Winter 2007 / No. 70
MarketVision™
2006—The employer perspective
by Bonnie Brazzell
Competition has been intense in the worksite market for a number
of years and shows no signs of letting up. More and more carriers,
as well as distributors, are entering the market with a wide
variety of products. To stay ahead of the game, it is important
that carriers really understand their customers. In worksite,
this includes three separate “customer” or “stakeholder”
groups—the broker or producer, the employer, and the employee.
Carriers that wish to succeed in the worksite market must consider
the needs, wants, and expectations of all three groups when developing
their marketing plans and strategies.
Eastbridge recently completed a new study of employer attitudes
towards benefits, in general, as well as towards voluntary benefits.
The study results are based on interviews with over 500 benefits
managers in accounts ranging from 10 to more than 5,000 employees.
The report updates our landmark MarketVision™ study of
2002 as well as several other employer studies conducted over
the last three years. Interestingly, we learned that some things
have changed over the last several years while others have remained
the same.
Attracting and retaining employees and increasing employee job
satisfaction continue to be the two most important goals of benefit
plans, according to benefits managers. Helping employees plan
for their financial future is also key. Noteworthy is the fact
that “helping employees balance work/family life” increased
in importance compared to the 2002 study. Still, employers are
most influenced by cost issues when making benefit decisions,
which can often undermine these goals.
Not surprisingly, 90 percent of the benefit managers surveyed
rated “controlling costs of both health and welfare benefits”
as the most important factor they consider in making benefit
decisions. Reducing HR administrative costs was significantly
lower in importance this year as compared to a similar study
conducted by our company in 2002, perhaps indicating that cost
increases in medical plans are taking precedence over reducing
administrative costs.
Like in past studies, the most popular approach to controlling
costs is to increase employee contributions toward benefits.
Interestingly, though, significantly fewer said they were likely
to do this now as compared to in 2002 (39% today versus 47% in
2002). Thirty-two (32) percent said that they would most likely
increase deductibles, co-payments, or other features of their
plans to control costs. More importantly, however, is the fact
that most employers favor these methods rather than opting for
more drastic measures like dropping benefits, moving benefits
to an employee-pay-all basis, or even moving to a defined contribution
approach.
Another somewhat surprising finding was that, despite all the
press coverage about employers wanting to reduce their benefit
costs, employees still have access to a significant range of
insurance coverage, and employers seem committed to continuing
to offer this range. More than nine out of ten employers offer
medical, prescription drug, and dental insurance. About 80 percent
offer term life, accidental death and dismemberment, and short-term
and long-term disability coverage to employees (either as employer-paid,
employee-paid, or on a cost-sharing basis). Few employers are
looking to reduce the number of benefits or cut benefit amounts.
The percentage of U.S. employers offering at least one voluntary
product today declined slightly to 54 percent. However, the decrease
was primarily due to a decrease in the percentage of small employers
(10 to 100 employees) offering voluntary (just 50 percent of
the small employers offer at least one voluntary product). Because
of the large percentage of small employers, the overall percent
(based on a weighted average reflecting the actual composition
of U.S. business) did, in fact, go down. However, most of the
other employer size categories saw increases in the percentage
offering voluntary (especially in the 101 to 500 employee size
category). These changes more than likely reflect the fact that
brokers are focusing more on larger cases than on smaller ones.
On the positive side, since there are more employees in the larger
businesses, the percentage of employees in the U.S. that have
access to voluntary benefits through their employer increased
to 70 percent, the highest level ever.
A factor that has not changed is the reason that employers offer
voluntary. Most employers said that their company offers voluntary
products because of employee interest as well as cost savings
to the company. They also believe that voluntary benefits help
enhance their overall benefits package which, in turn, helps
the business attract and retain employees. Those that don’t
currently offer voluntary feel that their program is adequate
without these benefits.
Cancer/critical illness and short-term disability insurance
are the most commonly offered voluntary products. Health savings
accounts, high deductible health plans, and long-term care insurance
rated the highest in terms of future voluntary product sales
potential, according to the benefit managers surveyed. These
products are related to helping employees with health-care expenses
and helping employers control costs. There is some concern, though,
with moving towards these types of plans given the need for educating
employees well enough to make sound benefit decisions.
Most of the employers in our study use multiple carriers for
their voluntary products. The most common answer was
“two or three carriers,” but one-third of the respondents
use more than three voluntary carriers. Also, the study showed
an increase in the percentage using more than five carriers.
When considering which carrier to use for their voluntary products,
most benefit managers look primarily at the price of the product,
the carrier’s reputation, and the administrative and technical
support offered. These were the same top three factors as in
the previous study. However, the reputation of the carrier went
up significantly in importance (from 82 to 91 percent).
Several new factors were included in this year’s study.
In looking at product issues, it appears that having “best
of breed” products is more important than offering a range
of products. The availability of personalized enrollment materials
and carrier help with the enrollment were also new factors that
were rated fairly important.
Clearly, voluntary benefits have become a mainstay in almost
every employer’s benefit program and their importance is
here to stay.
The Worksite MarketVision™ 2006—The Employer
Viewpoint will be available for purchase in February.
The study results are based on quantitative interviews conducted
with 504 benefit managers during June and July of 2006. The
interviews include roughly the same number of employers from
each of four different size categories (10-100 employees; 101-500;
501-2,000; 2,000+). Qualitative interviews were conducted with
an additional 31 plan administrators.
For more information on this report or to pre-order it,
give us a call at (860) 676-9633 or email us at info@eastbridge.com. |
