Benefits Products & Services
Benchmarking survey supports holistic consulting
“Employers ask us all the time, ‘What else should we be thinking about?’” says William F. Ziebell, president of Gallagher Employee Benefits Consulting and Brokerage. That’s because employers have come to think of Gallagher as doing more than placing benefits business, he says. Gallagher’s holistic approach to benefits consulting includes advice on a wide range of operational and HR practices.
“The days of being only an insurance broker—just going to market for coverage—are over,” says Ziebell. “We consider benefits decisions in light of the employer’s business strategy. How does the benefit program drive the business results the employer is seeking?”
The division Ziebell leads is part of Arthur J. Gallagher & Company—one of the leading publicly owned international insurance brokerages. He explains what’s behind Gallagher’s benefits consulting and brokerage strategy, and discusses the opportunities and challenges of today’s employee benefits market.
“Employers today are faced with what appear to be conflicting priorities in managing their compensation structure. How do they keep their costs down and still attract and retain talent? Keeping that balance is really important,” says Ziebell.
The balancing act is complicated by low unemployment and a growing economy, as well as changes in workforce demographics as Baby Boomers retire and Millennials assume greater responsibilities, he points out. Also, “The elasticity of employees to take on more costs is clearly coming to an end. Employers of all sizes are trying to keep costs down without having to shift more cost to employees.”
Ziebell describes Gallagher’s support role for employers as “human capital risk management.” It all starts with data. “We believe data drives decisions,” he says.
Gallagher began a serious data gathering initiative five years ago when it performed the first of its annual Benefits Strategy & Benchmarking Surveys—a compilation of data from employers on the costs and objectives of their benefits programs and related HR practices. The 2017 survey is based on national data from 4,226 organizations—both for-profit and nonprofit employers. It spans size categories from under 100 employees to more than 1,000.
Data is provided for a wide range of benefits program features and HR initiatives, aggregated nationally and segmented by geographic region. For example, it includes individual benefits costs; total benefits and compensation expenditures; use of private exchanges; contracted support from outside vendors; wellness programs, and absenteeism policies.
As part of its analysis, Gallagher looks at employers’ healthcare cost data over a three-year period and segments figures for firms that qualify as “best in class” for cost containment. It provides similar breakouts for firms it rates as “best in class” for HR resource management (based on employee turnover rate and success of employee communication efforts).
Then Gallagher analyzes the practices of employers that are rated “best in class” in both healthcare cost control and human resource management—the “Best of the Best.”
Among the ways that mid-sized Best in Class employers differ from other firms of their size: They are more likely to offer only one or two medical plans (71% for Best in Class to 62% for others); more likely carve out pharmacy benefits (20% to 13%); and less likely to provide domestic partner coverage (40% to 51%).
“The best in class and best of the best employers look beyond this year’s renewal costs,” says Ziebell. “They have a multi-year strategy for what they are spending.”
Among all employers, 70% still plan their benefits and compensation strategies on an annual basis, but multi-year planning showed gains in 2017—up to 12% of employers for benefits and 14% for compensation. Long-term planning was more common among upper-mid-sized and large employers.
“More and more employers—but not nearly enough—are looking at their own demographics,” Ziebell continues. “What is changing? Do they have succession planning in place? Do they have people in key positions who are at or past an expected retirement date? That’s a risk issue for those employers.”
Monitoring employee sentiment
Best in class employers also communicate more with employees to find out what they think about their own benefits and their employer, Ziebell says. These firms are more likely to do engagement surveys, not only to gauge the effectiveness of their benefits spending but also to ask questions like: Are you buying into what our organization is trying to do? Do you like the leadership and the kind of organization we are, how we’re perceived by the public?
“In today’s economy, competing for top talent becomes very hard unless employers have communicated their value proposition to their employees,” says Ziebell. “When employees buy into it, and you ask them to be smart about their medical spending, they’re more willing to do it.”
The 2017 Benefits Strategy & Benchmarking Survey shows that 32% of all employers, and 53% of large employers, conducted an engagement survey between 2015 and 2016. An additional 9% plan to do so by 2019.
Role of wellness
Wellness programs provide another opportunity to make a strong connection of values between the employer and employee. The survey indicates that 29% of all employers expect to adopt wellness programs by 2019, which would increase the total to 70%.
The survey shows that mid-sized employers that rank in the Best in Class in healthcare control are more likely to offer wellness programs, extend them to more participants and to provide richer incentives as part of those programs. Cash incentives or gifts are offered by 36% of the best in class, compared to 28% of the others; premium differentials contingent on participation are offered by 19% of the best in class, compared to 12% of the others.
“Wellness programs are evolving beyond physical wellness into broader areas of ‘well-being’—including financial, emotional, community, and career issues,” says Ziebell. Among the Best in Class mid-sized employers, 24% offer financial well-being opportunities, compared to 17% of the other firms.
“We’re trying to help CFOs understand the connection between the well-being of their employees and the overall cost structure of their organization. It affects their medical expenses and absenteeism. For example, someone who can’t afford to retire at his or her target retirement age is going to continue working, and older employees generally will be at a higher salary level and are going to have higher medical claims.
“We expect there to be a lot more consulting on well-being as employers recognize its value. It’s part of a holistic approach to delivering employee benefits, and paying attention to these issues is another way to show that the company cares.
“We believe that a holistic approach to benefits consulting is crucial,” Ziebell stresses. “To compete in this business today, you have to be more than just a benefits broker. You have to bring employers new ideas. You have to be a consultant and a business partner, and bring them advice on the bigger picture. A lot of the consulting we do with clients is best handled away from renewal time,” he adds.
“When clients ask us, ‘What else should we be thinking about?’ we can present our survey data and tell them, ‘Why don’t you take a look at what some employers are doing?’ It’s a multidimensional conversation involving CFOs, human resources, and the owner or president. We’re coming into the conversation with health and welfare consulting, retirement, communication, and compensation, and we’re looking at these issues holistically.
“There’s a fight for talent out there, and a broker needs to provide something more than just a competitive benefits package.”
Thomas A. McCoy, CLU, retired in 2013 as editor-in-chief of Rough Notes magazine.