Employee Benefits Blog

Last week we wrote about a recently issued Executive Order by the White House to hopefully usher in healthcare price transparency from hospitals and insurance carriers, both of whom hold their secret price negotiations close to the vest. We expressed optimism over the order’s ability to tame runaway consumer and employer healthcare costs. Sunlight, after all, is said to be the best disinfectant.

There’s another area of equal concern which has been driving up the cost of employer-sponsored healthcare for quite some time - prescription drug pricing. In a word, it is skyrocketing, with no end in sight.

The price of pharmaceutical drugs is rising 3x faster than wages, and 5x faster than inflation. In fact, more than 3,400 drugs have boosted their prices in the first six months of 2019, an increase of 17 percent in the number of drug hikes from a year earlier. And the average price hike across all prescription drugs stands at 10.5 percent.

A new coalition of health advocate groups was formed in October to make their voices heard on drug price transparency, caps on drug price increases, and other price reducing strategies. The coalition has identified drug manufacturers and pharmacy benefit managers (aka the middlemen) as the culprits, but it’s literally going to take an act of congress to get this under control.

The drug hikes come at a time when (or perhaps because) lawmakers and the Trump administration have vowed to address the problem of rising prescription costs.

The Trump administration, hungry to notch a win on healthcare prior to the 2020 election, continues to push ahead on initiatives designed to reign in healthcare costs. We applaud these efforts and are disappointed and dismayed by those in the healthcare industry opposed to these undertakings.

Announced November 15, the White House’s price-disclosure initiative would most certainly upend the $3.5 trillion healthcare industry. In fact, the requirements called for, by executive order, are far more extensive than many industry experts predicted. Somewhat expectedly, they have drawn the ire of hospitals and healthcare delivery providers caught in its crosshairs.

The Executive Order On Healthcare Transparency

Issued jointly by the Department of Labor (DOL), Department of Health and Human Services (HHS) and the Treasury Department, the proposal imposes new transparency requirements on group health plans and health insurers in both the individual and group markets.

In the simplest of terms, the proposed rule will force hospitals and insurers to disclose the highly secretive rates they negotiate with each other for an extensive list of services, including doctor and facility fees, supplies, and even drug costs.

It wasn’t long ago employers feared that the growing popularity of more portable employee benefits such as Health Savings Accounts (HSAs) might lead to a drop in workforce loyalty and employee retention.

Coupled with the ACA’s provision striking down preexisting conditions, HR professionals were fearful this would cause an exodus of workers who perhaps weren’t loyal out of choice, but rather because of their employer-sponsored healthcare coverage and yet-to-vest retirement benefits.

It turns out that these fears have been mostly unfounded. In fact, the rate at which employed workers move to new jobs has been depressed for more than a decade and has only recently approached levels seen before the 2008 financial crisis, according to data from the U.S. Census Bureau.

More precisely, and according to a Wall Street Journal article published earlier this week, 5.8% of U.S. workers switched jobs in the first quarter of 2018 (the most recent period available), compared to an average of 7% per quarter back in 2000 and 3% per quarter in 2009, the latter of which represents an historic low during this period. 

Today's still relatively low level of job switching has economists calling into question a key economic model of our time, called the Phillips Curve. It predicts that inflation rises as unemployment falls, but that hasn't happened lately. So what's going on? And what does this have to do with employee retention?

This afternoon the IRS officially announced the final 2020 election/contribution limits for Flexible Spending Accounts (FSAs), qualified Commuter Benefits, and several retirement savings vehicles. (See comparison tables, below.)

Considering that many employers have already held their employee benefits Open Enrollments for 2020, today’s announcements by the IRS can best be filed under the “better late than never” category.

These IRS statements finally set official contribution limits for Health Care FSAs, Dependent Care FSAs, Limited Purpose FSAs, Qualified Parking and Qualified Transportation Saving Plans, 401(k)s, 403(b)s, most 457 plans, IRAs, SIMPLE Plans, and the Federal Government’s Thrift Savings Plan.

All of these saving plans provide participants with the opportunity to save money, either by paying for qualified expenses with pre-tax savings contributions, or by saving for retirement with pretax elections. 

Companies across the U.S. are chasing a Monday deadline to provide the federal government with full disclosures of how they compensate workers of all genders, races and ethnicities. The data collection exercise, the largest and most detailed ever, is part of an effort by the government to close gaps in earnings.

Subject to the requirement are the more than 70,000 private U.S. companies with more than 100 workers. Collectively these companies employ more than 54 million American workers. These firms must submit their compensation information to the Equal Employment Opportunity Commission (EEOC) by September 30th.

This deadline comes almost two years after the rule, issued under the Obama administration, was originally scheduled to go into effect. In 2017 the Trump administration pumped the breaks on the rollout of the new rule, arguing that the collection and aggregation of such in-depth salary information was a burden on companies. (Advocacy groups sued the EEOC to get the pay-reporting requirement reinstated.)

EEOC officials say that this detailed compensation data, which will span virtually every industry and region of the county, will help them quickly ascertain which discrimination complaints deserve closer scrutiny, from the tens of thousands that are filed with the EEOC annually. (They received over 75,000 in 2018 alone.)

Many companies stick with their employee benefits broker for years on end, not giving too much thought to whether a change is warranted. HR directors always have long to-do lists full of time-sensitive issues, so finding a new broker is typically the last thing on their minds — except maybe during contract renewal season if the news isn’t good (and it never seems to be with health insurance these days).

The issue here is that there is a point when it’s time to fire your broker, but recognizing it when the time comes is difficult because you have a million things on your mind and far more pressing matters at hand.

However, there are some definite signs it’s time to find a new employee benefits broker and it’s important to keep an eye out for them. Here are some of the big ones.

We are about to witness an important change in workforce demographics – one that has implications for virtually every company recruiting college-educated adults.

Women, you see, are about to become the majority of the college-educated workforce in this country. Back in 2007, women surpassed men as the majority of college-educated adults in the United States, but it’s taken 12 years for this change to reach the labor force.

Responding to this change, savvy companies are striving to become more attractive to female job candidates. Some of these new practices include the ways in which companies are redrafting job descriptions with more gender-neutral language, as well as changes companies are making to compensation and culture.

Changes to employee benefits programs are even more widespread, and include;

With the rising cost of health insurance, many consumers are opting for high deductible health plans (HDHPs) to keep their medical premiums affordable, especially when they’re relatively young, comparatively healthy, and don't spend much of their budget each year visiting a doctor. However, many people enrolled in qualified HDHPs are disappointed to learn they can no longer, by law, participate in a traditional flexible spending account (FSA). 

The nature of how these plans are designed leaves some wondering how they’ll cover all the expenses incurred prior to reaching their deductible, which has led to the rise of health savings accounts (HSAs) and limited purpose flexible spending accounts (LPFSAs).

Only those enrolled in qualified HDHPs are eligible to open an HSA and reap the tax benefits, but many are unaware that they’re also eligible to open a limited purpose FSA (providing their employer offers one), which frees up the money in their HSA for future use — even retirement. 

What Is a Limited Purpose FSA?

HSAs are usually a major selling point of HDHPs. They allow participants to set aside a portion of their income from each paycheck in order to pay for qualifying healthcare expenses. Limited purpose FSAs are like HSAs in that participants can contribute a specific amount from each paycheck. LPFSAs are like traditional FSAs in that they make funds available immediately, rather than forcing you to wait until enough money has accumulated to access the money you need for necessary vision and dental care (whereas HSAs require funds to be in the account before reimbursement can occur).  

Employees, customers, suppliers, and even community neighbors all moved in front of shareholders yesterday as the primary audiences publicly held companies should utmost serve in the future.

That’s according to a statement released by the Business Roundtable, a group of CEOs representing 200 corporations around the country. This new vision recasts the prime directive of corporations from first and foremost serving shareholders (e.g. maximizing profits) to serving these new audiences.

The new mission suggests that corporations should; invest in employees, deliver value to customers, deal ethically with suppliers, and support outside communities. “Shareholders ride the caboose in this new code of corporate purpose,” said a dissenting opinion piece in yesterday’s Wall Street Journal.

Jamie Dimon, chairman and CEO of J.P. Morgan Chase and chairman of Business Roundtable, said yesterday, “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”

New this year, per the U.S. Department of Labor, is the ability for employers nationwide to auto-enroll employees in disability insurance coverages for ERISA-covered plans.

The implications of this decision are far reaching and merit serious consideration by employers offering disability benefits, which are designed to prevent income disruption in the event of a qualifying disability. (As with other auto-enrollment options such as 401(k) contributions, employees retain the opportunity to opt-out if they choose not to take the coverage.)

For those employers who don’t yet offer disability coverage, we strongly encourage you to read our blog post from earlier this year on why disability insurance is one of the most valuable benefits you can offer.

The Gap Between Interest and Action

At present, one in four 20-year-olds in the workforce can expect to be out of work for at least a year before they reach retirement, due to a disabling condition - that’s according to probability tables developed by the Social Security Administration.