B E N C H M A R K S T U D Y

2017 Healthcare Benefits Trends

healthcaretrendsinstitute.org

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BackgroundThe Healthcare Trends Institute, an educational platform focused

on the rapidly changing healthcare benefits industry, conducted its fourth annual employer benefits study. The national survey went to over 250 human resources executives, benefit specialists and other benefit decision makers from organizations ranging in employee size from less than 50 to over 2,500. The quality and cost of healthcare is on every employer’s mind. The CMS has potential healthcare spending reaching $4.2 trillion by 2020. With our nation in a state of transition right now, there are some relevant considerations employers are facing as they look to transform the inevitable cost curve ahead and meet yearly organizational healthcare cost containment goals.

The Survey formed the basis for the 2016 Healthcare Benefits trends report on the following topics:

CURRENT HEALTHCARE BENEFIT BENEFITS:

Identifies the most widely implemented health plan and benefit strategies employers are relying on to control costs, administer a wide-range of employee benefits and remain compliant in an ever-demanding regulatory environment.

Use of and Interest in Defined Contribution Plans, Benefits Redesign, and Employee Communication: Examines the awareness by organizations of defined contribution plans, their advancement in retooling benefit offerings, and commitment to communication efforts that educate and engage employees.

HEALTHCARE BENEFIT TRENDS – LOOKING FORWARD:

Recognizes new market trends and approaches employers are considering to meet the needs of multi-generational, diverse employee populations.

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Study Highlights• Over half the companies reported offering HDHPs this year, up from 39% last

year and 28% in 2013.

• Employers show and increased interest in HSAs, HRAs, and FSAs indicating that at least half of their employees are enrolled in an account-based health account.

• Retaining and attracting quality employees remains the most important health benefit outcome according to three quarters of employers.

• For the fourth straight year, approximately half of employers choose insurance brokers as their number one partner they depend on to help learn about new health benefits.

• Over 60% of employers agree with the need for tools to identify and compare trends around employee health account spending moving forward.

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S Findings:Throughout 2016 organizations remain committed to providing a standard suite of benefits.

Preferred Provider Plans were the most offered health coverage option at 70 percent. Additionally, employers have begun to make the switch to high deductible health plans (53%) with health savings accounts (59%) and away from Health Maintenance Organizations (37%).

Wellness (37%) and mental health programs (38%) continue to be of importance to workforce management. These efforts seem imperative when considering statistics from a 2016 Mental Health Foundation report that revealed the damaging effect that poor employee wellbeing is having on employees and their companies, as one in four workers have considered resigning due to stress and one in five take a day off work due to stress.

Organizations need to remain aware of the need to keep their workforce physically fit and promote wellbeing through stress management. Effective employee benefit programs will move toward targeting physical, mental and emotional dimensions to produce lasting results for employees and employers alike.

What employee health benefits does your

company currently offer?

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Findings:

The average number of medical plans being offered remained at three or more in 2016. About 41 percent of employers are still providing several coverage options. As noted in this year’s survey findings the top three health plan types offered are PPOs, followed by HDHPs and finally HMOs. While consistent with last year, this indicates a gradual move toward offering HDHPs as opposed to adopting a full-replacement HDHP strategy.

How many different group health insurance

plan options do you give employees?

None at this time - 6.9%

1 - 29.7%

2 - 21.7%

3 or more - 41.7%

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Findings:Employee benefit communication continues to evolve as companies must work to reach several

generations of employees throughout the year. The majority of respondents are relying on email (77%) as at least one way to reach employees. However, approximately half of companies are also actively using multiple methods of communication such as face-to-face meetings (51%), print (49%), internal websites (49%), and insurance advisor meetings (41%) to reach employees in their preferred communication styles.

Seeing as Millennials now makeup the majority of the workforce, organizations will need to make a clear investment in creating digital communications that can be accessed 24/7. This will be a rising trend as this generation grew up with laptops and cellphones. They are accustomed to getting text reminders about everything from an upcoming doctor visit to the delivery of a package. Employers need to send similar benefit alerts and messages to employees using a text-messaging platform.

How do you currently communicate to

employees about their health benefits?

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Findings:Employer confidence is strong that they are effectively engaging

employees about their benefits package. Approximately 37% of respondents feel confident that they are communicating well with employees, while another 50% believe they are very effective in their communication approach with workers.

A recent benefits communication study by the International Foundation of Employee Benefits (IFEB) suggests that companies continue to refine their benefit communications to include these top five best producing strategies: Personalizing communication materials, communicating by lifestages, year-round communication, customizing to multiple generations and communicating in multiple languages. Effort in these areas should yield results that include information being read and understood by their workforce.

How effective do you feel your

communication approach is in engaging

your employees to make educational

decisions about their health benefits ?

50% 37% 7.4% 5.6%

Very Effective

Confident

Ineffective

Not Effective

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Findings:Growth in account-based plans is increasing. These plans typically offer the greatest savings and

are the lowest-cost option for employees in terms of their paycheck deduction. Surveyed employers reported that a little over 50 percent of their employees are enrolled in an HSA, HRA or FSA in 2016.

As HDHP growth continues it should be expected that participation in account-based options does as well. Companies have had to rethink their benefit offerings to save on costs while providing coverage that helps create greater employee involvement. Employers may move toward contributing to HSAs to encourage participation and ease an employee’s transition to the consumer directed health plan environment.

The time for FSAs has also firmly arrived. According to PwC’s 2016 Employee Financial Wellness Survey results each lifestage is demonstrating a growing need for utilization of this benefit. More than one in five employees provide financial support or care for parents or in-laws. Additionally, 55 percent of Gen X employees are paying dependent care expenses and among Millennials, 67% are paying dependent care expenses. Employers need to emphasize the tax advantages of these accounts and the carry-over option if they offer it to entice employee participation.

What percentage of your employees are

enrolled in a Health Savings Account,

Flexible Spending Account and/or a Health

Reimbursement Account?

51.5%

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Findings:With our nation in a state of transition now there are some relevant considerations employers

must face as they look to transform the inevitable cost curve ahead. The top three solutions offered by organizations are to increase employee cost sharing (20%), increase employee healthcare engagement (22%) and enhance efforts related to wellness and health management programs (18%) to control future healthcare costs. With the U.S. Centers for Medicare and Medicaid anticipating healthcare spending to reach $4.2 trillion by 2020, employers will have their work cut out for them.

With the new administration and uncertainty

of healthcare reform, do you plan to make

any of the following to your employee

benefits package?

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Findings:Today’s employee benefits must satisfy a wide-range of workforce needs. Many workplaces are

comprised of multigenerational, diverse employee populations that require a wider variety of innovated benefits than in years past. Companies recognize that their benefit offerings need to help retain and attract quality employees (75%), improve employee morale and satisfaction (68%), and improve employee health (67%).

The IFEB Employee Benefits Survey 2016 benchmarking data also depicts a workforce that ranks employee stress levels higher and higher year-after-year. Companies need to recognize the need for a modern approach to their offerings, one that accurately reflects and addresses the new demographics of organizations and the variety of stressors in employees’ daily lives.

Which of the following are important

outcomes to your health benefits offerings?

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Findings: Organizations understand they need to devote the time and

resources necessary to making their benefit offerings competitive and a good fit for their culture with over 84% of employers agreeing that the quality of their benefits package is important.

Today’s robust hiring market means companies are refocusing their efforts on creating attractive compensation packages, with a rising trend toward investing more in benefits. Currently, benefits now comprise a large percentage of total employee compensation (up to 60% for some companies), according to the IFEB Employee Benefits Survey 2016. A complete benefits package will help demonstrate an organization’s commitment to the wellbeing of their employees and increase worker satisfaction and overall job satisfaction, which leads to a positive reputation in the business world.

How strongly do you agree or disagree

with the following statement:

“The quality of a benefits package

impacts the reputation of my company”?

7.8

56% 28% 11.8% 4.2%

Strongly Agree

Agree

Disagree

Strongly Disagree

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Findings:

In a defined contribution plan (DCP) employers give employees a set amount of money to purchase the benefits of their choice. DCPs remain a relatively new concept for active employees. This correlates to this year’s survey finding of 36 percent of employers reporting some uncertainty about this approach. Of those employers familiar with DCPs they believe they can help employees understand the value of their benefits (27%) and make more cost-conscious benefit decisions (24%).

Current nationwide benefit surveys report about 12 percent of employers are using DCPs and 36% are considering it for 2017. The approach encourages employees to “benefit right-size” by often implementing robust decision support tools that can ease the transition to HDHPs or high performing network plans.

Do you think offering a defined

contribution plan (DCP) would:

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Findings:

Employers overwhelmingly recognize (69%) that a well-executed benefits strategy must have plan and cost comparison tools to help engage and educate employees. Ease of use for employees is also important so tools like online access (58%) and mobile applications (40%) are desired to ensure successful benefit enrollment and participation.

What employee features do you feel

are most important when designing

a benefit offering?

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Findings:Almost half of all employers are looking to their insurance broker to help with benefit information

and guidance, up from 40% last year and X percent in 2014. Complexity around the ACA has grown over the last several years as well as employers’ needs to contain healthcare costs. Companies are engaging their broker for help with compliance efforts, voluntary benefit options, wellness and healthy program designs, and technology support to meet their organizational and employee needs.

Brokers face an evolving benefits landscape with changes in regulations, advances in technology, shifts is employee demographics and most definitely in employer expectations. To fully address employer needs, brokers must continue to expand their capabilities in every direction to deliver on healthcare cost management and a competitive employee benefits package.

What type of organization do you

depend on to help you learn about new

health benefit designs and distribution

models, such as Consumer Directed

Health Plans, Defined Contribution Plans

(DCPs) and private exchanges?

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Findings:Keeping healthcare costs in check for employees remains a priority for employers (29%) as they’ve

considered their benefit offerings over the past couple of years. As they’ve looked toward new approaches of employee empowerment, at least a quarter of organizations have begun to invest in employee education (25%) and healthy/wellness incentives (27%).

Organizations looking to make employees their own best care managers, understand it requires creating an informed healthcare shopper and providing an environment that guides positive employee behavior and promotes engagement.

According to the National Business Group on Health and Fidelity Investment 2016 Survey, incentives have the power to help employees achieve positive wellness results. And industry benefit specialists also recommend designing programs with flexibility of choice to earn wellness incentives rather than prescribed actions. Treating employee empowerment as a long-term strategy through education, engagement and incentives will support employees in meeting their health and wellness goals year-over-year.

In the past 2 years, how has your

approach to designing benefits change?

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Less than 50 - 28.6%

51-100 - 13.1%

101-1000 - 33.7%

1001-2500 - 6.9%

2501+ - 17.7%

Approximately how many full-time

employees are in your company/

organization?

What is your role in the organization?

Human Resources - 32%

Owner/CEO/President - 12%

CFO - 2.9%

Benefits management/

administration - 24%

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Survey Summary/Conclusion

• Companies appear to be making some tweaks to benefit offerings, but are consistently still offering PPO coverage while making the gradual move to HDHPs. They remained committed to providing prescription drug, dental and vision options. Due to their relatively low cost these plans offer employers a very affordable way to positively impact employees’ overall health and productivity.

• Communication efforts surrounding benefits are strong among employer groups. They understand the importance of creating health literate employees by reaching them through multiple platforms of communication. Employers need to remain compelled over the next few years to add mobile applications to their communication channels in an effort to reach more millennials, who are the becoming the majority of their workforce.

• Account-based plans such as HSAs, HRAs, and FSAs continue to grow in popularity. A health trend that is expected to bloom in the years ahead. For instance, a new type of health account “a qualified small employer health reimbursement arrangement” was part of the newly-signed 21st Century Cures Act. A tool that may be used more in the future to expand group coverage.

• Insurance brokers have a prevalent role in helping employers shape their future health plan and benefit offerings. Organizations are interested in forming partnerships with their brokers, relying on them to be knowledge experts on new compliance mandates, plan designs, health and wellbeing solutions, and pharmacy strategies.

• Companies are looking to increase the use of tools and data in their benefit decision-making process. Integrating data to see patterns as to what’s working, what isn’t and where the gaps are will help employers provide relevant options and more personalized health and wellbeing benefits to increase employee satisfaction.

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About the Healthcare Trends Institute

Healthcare Trends Institute is an educational platform to help employers, third-party administrators, health plans, brokers, banks, payroll providers, consumers, and other stakeholders keep up with the rapidly changing healthcare benefits industry. It covers a range of topics related to the administration and management of healthcare benefits. To ensure all content and programs achieve the highest level of quality and relevancy, the Institute is guided by an Editorial Advisory Board comprised of subject-matter experts that represent diverse aspects and perspectives within the healthcare benefits industry. More information is available at www.healthcaretrendsinstitute.org

Tiffany Wirth, Executive Director

Healthcare Trends Institute

700 26th Avenue E

West Fargo, ND 58078

P 701.499.7215

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consumers across the United States and Canada. Together we take the complexity out of defined contribution,

HSAs, HRAs, FSAs, VEBAs, PRAs, premium billing, public and private health insurance exchanges, COBRA,

wellness plans, and transit plans.