Benefits Products & Services
The Guardian Workplace Benefits Study probes problems and solutions
The Guardian Life Insurance Company released its 4th Annual Work place Benefits Study in the second half of 2016 and, for the first time since the study began in 2012, the results showed a significant drop-off in worker satisfaction with their benefits plans. The results were derived from an independent, nationwide survey of 1,439 full-time employees and 1,204 benefits decision makers in companies with at least five employees.
The Guardian Benefits Value Index (BVI), which measures the perceived value of employee benefits among workers, declined from 7.1 (on a 10-point scale) in 2014 to 6.7 in 2016. Those employees who were “highly satisfied” with their overall benefits package fell from 70% to 65% over those two years.
Those who said their current benefits package is of greater value than five years ago likewise dropped, from 43% in 2014 to 28% in 2016; those anticipating a more generous benefits package over the next two years fell from 17% to 10%.
Among the demographic groups that have experienced more dramatic declines in BVI scores in the last two years were Generation X (ages 36 to 50)—from 7.0 to 6.4 and mid- to upper-income workers (household incomes of $50,000-$100,000)—from 7.3 to 6.6.
“We had expected a drop in the BVI sooner,” explains Gene Lanzoni, assistant vice president of thought leadership, Group and Worksite Marketing for The Guardian. “When we created the BVI in 2012, it was shortly after health care reform had been enacted, and employers were starting to make changes—including moving from richer medical benefits to more consumer-driven healthcare plans and maybe even exchanges, public or private. Yet the BVI stayed relatively flat for several years in a row.
“The fact that the BVI dropped as sharply as it did in 2016 in contrast to the three prior years was something of a surprise.”
In general, the study reinforces the critical role that employee benefits play in providing financial security for working families. Without their workplace benefits, 55% of working Americans believe they would face financial hardship. It shows that of the 65% of workers who are highly satisfied with their benefit plans, 84% report high job satisfaction and 74% want to stay with their current employer five years or more—compared to only 53% of those with a lower BVI who want to stay.
“A more holistic benefits enrollment experience is definitely a best practice.”
Assistant Vice President of Thought Leadership
Group and Worksite Marketing
The Guardian Life Insurance Company
Employers seem ready to work on improving the benefits satisfaction level of their employees; 75% of them rate “improving employee overall satisfaction with our benefits program” as a highly important objective for their company.
Guardian links the drop-off in benefits satisfaction in 2016 to the rise in employee out-of-pocket costs for medical insurance. Employers making medical plan design changes have risen from 62% in 2014 to 67% in 2016; those implementing high-deductible health plans have gone from 48% to 54% over the same time frame; and those that have increased cost sharing have risen from 43% to 49%.
Medical insurance is “by far the most valued employee benefit among working Americans,” the study points out, and “more than half of workers agree that cost is the single biggest driver of their benefits satisfaction and decision making.” So as employees absorb more of their own medical costs, their perceived value of their benefits programs falls. Those with high- deductible health plans had significantly lower BVI scores (6.5) than those with traditional plans (7.1).
“Another surprise from the 2016 study,” says Lanzoni, “is how few employers with high-deductible health plans offer Health Savings Accounts (HSAs) alongside the HDHP”—about 40% of employers, according to the study. “For small employers, only about 20% have an HSA alongside their high-deductible plan. It’s really important for employees to be using an HSA appropriately to set aside funds for uncovered medical expenses.”
Lanzoni continues, “If an employer offers an HSA alongside the high- deductible health plan, that’s a starting point, but once an HSA is in place, there’s a lot of room for improvement in how employers educate employees to use the HSA effectively as both a short-term and long-term savings tool. In terms of employee understanding of how to use HSAs appropriately, we might be about where we were 10 years ago with 401(k)s. It has taken that long to move the needle forward on 401(k) understanding and awareness.”
The study shows that for 60% of the employees with an HDHP, their deductible is over $1,200; for 25% of them it is $3,000 or more. When faced with a $3,000 out-of-pocket medical expense, 37% said they would have to make a deal with the provider to pay over time; 34% would use a credit card; 9% would ask for a loan from family or friends; and 6% would take out a bank loan.
In addition, 33% of workers with HDHPs report having ignored medical advice or neglected their own care, including 20% who have skipped doctors’ appointments and slightly under 15% who have delayed surgery or a recommended procedure.
The study concludes that “without taking additional steps, employers using HDHPs to rein in medical costs may experience a bump in short-term savings, but potentially at the risk of higher catastrophic medical and disability claims in the long term if employees continue to neglect their own health care.”
Making enrollment work
Lanzoni says that The Guardian’s research points towards the need for employers with an HDHP to move toward presenting a full range of products that can supplement and complement the high-deductible medical plan—including a Health Savings Account and supplemental health products—for an employee to consider. “First of all, these products need to be offered, and when they are, it’s probably best to do it as a suite.
“When we’ve done research with consumers, they describe what they want as an ‘Amazon’ shopping experience. ‘Depending on what choices I’m making, I can see what it is going to cost when I go to check out. For example, if I do take this critical illness or accident product, here’s what I might have to give up in what I’m putting into my 401(k) contribution.’ A more holistic benefits enrollment experience is definitely a best practice,” Lanzoni says.
The need for effective education at some stage of the enrollment process is evident from the results of The Guardian’s study. Employees who were confident in their most recent benefits decisions had a much higher BVI score than those who are less confident (8.2 versus 4.6).
Lanzoni says, “We think the kind of enrollment experience Americans are looking for is online—a smart process where the employee provides a little bit of information and then receives recommendations or at least promptings to look at offerings that might be relevant for his life stage. Employees are looking for that kind of personalization.
“They’re also interested in access to professional advice, which is something that is really absent from the process for most people. Most employers do not necessarily make available a financial professional or a benefits specialist from one of the insurance providers during or even after that process. We think professional advice—maybe by phone or a chat function—is becoming more appealing, especially to Millennials. but they ultimately feel better when they know a professional has at least reviewed their work and is validating it.”
Lanzoni points out that even when the employee has a high number of choices to make, the enrollment experience doesn’t have to be confusing.
“The study shows that the Benefits Value Index scores are the highest when there is a lot of choice but also very effective communication to support it. That’s a positive conclusion for employers who may be thinking they are just offering too much. Before they come to that conclusion, maybe they should evaluate how they are communicating those benefits to their employees and what the enrollment experience looks like.” n
Thomas A. McCoy, CLU, retired in 2013 as editor-in-chief of Rough Notes magazine.