Charting a Steady Course

Transcription

1 BENEFITS STRATEGY & BENCHMARKING SURVEY INDUSTRY ADDENDUM ENERGY Charting a Steady Course

2 Survey Overview Gallagher s 2016 Benefits Strategy & Benchmarking Survey provides insights into how benefit and human capital challenges are addressed by over 3,000 organizations nationwide. This addendum highlights select key findings and implications based on the 117 energy organizations that participated in this year s research. Energy sectors have historically enjoyed strong operating revenues and high profits a financial position that made attractive, robust benefit packages affordable. Yet, this status quo also left many employers underprepared when the decline in oil prices and the upward trend of benefit costs collided. Looking for a way to retain core talent amid current economic realities, energy companies are adopting a sustainable model that strategically maximizes compensation and benefit investments with a proactive and structured total rewards approach. Full-time employees (FTEs) domestic UNDER to % 21 % 37 % 31% 500 to 999 1,000 OR MORE Type of energy organization Drilling & Energy Services Exploration & Production Oilfield Equipment Midstream Power Generation Marketing, Distribution & Trading Renewables Refining 17 % 14 % 12 % 9 % 8 % 3 % 2 % 35 % BENEFITS STRATEGY & BENCHMARKING SURVEY Industry Addendum

3 Human Capital Strategy Top priorities align and focus on cost management Top operational priorities 58% Maintaining or decreasing overall operating costs 51% Revenue growth 46% Attracting and retaining a competitive workforce Top HR priorities 63% Controlling benefit costs 53% Retaining talent 36% Increasing workforce engagement and productivity Emphasis placed on talent retention 41 % Report turnover of 15% or more 53 % Consider talent retention a top priority Low oil prices have forced many energy employers to minimize operating costs by scaling back operations, including headcount. In the wake of this action, they re now focused on retaining and engaging core talent. One key objective is finding creative ways to retain core talent while controlling costs. Most employers are using year-to-year planning cycles that often lead to a near-term, reactive benefits approach. Data-driven, strategic planning can help improve their decision making. This process provides the structure and reliability needed to combat considerable cost and sustainability challenges. The first step in making strategic improvements is completing an objective self-assessment of current programs and related processes. For example, employers should evaluate whether the right mechanisms are in place to ensure appropriate enrollment and eligibility management. Targets could include general and dependent eligibility audits, and surcharges or exclusion for spouses with access to other coverage. Based on the assessment findings, setting realistic goals for process improvement should follow. Taking these steps will show that strategic planning is a high priority and may help boost confidence across the organization. Most continue to be in a reactive benefits planning cycle Manage year to year based on costs 73 % 8 % Plan multi-year with multi-data inputs Arthur J. Gallagher & Co. AJG.COM 3

4 Medical Benefits Consumerism Biggest challenges in managing healthcare costs 68 % High cost of medical services 60 % High cost of prescription drugs Tactics to increase employee responsibility for health and healthcare costs by 2018 Wellness program Cost transparency tools Healthcare decision support Nonsmoker premium discount Narrow networks Private exchange 43 % 70 % 66 % 60 % 21 % 19 % Prior to the downturn, energy employers focused less on healthcare spend and more on driving revenue goals. With rising healthcare costs and limited industry growth including oil prices at a two-year low many now invest more attention and effort in managing that spend. Today s employers are actively planning how to implement their benefit management strategies and initiatives. Increasingly popular tactics include non-traditional employee cost sharing and consumer-centric approaches such as narrow networks, smoking surcharges, spousal surcharges, cost transparency and decision support tools. Additionally, there has been notable growth in consumer-directed health plans (CDHPs). These plans support employers efforts to minimize the impact of healthcare cost trends and motivate employees to make healthy behavior changes. While many employers offer CDHPs, incentivizing enrollment through premium reductions or health savings account contributions is needed to spur employee adoption. Thoughtful, data-driven implementation of CDHP options can lead to appropriate cost sharing while minimizing the burden on participants. And when energy employers provide access to education and support tools, they re also able to boost understanding with migration. Strong growth expected for CDHPs Currently 43 % offer a CDHP An additional 20% plan to offer by BENEFITS STRATEGY & BENCHMARKING SURVEY Industry Addendum

5 Pharmacy Growing use of specialty pharmacy benefit managers 26 % Currently use An additional 15% plan to use by 2018 Cost-sharing mechanisms for prescription plans rely heavily on copays 64 % Copay only 13 % 23 % Both Biologics and specialty drug projections by 2018 Require pre-authorization 53% Use step-care therapy 48% Use a specialty pharmacy 41% Mandate the use of a specialty pharmacy Coinsurance Use a fourth-tier pharmacy benefit 33% 23% Step therapy, quantity limits and prior authorization strategies are common programs provided by pharmacy benefit managers (PBMs), and to a lesser extent medical benefit health plans. These programs can mitigate some of the specialty drug cost, but their overall effectiveness may vary from payer to payer. For self-funded plans, energy employers should consider putting all available clinical edits in place. This move ensures that drugs are used in a clinically appropriate way, safe for the intended user; effective at treating the prescribed condition; and the best, most cost-effective treatment. Site-of-care and network optimization programs seek savings through setting lower costs. On the pharmacy benefit, they often limit specialty medication dispensing to a specific specialty pharmacy that can typically offer deeper discounts and clinical services. While this is a reasonable strategy for maximizing discounts, many PBMs have turned their specialty pharmacy practice into a significant revenue driver, creating the need for careful monitoring. The less common strategy of forcing medical benefit drugs to the pharmacy benefit is usually driven by stand-alone or carve-out PBMs. While this is useful for certain specialty drugs, a plan should carefully weigh account health management programs for the medical benefit and a PBM s drive to grow revenue. Some plans change copay tiers to curtail the cost of expensive drugs, including fourth- and fifth-tier designs. These changes can bring plan savings, but it s important to take into account the additional cost responsibility shifted to the participant. With the Patient Protection and Affordable Care Act s regulations on out-of-pocket maximums, any savings produced tend to have a minimum effect overall. Arthur J. Gallagher & Co. AJG.COM 5

6 Employee Communications 55 % Strongly agree or agree employee communications are successful Most lack a comprehensive strategy 71% Program-specific coverage* 17% Comprehensive strategy 12% No strategy * Safety, wellness, benefits enrollment, etc. Top employee outcomes targeted through communications 79 % Understand the full value of compensation and benefits 60 % Well-informed and up to date on benefit choices Effective communication not only drives the success of benefit and compensation programs, but also impacts overall operations. Less than half of energy employers believe their workforce is highly engaged, satisfied and committed. Their perception reflects the current environment where employers are asked to do more with fewer resources and people. Indicators of a communication gap include issues related to employees lack of understanding or appreciation of compensation and benefits. Low engagement in wellness programs and limited participation in 401(k) matching programs are other possible signs. Communication also plays an important role as employees are given more responsibility for making their healthcare choices. To build a concept of total rewards and empower informed decision-making, employers should raise employees awareness of the scale and scope of their available benefits. Workforce surveys and demographic evaluations are important aids for effectively communicating with employees. When employers gain a deeper understanding of employees priorities and perspectives, and translate them into clear, relevant messages, they can improve message receptivity and engagement. Determining how to send targeted messaging to the right audience, through the appropriate channels, may require an assessment of current capabilities. For evidence-based, customized solutions that meet the specific needs of the organization and its employees, communication specialists can be a valuable resource BENEFITS STRATEGY & BENCHMARKING SURVEY Industry Addendum

7 Other Significant Benefit or Human Capital Trends 48 % 85 % Offer long-term disability Expect revenue to increase over the next two years 30% anticipate a decline Four of five pay the entire premium 31 % Take steps to gauge employee retirement readiness 48 % Underspend on workforce training and development 62 % Have not conducted an engagement survey to assess the motivation, satisfaction and commitment of their workforce Arthur J. Gallagher & Co. AJG.COM 7

8 Final Remarks The current energy economy and healthcare environment are intensifying the need for forecasting and strategic planning. These factors call for employers to comprehensively evaluate current approaches and benefit offerings, and look to sustainable solutions. By combining innovative approaches, an understanding of workforce makeup and employee priorities, and the use of analytics, organizations can control costs while strengthening their competitive position now and for the future. This addendum offers you a look at some of the key issues facing energy employers. The intent is to provide context and direction that can help you adjust your HR and benefit strategies, and in the process, create the engaging employer-of-choice environment your employees need to achieve and sustain success. To learn more, contact the Energy Managing Director, James Wright (james_wright@ajg.com), or your local Gallagher consultant. TERMS OF USE The intent of this Survey is to provide you with general information regarding current practice within the employee benefits environment. The data does not constitute recommendations or other advice regarding employee benefit programs, and the user is in no way obligated to accept or implement any information for use within their organization(s). The decision to utilize any information provided rests solely with the user, and application of the data contained does not guarantee compliance with applicable laws or regulations regarding employee benefits. Information provided by the Survey, even if generally applicable, cannot possibly take into account all of the various factors that may affect a specific individual or situation. Additionally, practices described within the Survey should not be construed as, nor are they intended to provide, legal advice. The Web Site and the Content do not constitute accounting, consulting, investment, insurance, legal, tax or any other type of professional advice, and should be used only in conjunction with the services of a Gallagher consultant and any other appropriate professional advisors who have full knowledge of the user s situation. Gallagher does not represent or warrant that the Content will be correct, accurate, timely or otherwise reliable. Gallagher may make changes to the Content at any time. Gallagher assumes no responsibility of any kind, oral or written, express or implied, including but not limited to fitness for a particular purpose, accuracy, omissions and completeness of information. Gallagher shall in no event whatsoever be liable to licensee or any other party for any indirect, special, consequential, incidental, or similar damages, including damages for lost data or economic loss, even if Gallagher has been notified of the possibility of such loss. For the purposes of this section the term Gallagher shall be construed so as to include Gallagher Surveys as a marketing division and/or Gallagher Benefit Services, Inc. and its affiliates Gallagher Benefit Services, Inc. All rights reserved. No part of this book, including the text, data, graphics, interior design and cover design may be reproduced or transmitted in any form, without explicit consent from Arthur J. Gallagher & Co. Gallagher Benefit Services, Inc. 16GBS25075_E