Maximizing The Value of Your Investment in Employee Health Benefits

As you consider your investment in employee health benefits for 2008 – 2009, some facts and approaches may be helpful.

Health Benefits Costs Present Management Challenges

When you choose to provide health benefits to your employees, your company must balance two conflicting objectives – maximizing the incentive value of healthcare to your employees, and controlling the cost of this investment.  TriNet’s 2008 – 2009 health benefits program help strike the right balance.

Health insurance premium costs continue to increase across all insurance types, providers and regions. Between 2001- 2007, health insurance premium costs rose 80%—nearly four times faster than wage cost growth in the same period. This trend continues with no sign of abatement.

Costs of TriNet-offered plans reflect national trends. Many plans (including High Deductibles, HMO’s and some others) have very low, or no increase, due to favorable claims experience and low risk. Low-deductible plans which expose insurers to near “first-dollar” claim costs generally have higher percentage increases. But across plan types, options and regions, the median annual increase for TriNet-sponsored plans in 2008 – 2009 is well below national averages.  The TriNet total picture is continued wide choice among excellent plans, with measured increases based on the cost of providing insurance.

Incenting Employees Through Plan Choice and Quality

TriNet’s plans place your company at the leading edge of employee health benefit choice and plan quality.  Within the 59% of companies with fewer than 200 employees offering healthcare at all, only 11% offer more than 1 plan, and only 1% offer three or more (as TriNet companies do). 

But high-performing employees demand choice.  A recent Watson-Wyatt study concluded that most employees want broad choice among health plan types and are willing to pay higher premiums in return.  This study is supported by research from Hewitt, which finds that two-thirds of employees consider the range and quality of health plans as a primary factor in staying with or choosing their employer.  The same Hewitt study found that 85 – 90% of employees prefer 3 or more plan choices.

Health plans offered through TriNet place your company within the top 1% of small employers in your ability to meet employee demand for plan choice. TriNet’s plans maximize employee choice because they include the full range of health insurance options – from low-premium, high-deductible plans through higher-premium, low deductible PPO plans from top-tier providers.

TriNet adds value to broad plan choice by maintaining the highest quality plan providers and plan administration features. TriNet’s 2008 – 2009 plan offerings do not require medical underwriting and contain no exclusions for pre-existing conditions. TriNet-served employees can select and manage their insurance choices in privacy and with instant access to information through HRPassport, and get answers through the Employee Solution Center. 

TriNet ‘s 2008 – 2009 plans meet employees’ needs for quality and choice, making companies more competitive for top talent.

Managing Cost of Investment In Employee Health Insurance

In the weeks ahead, companies will make two key decisions to meet the objective of managing the investment in employee healthcare – setting the health insurance benefits budget, and deciding on the benefits funding strategy.
Funding available for company contribution to employee health premiums is determined by each company’s business situation.  Guidelines based on national data should always be applied with care; however, three common benchmarks are:
• Average annual premium contribution paid by small firms (<200 employees) was about $7,600 per employee in 2007;
• Average percentage of premiums paid across all plan types by employers in small firms for single and family coverage was 84 – 88% and 61 – 68% respectively in 2007;
• Average percentage of premiums paid by employee for employee-only coverage (about 16%) and family coverage (about 28%) has been roughly stable since 2001.

The second decision is the benefits funding strategy – how to apply company resources across multiple insurance offerings available.  The following guidelines may be helpful:
• “Percentage contribution” funding strategies allow employees to choose across plan types – PPO, HMO, HDHP—with assurance that a fixed percentage of premium will be paid.  This strategy incents employees toward lower-deductible, higher fixed-premium plans – where annual premium increases, and total premiums, are typically highest. Consider whether this strategy may actually reduce employee satisfaction with health plans over the longer term, by maximizing employee exposure to premium cost increases.
• “Fixed contribution per employee” funding strategies incent employees to maximize the value of employer contributions to benefits by shopping across plans.  These strategies pay a higher percentage of an employee’s fixed premium in lower cost plans – HMO/HDHP/Standard PPO – where annual cost increases and premiums are lowest. Over time, these strategies take the fullest advantage of the range of benefit choices offered by TriNet plans, and may increase employee satisfaction.

TriNet believes that how management communicates these decisions to employees is an important element of the benefit funding decision process. TriNet consultants can assist management teams in preparing communications that help employees understand what decisions were made, and why.

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TriNet recognizes that the benefits funding decisions are among the most impactful financial decisions facing your company.  TriNet consultants can help you make the best possible decisions for your employees and your company.