Support For Employer-Provided Health Plans Starts To Erode
By Cyril Tuohy
The rumblings of employees dissatisfied with the value of employer-sponsored health benefits are getting louder.
But are the grumblings loud enough for employees to put their money where their mouths are? Are employees willing to walk out the door and leave their employer-sponsored cocoons, tossing all the value talk out the window?
Are employees really willing to ditch their group health plan for the individual market, especially now that the public health exchanges are up and running?
Kerry Donoghue, a partner and health and benefits business leader for the benefits administration business with Mercer, and her colleague Beth Umland, director of research for Mercer’s Health and Benefits business, said the perceived value of health and retirement benefits offered by employer-sponsored plans is starting to erode.
“Out-of-pocket expenses for employees are likely to continue to rise,” Umland said in a statement. “We’re seeing more cost-shifting and rapid growth in high-deductible consumer-directed health plans and employers are asked to cover more employees under health reform.”
That trend toward eroding support for employer-sponsored benefits was revealed recently in Mercer’s widely-followed 2013 Workplace Survey.
Younger employees in particular are fed up. Why should they be saddled – they say – with paying the costs of the older employee population and their dependents working for the same employer? Why not simply decline benefits from their employer and get them elsewhere instead?
The percentage of workers under 50 years old who say their benefits are “definitely worth it” in terms of what they pay out of pocket has dropped from 45 percent two years ago to 30 percent this year, the Mercer survey found. Mercer calls the trend “alarming.”
Guardian Life, in its recently released second annual Workplace Benefits Study, also finds “a growing disconnect between employers and their workers,” on the question of employer-sponsored benefits.
Guardian said that 47 percent of employers are planning to ask employees to bear a greater portion of their benefits cost in 2014.
Employers, Guardian said, are seeking opportunities to “shift more costs and responsibilities to their employees at a time when these benefits are becoming more critical to the workers’ overall financial security and well-being.”
Phyllis Falotico, assistant vice president of group marketing at Guardian, said that the “reality within the industry today is that employees are being asked to shoulder increasing responsibility for their benefits,” so employees need to understand all the options available to them through employer-sponsored plans.
Critics of the Obama administration and some corporate benefits managers have found it convenient to blame the Affordable Care Act (ACA) for shifting costs onto the back of employees, but long-term cost trends reveal that the cost of benefits was rising long before the ACA was signed into law.
Average annual health insurance premiums for family coverage came to $9,068 in 2003, according to the Kaiser Family Foundation and the Health Research & Educational Trust (HRET) surveys of employer-sponsored health benefits. Last year, average annual health premiums for family coverage came to $16,351, according to Kaiser/HRET.
Concurrent with the grumbling about the cost of employer-sponsored coverage from younger workers is the continuing value that the majority of employees believe the employer-based system provides, due in part to the group rates employers can negotiate with insurance carriers and the subsidy that employers provide.
Of the $16,351 in average health premiums for family coverage, the employer picked up $11,786, or 72 percent of the total cost, according to Kaiser/HRET.
The Mercer Workplace Survey found 93 percent of employees agreeing with the statement “my health benefits are as important as my salary.” In addition, 86 percent of employees disagree with the statement “my benefits don’t matter much to me,” the survey found.
Ditto with the Guardian Benefits Value Index, which measures the degree to which employees value their workplace benefits. Based on a scale of 1 to 10, the index rose to an average score of 7.1 , up from 6.8 in 2012.
Employer-sponsored health and retirement benefits provide unbeatable convenience. The ease with which employees can set aside money for retirement through salary deferrals is without parallel throughout the defined contribution system.
And with more employers considering moving to private exchanges, employees will certainly find new ways to extract value from that convenience, whether through the skilled use of analytics provided by power algorithms or “buying-down” their benefits to make sure they are not paying for anything they don’t absolutely need.
So the grumbling around the erosion of the perceived value offered by employer-sponsored benefits is higher than it was, but still nowhere near enough for employers to ditch their sponsored benefits just yet.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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