Benefits Growth Strategies

Competing for talent

What is the price of providing health insurance—versus what will it cost me to drop it?

By Kevin Trokey

There has been a lot of talk of late about employers getting out of the business of offering benefits, or at least the medical insurance business. You've probably seen studies such as the McKinsey & Co. study that found that 30% of all employers will "definitely" or "probably" stop offering their workers health insurance when mandates take effect in 2014.

Yet other studies, such as the one performed by Workforce Management and Business Insurance, have found that most employers won't drop their health insurance. Their survey found that 52.5% strongly disagreed that dropping coverage (and accepting a $2,000 fine per full-time worker) would be the right strategy, with another 15.3% somewhat disagreeing.

Most employers are evaluating their decision based on two factors:

1. Will it be cheaper for me to continue to provide medical insurance or to drop it and pay the fines?

2. Do I have the resources and understanding to deal with the increased compliance issues that will result?

Both questions are opportunities for you to help guide your clients and prospects to the answers that are right for them. However, be sure that you are able to give unbiased advice and not just drive them to the decision that works best for you. (If you are dependent on the commissions from medical insurance, it is unlikely that you can truly offer unbiased advice. If you don't have opportunities to generate revenue from offerings other than insurance and aren't moving to a fee-based compensation model, start moving in that direction now before your clients have to make their final decision.)

Let's start with the second issue: your clients' lack of understanding about how the legislation will likely affect them. I say "likely" because it will continue to be a moving target. If you use the simple strategy of communicating the following information to your clients, you will be delivering great peace of mind (or at least they will know specifically why they should be upset).

1. What has already taken place?

2. What will happen next?

3. What is a little further down the road?

4. How does it affect them?

5. Are they doing what they need to be doing?

Now, back to the first issue: "Will it be less expensive for me to pay the fines than it will be to offer insurance?" This is a much more difficult question to answer than it may first appear. Sure, it's easy to make a calculation of the applicable fines and compare that to the price of the insurance, but this comparison doesn't come anywhere close to identifying the true "cost" of the decision. Obviously, cost includes many things beyond the dollars and cents.

Attracting and retaining the best of the best will be more critical than ever to the success of every organization.

Out on the horizon is what I call "employee free agency." We are at the very beginning of a decade that will have 65 million Baby Boomers moving into retirement and taking a whole lot of talent, knowledge and leadership with them. Top talent will be at a premium, and employers better have a strong value proposition if they want to win the competition. Those who do will have a huge competitive advantage.

And it's not just about being attractive to a shrinking labor pool; it's about being attractive to the best of the best in that pool. Businesses will continue to run leaner than ever before, making the "critical few employees" just that: critical. The only way to do more with less is if you possess the absolute highest levels of talent.

Top talent is always in demand and will always be the target of aggressive employers. With recent surveys indicating that 60% of high performers are hoping to be working somewhere else within the next 12 months, employers have to figure out how they are going to keep the talent they already have as well as how to attract the talent that is currently working for the competition.

The right benefit program is a big part of the answer. And it's becoming more important than ever to offer a robust, innovative, and competitive program to attract and retain talented employees who are able to help drive business success.

Life is busy, and people want help managing it. Employees want the convenience of accessing all sorts of services, information, and resources through their employer, even if they have to pay for it themselves.

With technology, everything is seemingly more accessible. Yet we seem to have less time than ever. On top of that, technology seems to be a double-edged sword, offering an overwhelming number of options. For so many things employees want and need, they don't need the absolute best solution; they just need a solution that will work and is easy to access. Yes, this could include voluntary benefits, but maybe it's help finding adult day care, personal financial planning, access to legal assistance to create a will, or even a vetted list of home repair specialists. Employees are willing to pay for these services; it's finding the right provider or service in the first place that's the challenge. An employer that is willing to take on that responsibility will definitely earn the appreciation of its employees.

If employers, with the resources they have at their disposal, are intimidated by the challenge of finding the right answers, imagine how overwhelming it is for the average employee. Nothing endears you to someone as much as when that person shows genuine interest in helping you feel safe and secure. At a time when employers should be thinking more creatively about their benefits offering, does it make sense to be dropping health insurance? And doesn't it make sense that employees will feel abandoned by employers who have opted to pay a fine and leave them to fend for themselves?

Benefit programs are one of the biggest drivers of employee loyalty.

The 2009 MetLife Employee Benefits Trend Study clearly demonstrates just how critical a benefit program is to creating loyal employees. From their survey:

• When employees are highly satisfied with their benefit program, 75% report being satisfied with their job (compared to just 25% with a low level of benefits satisfaction).

• When employers take the time to effectively communicate the benefit program, the percentage of those satisfied with their benefits goes from 9% to 71%, those satisfied with their job jumps from 27% to 75%, and those who are loyal to their employer moves an impressive 45 points from 25% to 70%.

• 41% of employees say that benefits affect their decision about whether to remain with an employer.

Healthy employees = productive employees

Think about yourself. When you show up for work and you're feeling healthy and happy, you're more productive at your job. It's the same for everyone in your company. Yes, a healthy workforce does start with physical well being, but it also includes a healthy work environment, engagement with the job, and the confidence that they work for someone who is looking out for their wellbeing. Providing the right resources for employees helps ensure that they show up each day ready to be productive.

From the same benefits study cited above:

• For each dollar invested in wellness, there is a savings of $3.48 in medical costs and $5.82 saved in absenteeism.

• 26% of employees miss fewer days of work because they participate in wellness programs.

With the confusion about what health care reform really means and the temptation to make a decision on price vs. true cost, it's understandable why some of your clients may be considering getting out of the "benefits business." That's why they need you to help explain why the need for the right benefits program is more critical than ever.

For employers who may opt to pay the fine but maintain the non-medical parts of their benefit program, the cost of their decision will be high—even counting the savings from dropping the medical benefits. Taking away the insurance is bad enough, but add in the shift of the associated burdens to employees to find and self-service their own insurance, and your value proposition to employees drops significantly. I think it's also safe to say that any employer that is willing to shift those burdens to employees will be less than effective with whatever remains of its benefit program.

You have a responsibility (and an unbelievable opportunity) to take away the anxiety your clients feel because of all of the unknowns about health care reform. You also have a responsibility (and opportunity) to help them understand the real costs they would pay if they decide to get out of the benefits business. Help them to look at themselves through the eyes of their employees: employees who, because of their impending free agency, will now possess more power, be more selective, and have higher expectations than ever before. Given the current state of the economy, this may be a hard vision to buy into, but it's out there and it's not that far away.

The price of the fine is easy to determine; the cost of abandoning employees is much more difficult to calculate, and likely to be much higher.

The author

Kevin Trokey is president of Benefits Growth Network, a membership-based consulting firm for employee benefits agencies and departments and their producers. He can be reached at kevin@benefitsgrowthnetwork.com.