The cost of benefits is rising. We read about it in the newspaper. We hear it debated on television. Some of us see more being taking out of our paychecks every couple of weeks. But, what exactly does an increase in benefits costs mean for workers and organizations?
As a human resources person with experience working in the healthcare industry and purchasing health insurance for an organization, I have seen how costly and tricky health insurance plans can be. Outside of benefits managers, leaders, and financial types, most people don’t think about their health coverage until they a) don’t have it anymore, b) get sick, or c) start a family. So, we’ll start with two basic questions:
1. Do you know how much your health insurance costs a year?
2. Do you know what percentage of your health insurance you pay compared to your employer?
Cost
According to the Milliman Medical Index, healthcare costs for American families in 2012 exceed $20,000. Since 2005, Millman, one of the world’s largest independent actuarial and consulting organizations, has conducted annual studies on the average medical and healthcare costs for a family of four covered by a preferred provider plan. They note that, “Because of the way employer-sponsored health insurance is paid for, families may not realize the cost of their healthcare for a single year is roughly equivalent to the cost of a basic mid-size sedan.”
Milliman found that of the $20,728 that a family spends on medical costs per year, $12,144, or 58 percent, comes from employer contribution; $5,114, or 25 percent, is the employee’s contribution paid to or deducted by the organization; and $3,470, or 17 percent, is paid out of pocket by the employee.
Loyalty & Benefits
Many people believe that the better the benefits the happier or more loyal the employee. The MetLife Study of Employee Benefit Trends, which explores employer and employee opinions on benefits from a variety of industries across the U.S., has discovered a strong link between benefits and employee satisfaction. Their 10th annual report notes that, “One of the study’s most significant findings is the strong relationship between satisfaction with benefits and job satisfaction. First noted in 2004 and every year since, this correlation creates compelling evidence for the power of benefits to drive a universal set of business objectives - employee attraction, retention, and productivity.”
The Future
What do these trends mean for employees and employers moving forward? How might they influence worker decisions as they weigh salary over benefits? The MetLife study provides some interesting insight:
• 40 percent of surveyed employers plan to maintain their current benefits with no changes to the cost for employees;
• 30 percent of surveyed employers plan to maintain their current benefits by cost shifting to employees;
• 10 percent of surveyed employers plan to reduce benefits;
• 13 percent of surveyed employers noted “other"; and
• 7 percent of surveyed employers noted that they were not sure.
Many businesses, governments, and other organizations have moved in recent years to reduce benefits or pass along more of the cost to their employees in an effort to control spending, balance budgets, and compete in a changing economy. At the same time, there is also a growing recognition that while benefit costs are high-and growing-they do matter in attracting and retaining high-performing staff and boosting job satisfaction. According to the MetLife survey, at least 70 percent of employers plan to maintain their current benefits, but the question is who will foot the bill-employers or employees.
If costs continue to increase at the current pace, I would bet that in the next five years more and more employees will start to select jobs based on health insurance and other benefits over direct pay.
What do you think? Will generation Y workers pick jobs for the money or the benefits?
Have a question? Post it in the comments section below or tweet me @EmilyDouglasHC. I will do my best to answer every question, and may feature yours in a future post!