, there is an equal and opposite reaction." Reducing employee benefits is never a good idea. Voluntary benefits still offer the employees the benefit of choice and flexibility to design a plan to meet the unique needs of the employee and family.

JMP. Instead of cutting back, employers should look for more economical benefit plans. A high-deductible health plan coupled with a Health Savings Account (HSA) not only reduces premiums but also delivers significant payroll tax savings. One of our clients, a large national bank, offers an HSA to its employees and had 6780 employees enroll for the 2010 plan year with an average contribution rate of $2423. These accounts deliver an annual employer payroll tax savings of about $1.25 million, and a combined employee tax savings of about $4.9 million. This isn't even counting the millions in premium savings that the bank enjoyed.

Another ConnectYourCare client, Zions Bancorporation, began implementing a CDHP (consumer-directed health plan) in 2005, and since it was first introduced, the company and its employees have saved more than $10 million in healthcare costs. From 2006-2009, the percent increase each year in healthcare costs fell from its prior double digit levels to below 5 percent. Employees understand and appreciate the plan, and, on average, contribute $2200 to their HSAs and $1600 to their FSAs (Flexible Spending Accounts) annually.

JC. Economic realities of today and the need for companies to remain viable during this downturn have driven organizations to aggressively reduce or mitigate increases in all areas of spending; including annual benefit spends. In an attempt to manage these costs, some companies are increasing employee cost sharing through higher contributions or benefit plan design changes.

Others invest in more innovative programs aimed at reducing the ultimate driver of employer benefit costs; namely their annual claims spending. Historically, these initiatives focused on wellness and other preventative measures which, while imminently valuable, have a longer-term payback and don't satisfy today's requirement for immediate cost savings. Forward-looking companies are embracing alternative tactics such as Dependent Eligibility Audits, where participants are required to validate that their enrolled dependents meet the company's eligibility requirements, to ensure plan rule compliance and achieve significant and immediate cost savings that outperform any plan design or cost share change.

The Panel

Randy Clarkson is the president of Transamerica Worksite Marketing, a division of AEGON USA. He has been in the insurance industry for 28 years, starting his AEGON career in 1991. During his tenure at TWM, Clarkson has increased sales by opening new distribution channels, building new relationships and expanding product offerings.

J. Marc Palmer serves as the CEO for ConnectYourCare, driving the migration to CDH and preserving the organization's industry reputation as an account management solutions leader. Additionally, as Vice President of Strategic Planning and Development for Express Scripts, Palmer's achievements contribute to their overall success and recognition as a Forbes 130 company.

Joel Carter is Vice President Client Services & Business Development, Secova.
He focuses on developing and delivering world-class HR and benefit administration solutions to Fortune 500 companies and state and local governments. Carter is a frequent speaker at industry events and has authored papers on the proper design of benefits administrative processes and outsource initiatives.

David Josephs is Managing Director and Head of Consumer-Directed Healthcare, J.P. Morgan. He has worked on J.P. Morgan's CDH and HSA programs from their inception. Prior to joining the bank he worked directly for health insurers, as well as a management consultant to health plans. He served as a legislative assistant to a member of Congress and US Senator, handling healthcare issues.