Small Business: Communicating the increasing cost of health benefits
The perceived value of workplace benefits is eroding, due largely to employee concerns about rising out-of-pocket health care costs, a recent survey by human resources giant Mercer found.
Average employee costs such as co-payments, coinsurance and deductibles were $2,239 in 2013, up 12.8 percent from the 2012 average of $1,984, according to an analysis by Aon Hewitt consultants. It's expected to increase to $2,470 in 2014.
Given this trend, it's more important than ever for employers to communicate with workers about benefits and costs.
"Employers are faced with significant increases in premiums and benefit design changes," explains Kevin Quinn, a partner at Chernoff Diamond & Co. in Uniondale, an employee benefits advisory firm. "As a result, employees are experiencing significant increases in not only what comes out of their paycheck to participate in a health plan, but also what comes out of their pocket when they receive health care from their providers."
High deductibles. Only a couple of years ago, most employees weren't aware of the full cost of a doctor's visit or prescription, he explains. But with the evolution of high-deductible health plans and health savings accounts, they're seeing $2,000 to $3,000 deductibles that must be satisfied before being reimbursed, says Quinn.
That's making them much more aware of costs, he says, and that's why employers need to be up-front about these costs.
Meetings. The most common way to communicate is through employee meetings.
That's what Dede Gotthelf, owner of the Southampton Inn, does with her employees.
With a plan renewal date of May 1, she held a meeting last week at which her benefits adviser discussed plan changes and costs. "It's a very open conversation," Gotthelf says.
Rising premiums. Over the years, she's had to make plan changes to contain rising costs, now "well over $100,000" annually, she says. The company used to pick up 100 percent of employee health insurance premiums, but over the past decade it has had to increase employee contributions, she says.
The inn would have seen an 18 percent premium increase last year if it didn't make plan changes, including adding higher deductibles, says Alan Kifferstein, a broker with Economic Planning Group, a Manhattan firm providing employee benefits, insurance and pension brokerage services. The changes held the increase to 7 percent. This year the company expects to switch carriers, enabling it to keep costs roughly flat, he notes.
Paycheck reports. Kifferstein says some employers are producing "hidden paycheck" reports for employees, which lay out all the benefits they're receiving. "People often don't realize what they're getting," he says.
How you communicate depends on your company's culture, says Craig Johnson, a partner in the communications practice at Manhattan-based Mercer, a global human resources consultancy. For one company it might be meetings, and for another it might be email/intranet.
Updates. Either way, benefits communication must be "an ongoing conversation," says Johnson, who's seeing more companies hold pre-enrollment communication campaigns a month to six weeks before enrollment.
Marketplaces. Last year, most companies were required to notify employees of the existence of the new health insurance marketplaces and explain that employees could be eligible for a tax credit if they purchase coverage through the marketplace, says Avi Sinensky, an associate specializing in employee benefits and executive compensation at Meltzer, Lippe, Goldstein & Breitstone LLP in Mineola. They also were required to provide employees with a summary of benefits and coverage explaining their plans and costs, he notes.