Managing the changes on a benefits continuum.
By Ken Haderer
Those of us who provide benefits administration services have witnessed dramatic transformation in recent years. Employers face rising costs, increased complexity, new regulatory pressures, and, of course, the looming reality of United States healthcare reform. That’s a game-changing challenge and opportunity for companies that must make momentous decisions about their employees’ health benefits.
What’s increasingly clear is that organizations are transitioning and moving along a benefits continuum—from traditional paternalistic benefits to programs that place more accountability and responsibility on employees. We’ve seen this in the longstanding shift from defined benefit pension schemes to the near-universal acceptance of defined contribution (DC) accounts, as employees take more control of their retirement plans. Clearly, the DC approach to retirement is a blueprint for employers who plan to contribute to the health insurance and voluntary benefit plans many employees will purchase in the new exchange marketplaces.
In line with that, employers are turning to consumer-focused solutions to manage costs and encourage employee engagement. According to the latest findings, from Mercer’s 2013 National Survey of Employer-Sponsored Health Plans, the key strategies employers are using to control costs include introducing high- deductible, consumer-directed health plans, emphasizing wellness and prevention through a new generation of incentive programs, and turning to private exchanges. These exchanges make it easier and more cost-effective for employers to offer a range of medical plan options and voluntary benefits.
And so companies are looking to those of us in the benefits administration community for guidance and the availability of better programs, including communication and wellness initiatives that make use of online and social media platforms. They expect transparency, hands-on consultation, technology that includes the seamless updating of software, legal, and regulatory expertise.
Benefits administrators must be positioned to help companies of every size. In the smaller market of less than 2,500 lives, administration may be limited to health and benefit enrollment, with a co-sourced administrative structure that blends in-house HR specialists with some outsourcing. In the mid-market, a fully outsourced solution may be typical. And in the large market of more than 10,000 lives, benefits administration tends toward customized solutions, affording greater choice of carriers, along with custom plan design for employers who are paying a portion of benefit costs.
In each of these cases, all companies expect benefits administrators to manage a range of voluntary benefits—from dental and vision to legal and other services—that span the continuum of individual and group benefits associated with traditional corporate plans. And all of them can now take advantage of the private exchange solution, giving employees access to a full menu of benefit options they can purchase in a retail shopping experience. These private exchanges are available to companies with as few as 100 lives, while there are also exchanges that serve Medicare retirees.
One driver behind the growing interest in private exchanges is the added cost and administrative burden brought by healthcare reform. Of significant concern to many employers, especially those that rely heavily on part-time workers, is the 2015 requirement to cover all employees with work schedules that average 30 or more hours per week. Employers who do not meet this requirement will be subject to a tax penalty. Supporting employers in complying with this 30-hour rule is crucial for benefits administrators.
The pension landscape is no less fraught with greater regulatory complexity, market risks, and rising costs. These have turned plan sponsors’ attentions toward de-risking initiatives, and momentum is shifting toward the offering of cash-outs to terminated, vested plan participants, thereby lowering ongoing administrative costs and reducing the risk of unknown future financial obligations. The need for superior solutions and service from plan administrators has never been greater.
The bottom line for the benefits administration community is commitment, an ever-evolving dedication to complete service in a transformed—and transforming—environment that asks more and more of all stakeholders. Employers must make more complex decisions that balance cost with concerns about employee well-being and engagement. Employees must accept greater responsibility for their present and future, taking advantage of new opportunities in wellness and health management. And benefits administrators must facilitate all of that by offering the most and settling for nothing but the best.
Ken Haderer is Mercer’s U.S. Benefits Administration Leader, based in Norwood, Mass.