The nation’s worst economic slide since the Great Depression has caused employees to prize their benefits more than ever. That observation is highlighted in “Benefits & Behavior: Spotlight on Benefits and the Economy,” a report recently published by The Guardian Life Insurance Company of America.
“In times like these, access to good benefits means employees can take care of themselves and their families, regardless of what is going on in the economy,” according to the report.
The study, based on interviews with nearly 500 workers conducted by Opinion Research Corp., says workplace benefits are valued so highly these days that 57% of the respondents said they would be willing to take a salary cut or do without a raise or a bonus in order to keep the same level of benefit coverage. And when asked to choose between layoffs by an employer in dire straits, or elimination of all health benefits, 46% said that they would prefer layoffs, obviously expecting to be a survivor after the pink slips go out.
Long-term impact of employer benefit decisions
The growing importance of employee benefits comes at a time when firms have been scrambling to reduce expenditures any way they can. And at many companies, the imperative to cut costs has put benefit programs on the chopping block.
But if a company eliminates benefit programs or slices them too drastically in order to save money, it not only risks alienating workers over the near-term, it could trigger unintended consequences in the future.
“The decisions companies make in tough times can have an important impact on the employees they count on to help turn the business around,” explains Barry Petruzzi, Guardian’s second vice president for group insurance products. “A company’s top talent will be the most marketable as the economy improves, so brokers can help their clients understand the long-term impact of benefits decisions as they consider cost cutting measures.”
Plan designs to preserve benefits and cut costs
Fortunately, there are palatable trade-offs available to companies in the form of redesigned benefit plans that “save money but also provide employees with coverage they can feel good about,” says Petruzzi.
One alternative brokers can suggest to clients is a switch to consumer-driven health care plans paired with health savings accounts (HSAs). Such offerings come with higher deductibles, but can reduce premiums for both employers and employees by 20% to 30% compared to a comparable preferred provider option. Employers and employees alike can in turn contribute part of their savings to HSAs, which can be used to pay for medical costs taking the sting out of the deductibles hike.
One fairly inexpensive but important product that companies can offer employees is group critical illness coverage. If an employee gets diagnosed with cancer or other serious diseases, a critical illness policy can provide a lump sum that can be used for any reason including to cover costs below the medical plan’s deductible. Certain critical illness programs also pay a daily benefit for extended hospital stays for any other reason – providing coverage even if the hospitalization if not related to the critical illness. The added coverage costs as little as $2 to $5 per employee per week and helps employees get comfortable with higher deductibles.
Creative plans designs can be used to preserve benefits and save on premiums for other types of benefits too. For example, consider reducing the annual maximum in a dental plan and adding in a less expensive feature to enhance maximums. Guardian offers a feature that excludes preventive services from the annual maximum – effectively making the entire annual maximum available for other dental services. Another feature enables plan members to roll over a portion of unused annual maximums for the future. Additionally, plans that provide incentives for using network dentists can drive behavior and save costs.
Voluntary benefits may offer a solution
Voluntary benefits are also an option, with half of survey respondents saying they would consider purchasing benefits through their employer even if they had to pay all or most of the cost. When offering voluntary benefits, enrollment resources become even more important to ensure that employees appreciate their employers for sponsoring the plan.
“We have certified benefit advisers that come in and explain the benefits for people and help enroll them,” says Petruzzi. “And it’s often not as expensive as you think. A lot of our voluntary benefits are only a couple of dollars a week. It doesn’t cost the employer anything at all, but could provide a really good safety net for the employees.”
To help maximize enrollment, Guardian provides personalized enrollment kits and an employee benefit hotline to answer employee questions that arise after the enrollment session. And if employers agree to follow Guardian’s best practices, the company will waive minimum participation requirements. For more information and tips for successful enrollments, visit www.Guardianenrollmenttips.com.
“Clearly a lot of the data from this study shows just how much employees care about their benefits,” observes Petruzzi. “So while it’s important for employers to be able to cut costs, brokers should advise clients to think in terms of a total solution.”
To download the report, visit www.GuardianBenefits.com.
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