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Small Business Employee Benefits and HR Blog

Two Biggest Health Benefits Challenges are Controlling Costs, Recruiting and Retention

In the wake of changes due to the Affordable Care Act (ACA), it comes as no surprise that healthcare benefits are a major concern to employers. In fact, according to the 2014 Benefits Strategy and Benchmarking Survey, conducted by Arthur J. Gallagher & Company, the two biggest challenges employers face are 1) controlling benefit costs and 2) attracting and retaining a competitive workforce. Surprisingly, these concerns rank over revenue and sales growth, government regulation, and even maintaining profit margins.

The survey polled 1,833 employers throughout the United States. There were a variety of different employer participants, including for-profit organizations and non-profit organizations. Size of the employers varied from under 100 full time employees to over 1,000 full time employees.

Top Health Benefits Challenge: Controlling Cost of Benefits

Although controlling employee benefit costs ranked number one in the overall challenges that employers face, the survey revealed that only 31 percent of these employers polled have quantified the cost of healthcare reform.

Biggest health benefits challengesOut of the survey participants who have quantified the cost of healthcare reform:

  • 42 percent expect to see costs increase by at least 6 percent

  • 26 percent perceive costs to increase by 10 percent or more

A staggering 62 percent of employers’ healthcare premiums have increased since their last renewal. At least 25 percent of employers have seen increases of at least 10 percent.

Another trend revealed in the survey were the most popular methods of healthcare cost containment. Increasing employee liability was in the top four out of five strategies:

  1. Increase employees’ plan contributions

  2. Increase deductibles

  3. Increase out-of-pocket maximums

  4. Increase copayments

  5. Change plan carrier

Contemplating Defined ContributionThe survey points out that even with all of these strategies, “It is unclear how effective these adjustments will be. If they do not contain costs, employers may increasingly turn to the defined contribution model for relief.”

In fact, the survey results showed that at least 23 percent of employers have considered switching to a defined contribution model within the next three years. Of the small percentage of employers who have already switched to a defined contribution model, most noted cost and increased employee choice as reasons to switch to defined contribution.

Top Health Benefits Challenge: Attracting and Retaining a Competitive Workforce

The second largest challenge employer participants reported was attracting and retaining a competitive workforce while controlling benefit costs.

With the dynamic preferences of the workforce becoming more diverse, employers are in need of a more personalized approach to healthcare benefits to retain their employees. Survey results revealed several other trends regarding employers’ benefit choices to retain employees:

  • Although employees are very interested in long-term care as a benefit, 82 percent of employers do not offer this benefit.

  • Although dental benefits continue to be an extremely popular benefit among employees, 63 percent of employers are requiring a median employee contribution of 28 percent of premiums for individual policies; 84 percent of employers require employees contribute a median of 50 percent of premiums for family policies.

  • Almost all (98 percent) of employers are paying at least a portion of their employees’ medical benefits.

  • 77 percent of employers require their employees to contribute to their healthcare plan.

  • 78 percent of employers reported that at least 70 percent of their eligible workforce is enrolled.

Top Human Resource Concerns for Employers

When asked about the human resource challenges they face, employers’ concerns were focused on healthcare issues:

  1. Controlling healthcare expenses

  2. Keeping up-to-date on healthcare reform and other regulations

  3. Increasing employee job satisfaction

  4. Compensation expenses

  5. Retaining employees

Chart and Survey Source: Arthur J. Gallagher & Co. 

Are these the biggest health benefits challenges you see in the industry? Leave a comment.

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