The Gallagher Benefits Services Benefits Strategy & Benchmarking Survey collected employee benefits data from 957 organizations throughout the United States varying in size, type, industry and geography, and found dealing with health care reform and keeping employees healthy rated a distant second and third. Among larger organizations, improving employee health was noted as a greater challenge, and the issue consistently grew in importance as the employee population increased.
Thirty-four percent of organizations reported their benefits expense is between 11% and 20% of total compensation, while 30% said it is between 21% and 30% of total compensation. The majority of organizations think their benefits expense as a percentage of revenue will remain stable in the future, while 36% think that it will grow as a percentage of revenue.
According to the survey results, even with the recent delay in implementing the Patient Protection and Affordable Care Act (PPACA), most employers are not prepared for health care reform. Overall, more than 73% of employers have not yet quantified the financial impact of health care reform. In addition, more than 80% of all participants do not know how many of their employees may be able to purchase subsidized coverage more cost effectively through an exchange than the company plan.
Of those who have quantified costs, 3.9% said health care reform will reduce costs for their organizations. More than 41% indicated it will increase costs by less than 5%, and 27% reported their costs will increase between 5% and 9%. One in five (20.2%) said their costs will increase between 10% and 19%, inclusive, and 6.9% cited a cost increase of 20% or more.
Scott Hamilton, national managing director at HRadvantage, a division of Gallagher Benefit Services, Inc., in Chicago, told PLANSPONSOR employers are utilizing aggressive cost management of benefit plans. Defined contribution approaches to health care benefits are starting to take hold—high-deductible health plans (HDHPs) with health savings accounts (HSAs)—in addition to wellness programs and case management. Hamilton said his firm expects an increase in HDHP use, as it is becoming a more acceptable and more embraced solution.
Hamilton pointed out employers see health benefits as a very valuable employee recruitment and retention tool, so despite cost concerns, the survey found about 74% of employers are on board with keeping plans in place; less than 1% said they are dropping health care coverage for empoyees. “[There was] nothing surprising; the survey was an affirmation of what we’ve seen happening in the past two years in the marketplace, employers want to sustain an affordable compensation and benefit strategy, and they want to stay compliant with PPACA requirements, which is affecting decisions about what types of benefits to provide,” he said.
Controlling retirement benefits costs is also a challenge for employers, but Hamilton said he thinks most organizations have made a business decision—to aid in recruiting and retaining workers—to commit to some way for their workforces to save for retirement. He said he was not surprised to see more than 30% of employers are still offering defined benefit (DB) plans, and of those, 76% have not frozen their plans.
Defined contribution (DC) plan sponsors are continuing to scrutinize plan fees, making sure expenses are minimized so employees can get the maximum out of their investments, Hamilton added.
Among DC plan sponsors, the Benchmarking survey found, 63% do not use automatic enrollment. Only one-third (32.5%) make a core contribution to DC plans, but two-thirds (67.8%) make a match contribution. Company stock is falling out of favor; only 3.6% offer company stock as an investment option in their DC plans. Fifteen percent offer a brokerage window investment option.
More information about the report is at http://www.gallagherbenefits.com/2013nbs.
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