The Ancillary Revolution. Ancillary benefits as a competitive advantage in the wake of health care reform

Transcription

1 2014 The Ancillary Revolution Ancillary benefits as a competitive advantage in the wake of health care reform

2 Introduction Offering benefits, while, is only the first step in providing employees with quality health care that can distinguish an organization as a top employer. Those organizations that offer a variety of benefits options for their employees to choose from can gain a distinct competitive advantage. EyeMed, in partnership with Workforce magazine s Human Capital Media Advisory Group, surveyed 552 business leaders to better understand the benefits of offering multiple benefits options to employees. This survey revealed that while a majority of organizations recognize the value of choice in medical care benefits, there is still room for improvement in organizations offering a variety of ancillary benefit options. Research Method Surveyed 552 business leaders who were responsible for or provided input on health care and choice benefits offerings by employers. Respondents included a wide spread of industries and company sizes as well as local and global companies. Key Findings 1. Employers are aware that multiple benefits options are to employees, with 71.3 percent of respondents indicating employee interest in customizing benefits to meet their needs. 2. Employees are interested in customizable quality care in areas such as vision benefits, with three out of four employers indicating that innovative care options are worth the cost to employees. 3. How organizations choose to purchase their benefits affects the amount of choice in their plans. Employers that purchase in bundles offer fewer options than employers that purchase stand-alone benefits. 4. Organizations that want to distinguish themselves as employers of choice can do so by offering more options in ancillary benefits. Nearly two-thirds (63.8 percent) of organizations offer employees a choice of plans in medical care, while less than a quarter offer choice in group life (20.8 percent), vision (15.4 percent) and disability (12.7 percent) coverage. 5. New engagement avenues are top of mind with benefit administrators, with 61.2 percent of benefits professionals saying Web-based educational tools are to employees. 2 The Ancillary Revolution

3 The Competitive Advantage of Benefit Choice As regulation leads to greater standardization of medical benefits, employer-sponsored ancillary benefits become the focus of innovation in employer-sponsored benefits. In our survey, we discovered that organizations, regardless of size or geographic location, are strongly committed to offering medical and ancillary benefits to their employees (Chart 1), with 96.4 percent offering medical care, 92.5 percent offering dental and 88.6 percent offering vision. Indeed, the health care landscape has changed quickly since the passage of the Patient Protection and Affordable Care Act (PPACA) in The PPACA has already caused some shifts in how employers and employees engage with their insurance. Currently, employers are the largest insurance provider in the country, covering 54.9 percent of the nation s population, or million employees. 1 A recent report by Accenture 2 estimates that close to one in five Americans will be purchasing benefits directly from private exchanges by So the question remains, how will organizations continue to differentiate their benefit offering in a potential sea of sameness? It s too early to tell if this revolution in health care coverage will be good or bad. However, we do know that there will be a significant impact on voluntary (ancillary) benefits such as vision, dental or life insurance, as they aim to align more with the required coverage under the PPACA. In fact, ancillary benefits have already taken a more prominent place in the health care discussion. For employees, strong ancillary offerings define an employer of choice, 3 making voluntary benefits a distinct competitive advantage for organizations competing for top talent. 4 CHART 1: WHICH OF THE FOLLOWING BENEFITS DOES YOUR ORGANIZATION OFFER TO EMPLOYEES? 92.5 % 85.1 % DISABILITY 87.5 % GROUP LIFE 88.3 % RETIREMENT 88.6 % VISION DENTAL 96.4 % MEDICAL Employers that truly wish to differentiate their health and wellness programs go further by offering a selection of plans that allows employees to choose services they prefer, including options to pay more or less to get the exact coverage they want. 1) DeNavas-Walt, C., Proctor, B., & Smith, J. (2013). Income, poverty, and health insurance coverage in the United States: census.gov: U.S. Census Bureau. Retrieved from Census.Gov.; Janicki, H. (2013). Employment-based health insurance: census.gov: U.S. Census Bureau.; Kaiser. (2013). Employer health benefits. The Kaiser Family Foundation and Health Research & Educational Trust. 2) Accenture. (2013). Are you ready? Private health insurance exchanges are looming. Accenture. 3) Miller, S. (2013, 4 3). Ancillary benefits viewed as differentiator among employers. Retrieved from SHRM.org: benefits/articles/pages/ancillary-benefits-differentiator.aspx 4) Haraden, P. (2012). Ancillary benefits and health care reform. Employee Benefit Plan Review, 7-8. The Ancillary Revolution 3

4 CHART 2: DOES YOUR ORGANIZATION OFFER A CHOICE OF MULTIPLE BENEFITS OPTIONS IN ANY OF THE FOLLOWING BENEFITS AREAS? 35.7 % 12.7 % DISABILITY 15.4 % VISION 20.8 % GROUP LIFE 23.2 % RETIREMENT DENTAL 63.8 % MEDICAL However, when it comes to offering broader choice in voluntary benefits, organizations are not performing as strongly. While slightly less than two-thirds (63.8 percent) of organizations offer additional choices in medical care coverage (Chart 2), only one-third (35.7 percent) of employers offer choices to customize dental plans and significantly less than a quarter of all organizations offer additional choices in vision (15.4 percent), disability (12.7 percent), group life (20.8 percent) and retirement (23.2 percent). The lack of choice in plans may be affected by how organizations choose to purchase their benefits. According to our survey, organizations that buy insurance packages as a bundle offer fewer customizable options than organizations that purchase stand-alone insurance (Chart 3). This effect is significant on ancillary benefits, where organizations that purchase benefits in bundles offer less choice in ancillary packages across all benefits. In comparison, organizations that purchase stand-alone coverage offered more choice in medical (72.4 percent), dental (48.7 percent) and group life insurance (26.7 percent). This indicates that how benefits are purchased has an impact on maintaining a competitive edge in ancillary coverage choice. Employee Interest in Benefit Options Choice in benefits is highly valued by employees, and benefits professionals are acutely aware of this. Of the benefits professionals we surveyed, nearly three-quarters (71.3 percent) report that the ability to select from multiple benefits options to meet their needs is either moderately or extremely to employees in their organization (Chart 4). This is not a surprise, as each employee has different health needs based on his or her personal and financial situation. 5 A variety of choices, therefore, is not just in some instances, but rather an imperative for getting the benefits an employee needs. 5) SHRM. (2012) Employee Benefits: The Employee Benefits Landscape in a Recovering Economy. Alexandria, VA: SHRM. 4 The Ancillary Revolution

5 CHART 3: CHOICE OF BENEFITS BY PURCHASE PREFERENCE BUNDLE STAND-ALONE 72.4 % 60 % MEDICAL INSURANCE COVERAGE 17.1 % 18.6 % VISION INSURANCE/ MANAGED VISION CARE PLAN 48.7 % 31.4 % DENTAL INSURANCE COVERAGE 11.8 % 13.5 % DISABILITY INSURANCE CHART 4: ABILITY TO SELECT FROM MULTIPLE BENEFIT OPTIONS TO MEET NEEDS. 36.3% Extremely 35% Moderately 20.7% Slightly 8% Not at all 26.7 % 15.9 % 18.7 % 25.7 % GROUP LIFE INSURANCE RETIREMENT SAVINGS PLAN The Ancillary Revolution 5

6 CHART 5: ABILITY TO SELECT FROM MULTIPLE BENEFITS OPTIONS TO CONTROL SPENDING 14.8% 8% 30.4% 46.8% EXTREMELY IMPORTANT MODERATELY IMPORTANT SLIGHTLY IMPORTANT NOT AT ALL IMPORTANT CHART 6: ABILITY TO USE WEB-BASED TOOLS 16.2% Extremely 33.6% Moderately 32.3% Slightly 17.9% Not at all According to benefits professionals, cost has a significant influence on employee interest in the ability to select from multiple options in their ancillary plans. Roughly three out of four (77.2 percent) benefits professionals report that a choice of options to improve control over spending is extremely or moderately to employees (Chart 5). Would your employees pay a higher upfront premium for a vision plan if it reduced out-of-pocket costs at the point of service? Forty-eight percent of respondents indicate employees are open to the idea. Spending more is not necessarily a barrier, as a survey of American consumers by Deloitte 6 found that a significant majority of consumers would pay more for the ability to customize their plans and select the benefits and features they wanted or needed. This was confirmed in our survey, in which nearly half (48.1 percent) of the benefits professionals indicate employees are open to the idea of spending more to receive more personalized coverage. To increase the value of health care benefits and choice in packages, offering tools that enable employees to take more control of coverage is. In our survey, half of the organizations (50.8 percent) offer Web-based tools for employees, and 49.8 percent of the benefits professionals report that these tools are moderately or extremely to employees at their organization (Chart 6). Among organizations that already offer Web-based tools, there is an 11 percent increase in importance, with 61.2 percent reporting that employees value Web-based tools. This indicates that there is a significant increase in appreciation for Web-based technology based on exposure. As technology continues to become more accessible and intuitive, the use of Web-based management tools could be a significant competitive advantage for organizations. 6) Deloitte. (2012) Survey of U.S. health care consumers: The performance of the health care system and health care reform. Washington, DC: Deloitte. 7) CDC. (2013, 10 23). Workplace health programs have many potential benefits for both employers and employees. Retrieved from Centers for Disease Control and Prevention: 8) AMDAI. (2010). The global economic cost of visual impairment. Age-Related Macular Degeneration Alliance International. 6 The Ancillary Revolution

7 Seeing It Clearly: How Customizable Benefits Improve Vision Care To better gauge employee interest in a variety of offerings, we examined how organizations approach one area of ancillary benefits where more choice is : vision health. Offering packages for vision wellness that include preventive care can lead to significant savings for both employers and employees. 7 According to the 2010 report by the AMD Alliance International, 8 the economic cost of vision loss and impairment was $2.3 trillion. Improved quality of vision health deliverables including diagnosis, biomedicine, nutrition and technology have revolutionized what vision preventive care can do. 9 Providing vision wellness care, therefore, not only significantly reduces economic loss, but can also mitigate the effects of vision loss altogether. Vision is then not just a safeguard to mitigate risk but a pre-paid, often pre-tax means of financing their benefit. Vision benefits are for maintaining an overall quality of life, 10 and are already a competitive voluntary offering. As reported by Society for Human Resource Management, 11 the top five ancillary benefits offered by employers include prescription drug (97 percent), dental (96 percent), mail-order prescription programs (91 percent), mental health (85 percent) and accidental death or dismemberment insurance (83 percent). Vision ranks ninth on the list, offered by 79 percent of employers a large coverage gap considering the importance of vision health for employee happiness and productivity. 12 Those organizations that do offer vision benefits packages clearly distinguish themselves as different from the crowd by providing a value-added ancillary coverage. Three out of four benefits managers indicate employees are open to the idea of paying more to customize their vision coverage. In our survey, we noted that there was a drop-off in the number of employers providing vision benefits compared to general medical, with an 8 percent difference in coverage (Chart 1). Further, there is discrepancy between employee desire for choice in vision offering versus what most employers provide (Chart 2), according to the benefits professionals responding to our survey. Compared to 68.3 percent who offer medical choice options, only 15.4 percent offer multiple options for vision care, while more than 90 percent of benefit administrators recognize an existing desire of employees for choice. There are significant advantages to offering more vision choices to employees. Employers in our survey indicate that employee interest in choice for vision benefits includes: 1. An ability to improve cost saving and get better pricing on eyewear. 2. More comprehensive coverage that includes frequent exams, better selection of eyewear and improved provider networks. 3. Increased control over spending. 4. Better selection of fashionable eyewear. 5. Easier management costs at point of sale. 9) IFA. (2013). The high cost of low vision: The evidence of aging and the loss of sight. International Federation on Ageing. 10) NEHEP. (2008) Survey of public knowledge, attitudes, and practices related to eye health and disease. National Eye Health Education Program. 11) SHRM. (2012) Employee Benefits: The Employee Benefits Landscape in a Recovering Economy. Alexandria, VA: SHRM. 12) AFB. (2013). Facts and figures on adults with vision loss. 1. The Ancillary Revolution 7

8 To gain these benefits, roughly three out of four employers say employees at their organization are open to paying more to customize their vision coverage with select features. Similarly, employees are willing to consider paying a higher upfront cost for a premium vision plan that reduces out-of-pocket costs. Having options that offer customized coverage for vision management needs can lead to positive results for organizations as well. One benefits professional shared the following anecdote from an employee satisfied with her vision plan: [They] love it. [An] employee yesterday told me the total bill was $1,600, and she paid $420. She was very happy. This is a good example of an employee getting the value she wants from a vision package that meets her needs. Comprehensive vision care that offers high-quality services while providing a variety of choices is a strategic advantage for employers and an appreciated value-add for employees. Barriers to Choice Offerings As employees have demonstrated an interest in having more choices, the challenge then becomes: How do employers provide choice while minimizing feared complexity? Exploring solutions to allow employees a choice of plan to fit their needs would be a benefit to both employers and employees, with more than 91 percent of employers recognizing a desire from employees for greater flexibility within their benefit offering. A single-vendor model with a choice of plans could significantly reduce the complexity and overall cost of benefit options. Conclusion Improving ancillary offerings distinguishes top employers, regardless of size or location. Offering employees additional options provides improved control over coverage and cost, enabling employees to get the maximum value for their dollars spent and ensuring that employees have a positive, personalized experience. Web-based tools deliver further control of care to both employers and employees. Additionally, cost has a significant influence on employee interest in the ability to select from multiple options in their ancillary plans. However, employees tend to balance premium cost with potential out-of-pocket costs to get the care they need with the choices they want. In the current health care landscape, providing quality voluntary benefits isn t just a smart choice; it s a proactive step to attract top talent and gain a distinct long-term competitive advantage over other organizations. 8 The Ancillary Revolution

9 EyeMed With more than 35 million lives, EyeMed is the nation s second-largest and the nation s fastest growing vision benefits company. In a little more than one decade, the company s membership surged from 6 million to almost 36 million. One of its distinctive features is an expansive network of independent vision care providers combined with more of America s favorite retail brands, including LensCrafters, Target Optical, Sears Optical, JCP Optical and most Pearle Vision locations. EyeMed is a proud sponsor of OneSight, a charitable organization dedicated to eradicating the vision crisis across the United States and around the world. Cincinnati-based EyeMed Vision Care is the fastestgrowing vision benefits company in the United States. Dedicated to becoming America s first choice for vision benefits, the company s products, operations and business ambitions are focused on a single brand-defining mission: delivering the vision benefits that members appreciate most. Workforce Magazine Workforce is a multimedia publication that covers the intersection of people management and business strategy. Its community of senior-level human resources executives and C-level officers are the key decision-makers on talent management matters in the 2,500 largest corporations in America. They read Workforce for its editorial focus and relevance to help them improve their business and their bottom line through effective management. Workforce content helps HR professionals approach their jobs from a more strategic, big-picture, business-results perspective. Human Capital Media Human Capital Media (HCM) Advisory Group is the research division of Human Capital Media Group, which publishes Chief Learning Officer, Diversity Executive, Talent Management and Workforce magazines. HCM s mission is to focus on human capital issues that are relevant and to senior leaders. It specializes in partnered research solutions, creating completely customizable and proprietary deliverables. HCM s capabilities include thought leadership research and custom content creation (white papers, research reports, webinars, presentations), as well as market research on customer segments in the human resources industry. If you have any questions, contact HCM at skimmel@humancapitalmedia.com. The Ancillary Revolution 9