CHANGING THE PLAYBOOK:
USING BENEFIT AND PRODUCT DESIGN TO CHANGE THE GAME PLAN
By: Julie Bunde, Director of Product Management
The landscape of employer-sponsored health insurance in the
United States continues to change and evolve at breakneck
speeds. From implementing health care reform to managing
rising costs, our clients are navigating some of the most
complex challenges they’ve ever encountered. As employers
seek innovative solutions, they must strike a balance between
controlling cost and providing competitive health care
coverage for their employees.
So, how did we get to this point? Over the last decade,
employer health-related expenses have steadily risen.
However, it’s not only employers feeling the pinch. Employees
have also seen yearly increases in health care expenses, as
they’ve been asked to share a greater proportion of costs to
help offset their employers’ expense. If current projections
hold true, the trend shows no sign of slowing for either
employer or employee.
So what are employers doing to manage costs? Many have
increased their employee contribution amount. Others
have altered the benefit and plan designs they offer. A few
employers have gone so far as eliminating group coverage
altogether. While termination is an option for some
employers, it only provides a short-term fix for a long-term
health care challenge. What’s more, employers need to
consider the impact such a move could have on their ability to
attract and retain talent, in addition to productivity.
Regardless of business size or industry, the good news is you
have options. There are many levers and dials you can pull
and twist to change the game plan — benefit and network
design, health and well-being programs, defined contribution
and funding options, just to name a few — while continuing to
meet the coverage needs of your employees.
Before we dive into the nuts and bolts of managing costs, let’s
first explore why employers believe it’s important to continue
offering benefits.
Rising Cost of Health Care
In just one year, from 2010 to 2011, large employers saw the cost of
health care per employee increase more than 8 percent. Of that,
employees were asked to contribute roughly 22 percent to help
offset costs.
2010
2011
Employer cost per employee
$9,028
$9,821
Employee cost share
$1,966
$2,209
Source: Aon Hewitt Survey
CHANGING THE PLAYBOOK: USING BENEFIT AND PRODUCT DESIGN TO CHANGE THE GAME PLAN
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Using health benefits to attract and retain top-notch talent
If you think salary is all it takes to attract and retain a talented
workforce, think again. Salary alone is no longer the primary
decision driver for job seekers. These days, an attractive
benefits package can be very powerful, and can serve as a
significant distinguisher in the race to find the
best employees.
When asked what was the most significant challenge
facing their organization in the next three years,
human resource professionals rated talent shortage
first, followed by benefit affordability:
Shortage,
motivation,
and retention
of qualified talent
25%
16%
21%
Rising cost of
Total Rewards
22%
18%
Health care
reform complexity
Uncertain
economic
conditions
Total Rewards
administration
that meets
or exceeds
expectations
19%
10%
who are very satisfied with their benefits are nearly three
times as likely to say they’re very satisfied with their jobs,
and less likely to leave, as they feel a stronger sense of
loyalty. Ultimately, satisfied employees are more productive
employees, and that’s a win-win situation for everyone.
Conversely, employees who aren’t satisfied with their benefits
are more apt to be less engaged at work. These individuals
negatively impact productivity and will eventually seek
employment elsewhere.2 Unhappy employees can be a
financial drain because of the added expense that comes
with employee turnover.
With that, employers need to be in tune with the needs
and preferences of current and prospective employees. Not
sure what those needs are? Consider completing a benefit
satisfaction survey. These types of surveys provide valuable
insight into the benefits employees value and what they like
or dislike about them.
Keeping employees satisfied is only half the battle;
understanding and choosing the right benefit plan is
another challenge.
6%
7%
13%
Source: Deloitte Survey
Current and prospective employees alike consider benefits
to be an important piece of their overall compensation. A
new study commissioned by Unum, and conducted by Harris
Interactive, recently found there’s more value being placed on
benefits than ever before.1 Individuals are in search of financial
security, as they look for protection from the economic impact
illness, disability, loss of life or unemployment can cause. To
find this protection, they’re looking to employer-sponsored
benefits.
Marketplace perspectives
There are two prevailing benefit thought patterns in the
marketplace. The first is the financial point of view. This view
looks at health care from a dollars and cents perspective —
the cost of health care. The second is the human view, which
focuses on the human element — the value of health care.
Financial View
•
•
Human View
Health care as a
•
cost of doing business
Plan designs that share
•
cost/risk with employees
•
Benefit packages play a significant role in employee retention,
too. Research has found there’s a direct correlation between
benefit satisfaction and overall job satisfaction. Employees
CHANGING THE PLAYBOOK: USING BENEFIT AND PRODUCT DESIGN TO CHANGE THE GAME PLAN
Add health and wellbeing to improve health
Provide alternate
delivery mechanisms
Competitive benefit
package to attract
and retain employees
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Dialing up a game plan that works for you
Now that we’ve looked at the current landscape, and why it’s
important to offer benefits, it’s time to explore some of the
levers you can pull. There are many ways to customize plans
that fit your organizational needs, while leveraging benefits
for the group and your employees.
Defined contribution:
Similar to the move from defined pension plans to the
401k model in the 1990s, employers are looking for ways to
cut and cap employee health costs. One approach that’s
growing in popularity is defined contribution. There are two
general models for defined contribution: group coverage and
individual coverage.
•
•
Group coverage: An employer picks multiple plan options
for the employee to select from. The contribution amount
is then determined by a base plan (i.e. the least expensive
one). If the employee wishes to enroll in a plan other than
the base plan, they’re responsible for any additional cost.
Individual coverage: An employer offers a standalone
health reimbursement account (HRA) with a set amount
of money. Employees are able to use the HRA funds for
any 213(d) allowed expense, including an individual plan
premium. This model is the fastest way for employers
to reduce their role in benefit administration, while
continuing to offer something of value to employees.
Until health care reform takes full effect in 2014, one
of the challenges with this model is an employee must
go through individual underwriting, which not
everyone will pass.
Benefit and network plan design:
Effective benefit and network design can produce significant
claims cost savings. At HealthPartners, we’ve seen employers
choose to carve out certain high-cost care systems through
different network tiers. Others increase member cost share
for high-cost care systems, but allow employees the freedom
to access the system of their choosing.
Value-based benefits are also being used more often in plan
design. A value-based benefit design engages employees
and encourages them to seek the most effective form of
treatment. Incentives can include rewards, reduced premium
share, deductible and copay adjustments, and contributions
to account-based plans, such as a health savings account
(HSA) or HRA. It can also mean increasing the cost share
for those who receive services that aren’t necessary or
evidence-based.
Alternate approach for plan funding:
HealthPartners has seen self-insured health plans continue
to grow in popularity among employers. This form of funding
requires the employer to set aside their own funds to pay
employee health care claims. Under self-insured plans, the
employer assumes all of the risk because they’re responsible
for paying actual medical and pharmacy claims costs. Selfinsured employers pay an administrator a fee for services,
including claims processing, customer service, and disease
and case management.
As health care costs have increased, more employers
have weighed taking on the additional risk of self-funding
to gain more control over their health care strategy.
Employers have also turned to self-insurance plans
for these reasons:
•
•
•
•
•
Elimination of most state, and some future
federal reform, taxes and assessments
Exemption from state-mandated benefits
Consistent benefits for employees across multiple states
Savings if claims costs are lower than expected
More control over what’s happening with
employee population
Contrary to popular belief, self-funding isn’t just for the largest
of employers. Thanks to new product alternatives in the
marketplace, small employers can now consider self-funded
plans to be a feasible option.
CHANGING THE PLAYBOOK: USING BENEFIT AND PRODUCT DESIGN TO CHANGE THE GAME PLAN
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Using health and well-being to reduce cost
Preparing for current and future trends
Well-being has proven to be a valuable approach to reducing
long-term health care costs. When used effectively, these
programs can manage costs and produce significant bottomline savings for employers. Research suggests employers can
save as much as $3.27 in medical costs for every $1 spent on
health and well-being programs, and that absenteeism costs
fall by about $2.73 for every $1 spent.3
It’s important for employers to be aware of the trends driving
health care and reform in the marketplace. As you prepare
for current and future trends, continue to work with your
health plan provider, consultant or broker. These resources
can provide insight to help you understand what your
opportunities are as the market and regulatory environment
continue to evolve.
HealthPartners strongly encourages clients to integrate
well-being with their health plan. Doing so can significantly
increase employee participation. There are several health plan
models that can integrate well-being to improve engagement
by pairing incentives with benefit design. Choosing to embed
well-being into your plan design has many benefits, including:
HealthPartners makes it a priority to remain knowledgeable of
current and future legislation. This commitment has allowed
us to take a proactive role shaping health care and reform
opportunities. No matter which direction 2014 health care
reform heads, it’s important to be prepared to address current
and future market trends. Flexibility and adaptability will play
a crucial role in helping you achieve your financial goals.
•
•
•
Single solution for health plan and well-being program
Increased consumerism and employee engagement
Healthier and more productive employees, resulting
in lower turnover
Using incentives to engage
Employers must go beyond simply offering well-being
programs to successfully reduce costs. After all, what good is
it to offer them if employees don’t participate? That’s where
incentives come into play. Based on our experience, using
incentives can be a key driver to increase participation —
achieving rates as high as 75 percent, if not greater.
When determining what programs to offer, remember to
keep the employee in mind. Look for programs that are fun
and interactive. At HealthPartners, we’ve infused gamelike
features, such as a point reward and leaderboard system, into
our well-being offerings. These features encourage friendly
competition among coworkers, which has proven to be a good
motivator and workplace morale builder.
We understand the importance of providing market solutions
tailored to our clients’ needs. There’s no one-size-fits-all
solution. By partnering with employers, we’re able to deliver
products that allow them to manage costs and meet their
employees’ needs, all while staying within budget and ahead
of the game.
References
1
Unum. Employees Value Benefits More than Ever; Research from Unum shows
importance of most benefits has steadily increased since 2008 among employees
of all ages. Print.
2
etLife. “10th Annual Study of Employee Benefits Trends.” Employee Benefits
M
Trends Study from MetLife. Web. 03 May 2012. <http://www.metlife.com/
business/insights-and-tools/industry-knowledge/employee-benefitstrends-study/index.html>.
3
aicker, Katherine, David Cutler, and Zirui Song. “Workplace Wellness
B
Programs Can Generate Savings.” HealthAffairs 29.2 (2010): 304-11. Web.
At the end of the day, you need to determine what will
work best within your population, and what will work best
when integrated with your benefit plans.
HealthPartners Employer Academy is an ongoing education series for health plan purchasers.
Sessions provide practical information and tools to help purchasers navigate the constantly-
CHANGING THE PLAYBOOK: USING BENEFIT AND PRODUCT DESIGN TO CHANGE THE GAME PLAN
changing health care game. For more information, visit healthpartners.com/employeracademy.
450410 (5/12) ©2012 HealthPartners
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