Rapid adoption of consumer-driven health plans, a surge in specialty drug usage/cost, continued migration to automated benefits administration tools, and generous paid time off policies were four major trends in employee benefits in 2015.
Here's a breakdown of these trends and what you can do as an employer to maintain balance in the upcoming year.
Rapid Adoption of CDHPs
In an effort to contain costs through a “defined contribution” approach, as well as prepare for the Affordable Care Act’s (ACA) Cadillac Tax (which may ultimately face repeal), employers adopted Consumer-Driven Health Plans in droves this year.
While employees should theoretically welcome having more control over their healthcare, most found the higher deductibles, which are central to these plans, a difficult pill to swallow, despite employer attempts to dull the pain with contributions into Health Savings Accounts (HSAs). Critics of CDHPs pointed to this as nothing more than a cost-shifting exercise, rather than a true cost-saving measure.
In truth, when applied effectively, and with a good bit of well-executed employee education and online decision tools, CDHPs can be very effective in prompting consumers to make well-informed choices about their healthcare, which ultimately can bend the cost curve down for everyone. Additionally, when an HSA is appropriately funded, CDHPs can often be the most cost effective option for the vast majority of moderately healthy workforce, even though it might not perceptually feel like it since more costs come out-of-pocket vs. being automatically deducted from paychecks in the form of higher premiums.
A Surge In Specialty Drugs
With amazing advancements in pharmaceutical treatments, an aging population, a rebounding economy, and greater access to healthcare, employee consumption of specialty drugs has surged, particularly among those over fifty. And with greater demand, prices have shot up.
Recent reports from AARP show that specialty drug prices are higher than annual incomes for many employees. And with CDHPs on the rise, many employees are swallowing the high cost of specialty drug prescriptions themselves, despite the fact that it’s exceedingly difficult for the average person to fully understand complicated drug pricing tiers. All this is pushing some large employers to call for greater price transparency, and even possible legislative action to help curb costs.
Continued Migration to Automated Benefits Administration Tools
The employee benefits landscape is an increasingly complex space in which to maneuver. Employers tasked with the job of maintaining ACA compliance and faced with an ever-growing workload of benefits administrative duties are feeling the strain of a complicated benefits environment.
Understanding that their HR teams may have neither the time nor the expertise required to administer a benefit program in the required way, employers turned to technology more than ever in 2015 to try to address the issue. And they spoke with their pocket books, allocating significant YOY funding increases for technological solutions.
Generous Paid Time Off Policies
Unlimited vacation received quite a bit of press this year as several major corporations adopted policies that promise employees as many vacation days as they want, so long as they remain productive.
Though the Washington Post reported that only one to two percent of companies actually enacted these kinds of policies, it found that such “permissive time off” practices actually benefit employers in big ways: they can attract top talent in their fields, and they no longer have to cash-out unused vacation days.
In the same article, the Post reported that Oxford Economics found that “the average vacation liability per employee is $1,898, and that U.S. companies carried $65.6 billion in accrued paid time-off costs forward on their books last year.” Adam Sacks, of that organization, suggested employers can reduce that liability by implementing use-it-or-lose-it policies, including unlimited vacation policies that inherently can’t be used to carry vacation time forward into the following year.
Throughout 2015, a number of large employers also substantially increased their paid family leave policies, up to 26 weeks in some cases. This is a response to several factors, including fierce competition for the most skilled workers in hot markets like Silicon Valley, as well as the increasing recognition of a serious gender gap in many industries. It’s also the result of a growing demand for better work/life balance among employees, particularly Millennials.
Honorable Mentions
With healthcare costs continuing to escalate, many employers in 2015 were faced with a scenario that Brian Feeley wrote about in The Philadelphia Business Journal: "[Rising health costs] demand a balancing act between cost controls and employee morale."
In a nutshell, employers can only bear so much of the rising costs of healthcare. But they need to be careful when it comes to how much of the burden they put on their workforce.
To that end, employers in 2015 worked hard to introduce additional, non-traditional benefits to their portfolios, in an effort to bolster their entire benefits portfolio. These included financial wellness programs, tuition reimbursement, free food, on-site child- care, and tuition reimbursement, the latter of which could become a powerful recruitment tool, especially among a pool of talented but highly indebted Millennials.
To learn more about how to create a well-balanced portfolio of employee benefits, please contact us.