Benefits Products & Services
By Thomas A. McCoy, CLU
WHAT LIES AHEAD ON THE BENEFITS HORIZON?
The uncertain but necessary task of preparing for the future
How will the American workforce be different in two years, five years, 10 years? Which employee benefits will prove to be the best motivators? How will benefits be packaged and delivered differently? Helping plan sponsors to think long term can be a valuable part of a broker’s services.
Anticipating the future is never easy. There are always more immediate concerns. Ten years ago, the last thing HR directors were thinking about was the need to prepare for an eventual tight job market. Unemployment was rising, the economy was weakening, and there was the startup of the Affordable Care Act to think about. Going back 25 years, how many brokers would have foreseen the explosive growth in voluntary benefits that has occurred since that time?
A starting point in contemplating the future comes from recent market data and observations from insurers and international benefits brokerage firms. Studying what other professionals say won’t provide a crystal-clear view of the future, but it does offer a broader, more informed perspective for anticipating what might lie ahead.
“The challenge for most (employers) is how to maintain momentum for tomorrow
while keeping the lights on today.”
—Mercer’s 2019 Global Talent study
Principal Financial Group recently assembled a panel of its retirement executives to discuss what the retirement planning market will look like in the year 2030. By that time, the firm noted, the oldest Millennials will be nearing age 50, with most of them in their highest earning years. The report from the gathering pointed to the influence of companies such as Amazon that monitor consumers’ online preferences and deliver product suggestions accordingly.
Kevin Morris, chief marketing officer for Principal, noted that “individuals will want their (retirement) shopping experience to replicate their (consumer) shopping experience … with retirement
packages in the future being less about what employers select and more about consumers’ personal choice—like a cafeteria plan where individuals pick benefits to match their lives.”
The report from Principal’s panel further suggested that in the future a retirement plan will need to do more than get employees to retirement; it must enable them to get through retirement, which will have an impact on distribution options.
The panel also concluded that retirement providers will play a broader role in offering financial education for plan participants. “Newly emerging options like incorporating emergency funds and college loan repayment into workplace retirement plans have started to pave the way,” the panel’s report noted.
Another way to think futuristically about the benefits business is to examine annually gathered national data on employer practices, looking for trends that may be sustainable. Both Arthur J. Gallagher’s 2019 Benefits Strategy & Benchmarking Survey and Mercer’s 2019 Global Talent Trends Study are useful tools for gaining a glimpse of the possible future.
Gallagher’s results are based on data amassed from 4,155 employer organizations, segmented by employer size and region, and cover a wide spectrum of benefits and HR interests.
The 2020 edition of Mercer’s Global Talent study will be published soon; its 2019 edition includes data from more than 7,300 senior business executives, HR leaders and employees in nine industries worldwide. Nearly three-fourths (73%) of the executives Mercer surveyed predict significant workforce disruption in the next three years. (That figure was only 26% in 2018.)
The 2019 Mercer study found that 61% of HR leaders were involved in the rollout of major change projects and 54% were involved in executing those plans. But only 40% were involved in the idea stage of transformation initiatives. A question for the future might be: With significant changes predicted to be shaking up the workplace, will employers begin to recognize the need for HR executives to participate more fully in the strategic planning involving those changes?
In general, the Gallagher report points to the continuing battle employers face in controlling ever-rising employee healthcare costs while trying to minimize the shifting of those costs onto employees. In the 2019 survey, almost half of the employer participants (47%) did not increase their employees’ share of healthcare costs—deductibles, copays, coinsurance and out-of-pocket maximums.
The survey points to what it calls “healthcare activism” among large employers as one possible solution to holding down costs—an example being the Health Transformation Alliance (HTA) formed in 2016 by 50 companies covering 7 million lives. The household-name companies that are part of HTA—from American Express to Marriott to Walgreens—agree to share data and solutions with each other. Alliance membership includes access to pharmacy benefit manager services.
One area that Gallagher finds is trending upward is employers helping employees achieve financial wellness. “Since 2017, 41% have increased their emphasis of financial wellbeing,” the survey notes. Financial advisor sessions are offered by 69% (up seven points from 2018) and financial literary educa-
tion is offered by 54% (also up seven points from 2018).
Another way to view the future might be to look away from where the momentum is taking the business. Look instead toward contrarian opportunities. For example, the Gallagher survey points out, “The relative rarity of (employers offering) long-term care insurance (23%) could make it an effective differentiator, even though only 7% currently subsidize it.”
Looking at today’s workplace policies—everything from work-from-home arrangements to office dress—it’s clear that employers generally lean toward more individual freedom than they did 10 or 20 years ago. Data from Mercer’s study provide strong evidence of why employers are shifting work schedules to accommodate some employee preferences.
Mercer reported that 54% of the employees surveyed said that work-life balance is one of the top five things their company can do to help them thrive at their work. This percentage rose from 40% in 2018 and 26% in 2017. A further indication of the employees’ desire for flexibility: 82% of employees said they would be willing to consider working on a freelance basis.
According to Gallagher’s study, some of the most frequently offered work arrangements last year were flexible work schedules (54%); telecommuting (26%) and a compressed workweek (23%). The Gallagher survey also shows that 37% of employers upgraded their leave policies in the past year.
Today’s tight job market accentuates one problem that employers strive to overcome: employee turnover. Gallagher’s survey shows that in 2018, 32% of employers had turnover among full-time employees of 15% or more, which was an eight-point or 33% increase over 2016. Mercer’s study points to “employee attrition” and a “decline in employee trust” as two of employers’ top challenges today.
One way to start attacking the turnover problem, Gallagher’s survey report suggests, is for employers to conduct a formal and independent survey of employees’ level of engagement, which it calls “a critical measure of their emotional commitment to the organization and its goals.” Half of employers have not done so. “Investing in a well-designed survey often provides a valuable return if it supports the retention of even a few talented employees,” the report states.
Broker meetings with benefit decision makers must necessarily focus on relatively short-term horizons—what the plan should include as it is being formulated each year. It isn’t easy to steer the benefits conversation more than a year into the future. But even though the future can be murky, trying to look long term is prudent.
As Mercer’s study report states, “The challenge for most (employers) is how to maintain momentum for tomorrow while keeping the lights on today.”
Thomas A. McCoy, CLU, is an Indiana-based freelance insurance writer.