Employers have experienced significant increases in benefit plan costs in recent years. Some estimates suggest companies must take cost-containment measures now to prevent their benefits expenditures from quadrupling in five years. Despite these gloomy predictions, many employers, fearing a negative employee backlash, are reluctant to consider cost-containment measures any sooner than necessary.
A strategic approach to benefits communications can help a company deal with escalating benefits costs. Many employees do not have a realistic picture of benefit costs and who pays for what. Some employees think insurance carriers foot the bill for their benefits because this is where they send their claims.
Before you have to deal with the possibility of changing your benefit programs to control costs, ask yourself these two questions:
•Does your company even provide benefits communication? A surprising number of companies do not communicate any benefits information to employees beyond the traditional employee handbook that is provided on date of hire.
•If you do communicate, is it educational and informative? Employees should understand the basic mechanics of the benefits plan, how it operates, and the company’s position on cost-management.
Take the credit
In the educational component of employee communications explain how the company pays all the costs associated with the plan, and then show how much this “investment” increases from year to year. Increasing employee awareness of exactly how much the company pays for the coverage provided to each employee will enhance employee understanding of total compensation. Telling employees that the company currently spends $3,000 per employee on benefits coverage each year will often make staff more appreciative of the value they receive through the plan, and may even help with employee retention.
Show them the numbers
Use the actual numbers from the company’s own benefit cost experience to let employees in on what increases have been over the years. (See graph page G11 for a visual illustration of the significant increase in expenses being experienced across the country. This can be useful in educating employees about costs.)
Give advance warning
Let employees know what is happening with the plan, regardless of whether or not changes must be made to ensure the plan remains affordable. Tell them one solution being considered to address rising benefit costs is “breaking the zero” — that is, requiring employees to pay for coverage that is currently offered at no cost to them.
If the company plans to continue absorbing cost increases for the short-term, let staff know that, too. It may go a long way in increasing employee engagement and make it easier to position the need for employee contributions in the future if this becomes a necessity. However, be careful not to build false expectations that the company will always cover rising costs.
Tell them how they can help
Give employees a chance to help reduce costs, regardless of whether there are plans to implement any changes. Ask them to be a partner in making benefit plan expenses more manageable. Here are some suggestions:
•patronize pharmacies with the lowest dispensing fees (which can range from $5 to $15);
•educate employees about co-ordination of benefits and how they may be able to make better use of the benefits in a spouse’s plan;
•suggest adults visit the dentist once every nine months, instead of every six, unless there is a valid reason to go more often;
•verify all charges appearing on medical, dental and prescription drug bills — just as you would check any other receipt. This step will also force employees to see the “real” cost of their benefits — and not just the amount they have to pay (if any); and
•adopt a healthy lifestyle. Establish a company wellness program — anything from providing healthy choices in the cafeteria to subsidizing gym memberships.
Trade-offs
One of the best ways to tell employees about reductions in benefits is to give with one hand and take with the other, if you are able to do so.
If HR has information — from focus groups, employee feedback cards or through an annual planning process — that certain benefits are more highly valued than others, adapt the program to suit the workforce. If employees keep sending you the message that vision care coverage is not sufficient, bump that benefit up at the same time you increase coinsurance amounts for dental coverage. If you move towards limiting drug coverage, offer employees a drug card to soften the blow.
Communicate regularly
Make sure employees are fully aware of the rapidly rising costs of benefits, how much the firm pays for benefits, and the potential need for changes, so that any contribution they are required to make does not come as a complete surprise.
Employers are generally better about communicating with the workforce if a flexible benefits plan is in place, simply because of requirements to communicate at least annually for enrolment purposes. But, even if a traditional benefits plan is in place, communicate with employees regularly about coverage and costs.
Put the dollars in perspective
Sometimes what is said is less important than how it’s said. If employees are told they will now have to cover 10 per cent of the cost of their benefit coverage, this may cause anxiety. However, communicate the dollar figure that will be deducted from each paycheque, and the news is often easier to swallow.
For example, an organization was very concerned about how employees were going to react to having to pay, for the first time, a portion of their medical and dental coverage. But, when the workforce was told the increase was only $2 per pay, there was no backlash from employees.
Surveys have shown, contrary to what most employers believe, the majority of employees are not averse to picking up some of the cost of their benefits in order to continue coverage. However, for a workforce to make the switch from benefit recipients to benefit consumers, they need education and information. Perhaps the most effective way to manage upward-spiraling benefit costs is simply to talk about them.
Jason Billard is a communications consultant in Hewitt Associates’ Toronto office. He may be reached at (416) 225-5001 or [email protected].
A strategic approach to benefits communications can help a company deal with escalating benefits costs. Many employees do not have a realistic picture of benefit costs and who pays for what. Some employees think insurance carriers foot the bill for their benefits because this is where they send their claims.
Before you have to deal with the possibility of changing your benefit programs to control costs, ask yourself these two questions:
•Does your company even provide benefits communication? A surprising number of companies do not communicate any benefits information to employees beyond the traditional employee handbook that is provided on date of hire.
•If you do communicate, is it educational and informative? Employees should understand the basic mechanics of the benefits plan, how it operates, and the company’s position on cost-management.
Take the credit
In the educational component of employee communications explain how the company pays all the costs associated with the plan, and then show how much this “investment” increases from year to year. Increasing employee awareness of exactly how much the company pays for the coverage provided to each employee will enhance employee understanding of total compensation. Telling employees that the company currently spends $3,000 per employee on benefits coverage each year will often make staff more appreciative of the value they receive through the plan, and may even help with employee retention.
Show them the numbers
Use the actual numbers from the company’s own benefit cost experience to let employees in on what increases have been over the years. (See graph page G11 for a visual illustration of the significant increase in expenses being experienced across the country. This can be useful in educating employees about costs.)
Give advance warning
Let employees know what is happening with the plan, regardless of whether or not changes must be made to ensure the plan remains affordable. Tell them one solution being considered to address rising benefit costs is “breaking the zero” — that is, requiring employees to pay for coverage that is currently offered at no cost to them.
If the company plans to continue absorbing cost increases for the short-term, let staff know that, too. It may go a long way in increasing employee engagement and make it easier to position the need for employee contributions in the future if this becomes a necessity. However, be careful not to build false expectations that the company will always cover rising costs.
Tell them how they can help
Give employees a chance to help reduce costs, regardless of whether there are plans to implement any changes. Ask them to be a partner in making benefit plan expenses more manageable. Here are some suggestions:
•patronize pharmacies with the lowest dispensing fees (which can range from $5 to $15);
•educate employees about co-ordination of benefits and how they may be able to make better use of the benefits in a spouse’s plan;
•suggest adults visit the dentist once every nine months, instead of every six, unless there is a valid reason to go more often;
•verify all charges appearing on medical, dental and prescription drug bills — just as you would check any other receipt. This step will also force employees to see the “real” cost of their benefits — and not just the amount they have to pay (if any); and
•adopt a healthy lifestyle. Establish a company wellness program — anything from providing healthy choices in the cafeteria to subsidizing gym memberships.
Trade-offs
One of the best ways to tell employees about reductions in benefits is to give with one hand and take with the other, if you are able to do so.
If HR has information — from focus groups, employee feedback cards or through an annual planning process — that certain benefits are more highly valued than others, adapt the program to suit the workforce. If employees keep sending you the message that vision care coverage is not sufficient, bump that benefit up at the same time you increase coinsurance amounts for dental coverage. If you move towards limiting drug coverage, offer employees a drug card to soften the blow.
Communicate regularly
Make sure employees are fully aware of the rapidly rising costs of benefits, how much the firm pays for benefits, and the potential need for changes, so that any contribution they are required to make does not come as a complete surprise.
Employers are generally better about communicating with the workforce if a flexible benefits plan is in place, simply because of requirements to communicate at least annually for enrolment purposes. But, even if a traditional benefits plan is in place, communicate with employees regularly about coverage and costs.
Put the dollars in perspective
Sometimes what is said is less important than how it’s said. If employees are told they will now have to cover 10 per cent of the cost of their benefit coverage, this may cause anxiety. However, communicate the dollar figure that will be deducted from each paycheque, and the news is often easier to swallow.
For example, an organization was very concerned about how employees were going to react to having to pay, for the first time, a portion of their medical and dental coverage. But, when the workforce was told the increase was only $2 per pay, there was no backlash from employees.
Surveys have shown, contrary to what most employers believe, the majority of employees are not averse to picking up some of the cost of their benefits in order to continue coverage. However, for a workforce to make the switch from benefit recipients to benefit consumers, they need education and information. Perhaps the most effective way to manage upward-spiraling benefit costs is simply to talk about them.
Jason Billard is a communications consultant in Hewitt Associates’ Toronto office. He may be reached at (416) 225-5001 or [email protected].
