Benefits HRO and the Impact of Changing Benefits Trends

This week, we look into the world of benefits from the 10^th Annual MetLife Study of Benefits Trends. The long-running employee benefits research highlights the changes in trends due to the changes in the economy and their impact on the generations of employees.

Employer goals and objectives for benefits remain the same: control costs, attract and retain employees, and increase productivity. It is what employees, especially younger employees, value now that has been changing. And that may call for a change in strategies and approaches to maximize the dollars that employers spend on benefits.

Traditionally, younger employees were not very focused on long-term financial planning and retirement; now, 52% of those 21- to 30-year-olds are concerned about long-term financial security. Even though employees know that they must accept greater individual responsibility (63%) and are likely to face additional cost shifting in the future, nearly half (49%) of those surveyed say that because of the economy, they are looking to their employer to help them achieve financial protection through a range of employee benefits. The Generation Y percentage looking to the employer for help is even higher at 66%. Today’s employees of all ages are more aware than ever of the value of employer benefits, both traditional – like medical and dental – and voluntary benefits, where the employee may pay more or all of the cost. Take advantage of this awareness to increase communication, education, decision support tools, and even branding of the benefits you are providing.

Seventy percent of surveyed employers are planning to retain current benefit levels and only 10% may cut benefits, but 30% may need to continue cost shifting to employees. Few employers are planning to spend more overall on benefits, but employers are open to shifting priorities. For example, there are plans to increase the number of wellness programs and voluntary benefits offerings like long-term care, critical illness coverage, optional life coverage, and optional disability coverage.

Another reason why I wanted to bring this study to your attention is that it separates the employer data into progressive and standard. Progressive employers more attuned to changing employee needs – such as wanting more choices and life stage options – and likely to make adjustments to achieve cost control, attract and retain employees and increase productivity. This split is similar to other areas of HRO where one client wants the latest in transformation to optimize value and achieve business results and another wants improved technology and processes to lower costs and increase efficiency.

Employee benefits needs are growing, changing and challenged by uncertain economic conditions. All benefits HRO clients should expect to have a partner in adapting to changing conditions. Whether that means access to full-scale consulting for a revamp of benefits spend, policy, and offerings, or basic access to vendor research and client networking opportunities, what matters is the match of client expectations and the service provider’s ability to deliver.

Linda Merritt, Research Analyst, HRO, NelsonHall

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HRO Tips You Can Use

1.  Buyers, U.S. healthcare reform will continue — be prepared.

At the Mercer client conference last week, it was very helpful to hear its view of the precarious future of the U.S. healthcare reform. The healthcare reform act is being challenged in court in whole and in part and the outcome is uncertain. In the meantime, dates for further implementation are rolling near. Mercer posits that the act is unlikely to be repealed in total, but some amendments will likely be changed. Some are concerned large employers will dump employees into state healthcare exchanges and pay the relatively small penalties. Terms in the act make that unlikely as subsidies decline as income rises and are eliminated totally at $100,000. Also, larger employers need to compete in the war for talent and providing healthcare benefits will keep them in the game. The advice for smaller employers may be different and hybrid employee segment coverage models may develop.

2.  Misaligned expectations and poor implementation can still kill a HRO deal.

At lunch, a buyer told the sad tale of a failed initial outsourcing experience. By now, you know the too often told tale: misaligned expectations, a botched implementation, and an adversarial governance relationship that was not healed in time to save the deal. In retrospect, the benefits manager can see that they were 49% at fault, which includes failing to appoint a full-time implementation project manager or addressing the internal change management issues that come with first time outsourcing. The client is now with Mercer, providing a happy ending that was earned the costly way.

3.  Have a social media curator.

Brand management has changed permantly; any illusions of controlling your own brand are being shredded by social media and the same will be true of employment brand management. Can your HRO vendor manage its own brand socially and can they help you manage yours?

4.  An issue of passion can turn into a global wellness campaign and change lives.

Launching a wellness campaign to reduce healthcare costs and indirectly increase productivity is a worthy business objective. Levi Strauss, very early on, addressed HIV education out of deep concern for its employees and found it needed to first break through misinformation and fear. Now there is a new generation that will get the same education. Value-based passion, along with a great wellness program will be sustained for the long-term, helping employees and their families as well as generating savings.

5.   Vendors, invite industry analysts to your client conference.

Hearing the presentations and thinking about how they inform in ways that showcase the strengths of the service provider (perhaps stimulating further inquiries), speaking informally to clients, and looking for the consistency and continuity in what was said to industry analysts and now to clients. It all helps build a 3-D view into the vendor’s world.

Are you ready for your HRO 3-D close-up?

Linda Merritt, Research Director, HRO, NelsonHall