Charting a Steady Course

Transcription

1 BENEFITS STRATEGY & BENCHMARKING SURVEY INDUSTRY ADDENDUM MANUFACTURING 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 415 manufacturing organizations that participated in this year s research. Manufacturing employers today face the complex task of attracting, engaging and effectively communicating with a diverse workforce that ranges widely in age, role, skill level and culture. Fortunately, most in this highly competitive industry are rebounding well from a period of recession, including auto manufacturers that have experienced an especially good year. However, uncertain growth prospects and shifting economic indicators make it hard to predict the future. Full-time employees (FTEs) domestic 1 UNDER to % 11 % 39 %39% 1 Due to rounding, percentages do not total 100% 500 to 999 1,000 OR MORE Navigating the rising costs of medical and pharmacy benefits continues to be the status quo for employers. By analyzing internal and external cost factors, evaluating employee priorities, and exploring innovative approaches to a total rewards strategy, manufacturers can secure the employees they need to strengthen their organization s market position. Region 9 % 40 % 18 % 24 % 9 % BENEFITS STRATEGY & BENCHMARKING SURVEY Industry Addendum

3 Human Capital Strategy Top priorities centered around growth, cost control and talent Most rely on near-term planning with few data inputs 76 % Manage year to year based on costs Top operational priorities 73% Revenue growth 50% Attracting and retaining a competitive workforce 40% Maintaining or decreasing overall operating costs Top HR priorities 58% Controlling benefit costs 46% Training/developing employees 44% Attracting talent 68 % Underspend on workforce training and development BENEFITS 10 % Plan multi-year with multi-data inputs Some employees may value a robust medical or retirement package when deciding where to work, while others look more closely at base pay. Within a total rewards framework, manufacturers should offer compensation and benefits that appeal to their workforce across the full spectrum of needs and preferences. Revenue and sales growth depends on engaged employees. And understanding attraction and retention drivers is key not only to an effective benefits strategy, but also to the achievement of organizational goals. Workforce training is one area of opportunity for employers. Strategic investing in onboarding and developing employees can help shorten the learning curve for operational roles and workplace culture, boost productivity, and serve as a tool for engagement. Well-designed, targeted training lays the groundwork for employees to become more firmly entrenched and better equipped to contribute. Most manufacturers are planning their benefits and compensation year to year, often in reaction to current financial performance and economic conditions, which puts them at a disadvantage. Perpetual short-term planning makes it more difficult to adapt to future trends in healthcare and pharmacy costs, and limits insight into mid- to long-term business growth. Identifying gaps in the strategic planning process through internal evaluation will illuminate opportunities for improvement. When coupled with prospective data and external trend analyses, this approach also provides structure and a better line of sight into opportunities for controlling costs and increasing productivity. 78 % Manage year to year with adjustments as needed COMPENSATION 6 % Plan multi-year with multi-data inputs Arthur J. Gallagher & Co. AJG.COM 3

4 Medical Benefits Consumerism Biggest challenges in managing healthcare costs 72 % High cost of medical services 49 % High cost of prescription drugs Tactics to increase employee responsibility for health and healthcare costs by 2018 Wellness program Disease management programs Nonsmoker premium discount Dependent eligibility audit Integrated health and disability management programs 56 % 52 % 46 % 41 % 76 % Reducing healthcare costs while increasing operating margins an ever-present need requires strategically managed medical benefits. Most manufacturers agree on the factors that not only drive the costs of medical services and prescription drugs upward, but also contribute to unhealthy populations. However, there is no clear consensus on how to address these factors. Although some employers plan to adopt new cost-management tactics, the majority seem to be reapplying solutions that haven t delivered on their cost objectives. New approaches are likely needed for managing benefits by centering on data-driven insight into thoughtful, incremental changes. Creating a pathway for employees to take more responsibility for their health and healthcare will help control cost trend. More manufacturers are offering programs and tools that promote healthy behaviors and guide better healthcare decisions. For instance, introducing a wellness program in the next two years ranks as a top priority. Consumer-directed health plans (CDHP) are also an increasing part of the shift toward shared, collaborative health management. To ensure these benefits are implemented successfully, it s important for employers to educate employees on the value of all support tools and programs, and how to use them effectively. CDHPs are on the rise Currently 30 % offer a CDHP Another 15% expect to offer this plan by BENEFITS STRATEGY & BENCHMARKING SURVEY Industry Addendum

5 Pharmacy Type of pharmacy coverage Another 12% plan to carve out coverage by 2018 Snapshot: Pharmacy cost sharing (median) Retail Mail Order* Generic Rx copay $10 $20 Preferred Rx copay $35 $65 Non-preferred Rx copay $58 $120 Coinsurance (paid by the plan) 90% Part of health plan 10% Carved out 80% Manufacturers tend to carve in the pharmacy benefit and rely on their health plan for pharmacy benefits management. Alternative vendors or an altogether novel approach to this benefit may offer a better value, so carve-ins should be assessed. In addition, analytics can reduce costs by identifying gaps such as contracting inconsistencies. Data also helps make the pharmacy benefit manager (PBM) selection process competitive by allowing a view into costs and terms for multiple PBMs. Employee cost sharing within the pharmacy benefit is lower for manufacturers compared to other industries. Copayments rank as the most frequently used tactic, and medians range from $10 $120. For coinsurance, the median is 80%. Specialty and biologic medications are drawing more attention because of their high costs and rapidly expanding utilization and pipelines. With the potential for spending on these costly treatments continuing to increase, they should be closely managed. Self-insured employers can maximize value by encouraging appropriate access and adherence through specialty pharmacy benefit management tactics and design. *90-day supply 32 % Require pre-authorization for biologics Another 4% plan to by % Use step-care therapy for biologics Another 6% plan to by 2018 Arthur J. Gallagher & Co. AJG.COM 5

6 Employee Engagement Only half report an engaged workforce 49 % Believe their workforce is highly engaged Engagement often goes unmeasured 77 % Have not recently assessed employee engagement* *Within the last two years While most manufacturers have insight into the demographic makeup of their workforce, few understand the needs and wants of their distinct employee populations. Even though 40% place a high priority on increasing workforce engagement and productivity, 56% have no plans to formally assess employee perceptions of satisfaction, motivation and commitment. With competition for employees at every level, especially more transient and lower-wage laborers, engagement initiatives merit a close look. As millennials become the largest segment of the workforce, manufacturing employers will set themselves apart from competitors by adding newer, more innovative elements to their traditional compensation and benefits offering. Training, professional development and other benefits that address career, financial, social and emotional health are important options. To find the most effective combination, employers should evaluate the priorities of workforce populations through direct surveys. When benefits and compensation align with these interests, employee wellness and engagement can be strengthened significantly. Top five tactics for improving employee engagement Clearly defined employee performance goals Timely and constructive employee feedback Employee development action plans Communications that foster trust and confidence Career path support BENEFITS STRATEGY & BENCHMARKING SURVEY Industry Addendum

7 Retirement Benefits Types of plans offered 67 % Have a retirement program 401(k) 97% Defined benefit 13% Profit-sharing 13% Cash balance 1% LESS THAN ONE IN THREE employers are taking steps to gauge employee retirement readiness Many pre-retirees continue working because they re not in a financial position to stop. Retirement benefits are a foundational contribution to employees sense of financial security, and support not only their confidence to retire, but also their health and wellbeing. Setting up employees for post-career financial success requires employers to decide how to invest strategically in retirement benefits. Most manufacturers offer a retirement program, but their current efforts and ability to assess retirement readiness and drive planning are often insufficient to achieve the desired results. By using a data-driven process, they can increase key insights into employee needs and the potential for quick wins. For employers with defined contribution plans, future challenges to the current plan structure should be factored into longer-term options for retirement programs. Steps that help increase employee enrollment and plan contributions include employer matching, auto-enrollment and auto-escalation. And, when manufacturers effectively educate their employees on the advantages of retirement planning and participating in available programs, retirement benefits can be optimized. 49 % Have auto-enrollment 401(k) 34 % Apply auto-escalation Arthur J. Gallagher & Co. AJG.COM 7

8 Final Remarks Manufacturers can strengthen their competitive position by thoroughly evaluating their benefit strategies and setting a longer time horizon for planning. These moves allow them to identify and apply more sustainable solutions, such as medical plan tactics and programs that emphasize value and support more informed employee healthcare decisions. Gaining a better understanding of approaches to specialty medication management also helps employers reduce costs. In addition, measuring and improving employee engagement drives productivity and bottom-line performance. Some benefit options to consider are training, professional development, and financial wellbeing programs, including retirement plans that use automated mechanisms to boost employee readiness. This addendum looks at some of the key total-rewards management issues facing the manufacturing industry. The intent is to provide context and direction that can help you transform 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 Manufacturing Account Director, Kelley A. Demiryan (kelley_demiryan@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_MFG