Our insurance agent delivered the bad news last week – the company’s health insurance premiums are going up 19 percent next year. To curb this huge cost increase, we either have to look at increasing the deductible or increasing the premium burden on our employees.
Because of health care reform, this will be a common scenario that many employers will face over the next few years. Because of the new economic realities of escalating health care costs and an aging population (a few of my co-workers hit milestone birthdays that pushed them into the next higher age bracket), we’ve come to realize that balancing business costs and benefits needs is not just about spending more, it is about spending differently.
For our company, increasing the deductible reduced the premium cost, and some of that savings will now be re-directed to an employer contribution to the HSA (health savings account). This way, the employee gets the benefit of those HSA funds, not the insurance company.
This is becoming commonplace, as a recent MetLife 9th Annual Study of Employee Benefit Trends shows that a third of employer respondents indicated they plan on making health plan design changes too, over the next year. Unfortunately, some of those employers will be passing along the cost increase to their workforce, since 28 percent of companies with under 500 employees stated that they don’t want to shift benefits costs to employees, but feel they have no choice.
What are some other changes we can expect over the next few years besides health insurance?
Well, many employers expect non-medical benefits and retirement offerings to become more important components of their benefits strategy in the wake of health care reform. Surprisingly, non-medical benefits such as life, dental, and disability were twice as important for driving loyalty than employers suspect for those employees polled.
We will also be seeing a rise in voluntary benefits like critical illness, legal plans, and even pet insurance which are paid for entirely by the employee, but with the advantage of discounted group rates.
Another big shift we will be seeing in the next few years is in the wellness arena. Many companies have added a wellness component to their benefits structure, and as it becomes more apparent that financial stress negatively impacts employee health and productivity, these companies are focusing on financial wellness as an integrated piece of their wellness programs.
This is being accomplished by the use of financial assessments, financial literacy education, and one-on-one financial consultations, to improve the financial well-being of the workforce.
The study also anticipates an increase in the interest of guaranteed income option (an annuity) as part of the 401(k) investment line-up.
Employers have been hesitant to offer annuities in the past due to fiduciary concerns, but with President Obama even touting the benefits of a “paycheck for life” and the fact that many employees won’t have a traditional pension to take advantage of, this is certainly a trend worth watching. Currently, only about 15 percent of companies offer annuities at the point of distribution for their defined contribution plans, but another 28 percent have indicated they were interested in doing so in the next five years.
With the addition of annuity options for employees, it becomes even more important to provide education on the pros and cons of annuities, and the best messenger for this information is probably NOT the insurance company rep, but rather an unbiased financial professional that can truly look at what is in the best interest of the particular employee based on their circumstances.
This was originally published on the Financial Finesse blog for Workplace Financial Planning and Education.
