Innovative Solutions Can Turn Employer Health Care Benefits from a Frustrating Burden into a Competitive Advantage
It’s the same old story, year after year after year. Employers are presented with significant increases for their health care plans. They think (incorrectly) that there’s nothing they can do about it. Their “solution” is to sit down with their broker-consultant and decided how much of the increase to eat and how much to push off onto the employees.
The problem is the labor market is among the tightest in history, and employees have plenty of options if they choose to look elsewhere. Organizations who refuse to accept the status quo can provide a better AND less expensive benefits offering, giving them a powerful advantage in the war for talent.
The Same, Tired ‘Hamster Wheel’ Solution
The Wall Street Journal reported that the cost of employer-provided family coverage in 2019 rose by 5%, hitting a never-seen-before total annual cost of $20,576. What did employers do? As usual, shifted costs to their employees. Premiums for family coverage grew even faster – 8% for an average employee contribution of $6,015 annually. With low single digit inflation, employees aren’t seeing 8% increases in any of their other expenses, except perhaps for cable TV. We all know what more and more people are doing with their cable subscriptions.
Adding to employees’ frustration, their salary increases aren’t nearly keeping pace. The Society for Human Resource Management is predicting a mean 2020 salary budget growth of 3.3%, which is only 0.01% more than the 2019 increase. By those calculations, an employee with a salary of $50K would be budgeted for an increase of $1,650, which means a big chunk of their salary increase is going to be eaten up by the employee contribution for health care. A significant number of employees will be thinking the grass has got to be greener somewhere else.
And if rising employer health care costs weren’t enough, the government can’t resist piling on. In 2020, the Affordable Care Act Health Insurance Tax will take effect, adding 2.7% to the cost of all fully insured employer health plans. The state of Michigan, to cite one example, imposes a $2.40 per member, per month fee to fully-insured programs, as well as a premium tax of 0.95 % on top of that.
Some employers absorb more of the increased health care costs themselves. This only masks the problem because it results in the employer having less money to spend on other areas, like salaries, which means the employees often still end up bearing the cost increase. At the end of the day, employers are left running on the same old hamster wheel year after year and getting nowhere with their employee health care costs.
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