News Briefs: Employers Take the Hit on Costs

The trend of rising health costs continued in 2011, with employers shouldering the bulk of the increases, according to a new study by the Kaiser Family Foundation. The annual cost for family health insurance coverage jumped 9 percent to $15,073 this year, a sharp increase from $13,770 in 2010. Workers’ share of the total cost rose slightly more than 3 percent, while their employers’ share increased 12 percent to $10,944 per family.

Nearly one in five Americans are smokers, with the highest rates found among the least educated, poorest, youngest and uninsured, according to a new report by the Centers for Disease Control and Prevention. Of employees without a high school education, more than 28 percent smoke, similar to the rate of workers with no health insurance.

Most employers have a poor understanding of how specialty pharmacy benefits work, according to a new survey by the Midwest Business Group on Health. The study found that 25 percent of employers said they have little or no understanding of specialty pharmacy benefits and 53 percent have only a “moderate” understanding of the benefits. Seventy percent of the 120 employers who said their specialty pharmacy benefit was managed by an outside administrator did not know how much they were spending on the drugs, the survey said.

Thirty-five percent of workers who telecommute do so full time, putting in at least eight hours per day, according to a new CareerBuilder study. Employees who telecommute between four and seven hours per day made up 40 percent of the respondents, while 17 percent of telecommuters said they spend one hour or less on work per day. Also, 37 percent of workers who telecommute said they are more productive when they come into the office, while 29 percent said they were more efficient at home.

A new study by several universities concluded that insomnia costs U.S. companies $63 billion in lost productivity annually. That means an individual worker with insomnia costs the employer between $2,280 and $3,274 per year, the research said.

Principal Launches Voluntary Benefits Program

A Principal news release said the key advantages of voluntary benefits is that they allow employers to offer a wide variety of products at no cost to the company and workers can pay for the benefits through payroll deduction.

The company said it works with employers to create a customized enrollment strategy and benefit education program for voluntary benefits. Ranging from group meetings to one-on-one sessions, education programs feature working directly with a salaried financial professional at the work site.

Using an interactive needs analysis tool, the financial professionals help employees identify gaps in insurance and financial protection and then prioritize and select the most appropriate type of voluntary benefits both inside and outside of the group program.

The Principal now offers online enrollment for both English and Spanish-speaking workers.

“Employers taking a closer look at their benefit budgets are feeling the financial squeeze, but also realize retaining valued employees in the current environment is critical. Voluntary benefits allow employers to offer attractive benefits at a lower cost for both the employer and their employees,” said Amy Friedrich, vice president of the Specialty Benefits Division of The Principal, in the announcement. “We’re seeing an increase in our customers offering voluntary benefits because they realize it’s a win-win situation for their business budget and their biggest asset, employees.”

Fred Schneyer

High-Stress Jobs Linked to Higher Health Costs

Job-related stress caused workers to increasingly seek help from health professionals for physical, mental and emotional ailments, according to a study by economists at Montreal’s Concordia University, who found that the number of visits to health care professionals was up to 26 percent higher for workers in high-stress jobs.

The study, Psychosocial Working Conditions and the Utilization of Health Care Services, was published August 2011 in BMC Public Health.

“These results show that people in medium-to-high stress jobs visit family doctors and specialists more often than workers with low job stress,” said study lead author Sunday Azagba, a Ph.D. candidate in the Concordia department of economics.

To reach their conclusions, the economists crunched nationally representative data from the Canadian National Population Health Survey (NPHS). All NPHS figures were restricted to adults aged 18 to 65 years—the bulk of the labor force—and included statistics on the number of health care visits, chronic illnesses, marital status, income level, smoking and drinking habits.

“We believe an increasing number of workers are using medical services to cope with job stress,” said co-author Mesbah Sharaf, a Ph.D. candidate in the Concordia department of economics.

“There is medical evidence that stress can adversely affect an individual’s immune system, thereby increasing the risk of disease,” Sharaf continued. “Numerous studies have linked stress to back pain, colorectal cancer, infectious disease, heart problems, headaches and diabetes. Job stress may also heighten risky behaviors such as smoking, drug and alcohol abuse, and discourage healthy behaviors such as physical activity and proper diet and increase consumption of fatty and sweet foods.”

Previous research has found that aging populations and prescription drugs increase the price of health care. Yet few studies have so far correlated workplace stress rates on health care costs.

Easing Workplace Stress

The economists suggested that easing workplace stress could help governments reduce soaring health budgets and bolster employee morale.

“Improving stressful working conditions and educating workers on stress-coping mechanisms could help to reduce health care costs,” said Azagba. “Managing workplace stress can also foster other economic advantages, such as increased productivity among workers, reduce absenteeism and diminish employee turnover.”

The occupations analyzed as part of the Canadian National Population Health Survey included seven categories: mechanical, trade, professional, managerial, health, service and farm.

Most U.S. Employers Opt for ‘Passive’ Open Enrollment

A large majority (71 percent) of U.S. employers conduct passive rather than active benefit enrollment practices, enabling employees to renew most of their plans automatically, according to a 2011 survey by HighRoads, a provider of benefit plan communication services.

Respondents ranged in size from U.S. organizations with fewer than 5,000 employees to those with more than 100,000 employees, although most respondents had more than 5,000 employees.

“On the face of it, passive enrollment is easier for both employees and employers, since employees can just ‘roll over’ their current elections—except for flexible spending accounts,” said Kim Buckey, summary plan description (SPD) practice lead at HighRoads. “But that can be a risky practice,” she added. “If participants can renew their coverage without examining their elections, they may end up with coverage that doesn’t truly meet their needs or that will cost them more than they can truly afford. It also becomes more critical that enrollment materials accurately describe benefits and any changes to them—and that SPDs are updated promptly to reflect that information.”

Active enrollment requires employees to make a proactive plan choice each open enrollment period, which makes it more likely that they will review any plan changes. Employees who don’t take action are penalized—typically by a default enrollment into the option with the most basic coverage or to no coverage.

“It is critical that employees carefully review their plan open enrollment materials each year, particularly in light of health care reform and changes their employers are making to be in compliance,” said Mary Andersen, founder of ERISA Diagnostics Inc., a benefits consulting firm. “Those changes might be additional coverage possibilities, such as covering children up to age 26, or it could be new limits in coverage related to spending accounts. Either way, employees need to understand their options and take responsibility for their own benefit choices.”

HRA: The Employer’s Tool

Although—or even because—they lack portability, the case for HRAs can be compelling in some circumstances, given that HRAs, which come with few requirements, provide a great deal more flexibility to employers than HSAs.

“Employers have more control over the money in an HRA,” said Domaszewicz. Because HRA funds do not belong to an employee, the employer retains any funds left in an HRA when an employee leaves the company. This is a particularly attractive feature for employers in industries, such as retail or fast food, with traditionally high turnover.

Moreover, an HRA can be an attractive option from a cash flow perspective because the “funds” attributed to the HRA “account” are notional in nature (tracked within the accounting system) but actually funded only when a claim is presented.

“Employers that choose an HRA tend to be more paternalistic and they find that adopting an HRA is easier,” said Domaszewicz. “Because only the employer is putting money in the HRA, the employer gets to make all the rules for the benefit plan.” For example, if an employer does not want to adopt the minimum deductible required for an HSA, it can adopt an HRA plan with a lower deductible. Alternatively, HRAs can be linked to plans with out-of-pocket maximums that are higher than the limit the government sets for HSAs.

“With an HRA, employers have more flexibility in terms of the deductibles they choose for the health benefit plan, and even whether they carve out pharmacy benefits,” said Elizabeth Wolff, a principal at Aon Hewitt in Chicago.

“There are places where HRAs are still a good choice,” added Aetna’s Riedl. “Implementing a plan with a deductible that’s not as high as you might see in an HSA-compatible plan might be an easier transition, initially, from richer designs.”

HSAs allow only preventive care to be outside the deductible and covered 100 percent on a first-dollar basis. But “If the employer wants to have certain benefits not subject to the deductible, if they want to steer people to designated high-value health care centers of excellence or have particular types of care covered at 100 percent, HRAs allow them to do so,” Riedl observed.

By Joanne Sammer and Stephen Miller

In Reform’s Wake, Health Firms Adjust Employee Coverage

The ways in which U.S. health care organizations are responding to health care reform, as employers managing their own employee health plans, contain lessons for other organizations, according to an 2011 survey report.
Health Care Reform Readiness Survey of more than 200 professionals in U.S. health care organizations reveals that costs are expected to rise significantly with health care reform but will be balanced with increased access to care and a renewed focus on organizational efficiencies to improve patients’ quality of care.
Cost-Shifting and Health Promotion
The majority of health care industry respondents (75 percent) believe that health care costs will rise as a result of reform, with 43 percent indicating they expect a significant increase. To offset increased costs in their plans:
• More than 90 percent of health care employers expect to pass on some or all of these additional costs to their employees through higher employee contributions or reduced coverage.
• Some health care employers (48 percent) plan to facilitate improvements in employee health by increasing their wellness initiatives, while virtually none expect to reduce wellness programs.
Six in 10 health care respondents (62 percent) report that their employees have had very few questions about health care reform, while only 14 percent say employees have raised many questions.
On the other hand, 62 percent of respondents report communicating the impact of health care reform to their employees, and 33 percent plan to do so in the near future. Much of this communication activity has occurred in the context of annual benefits enrollment communications.
The major communication channels used to inform employees about health care reform included:
• Employee meetings (64 percent of respondents).
• Existing newsletters (41 percent).
• E-mails (40 percent).
• Intranet postings (22 percent).
Most organizations plan to maintain communications using existing channels (89 percent). About 35 percent will produce special educational communications (such as newsletters and e-mails) to educate employees on health care reform specifics.
Care Design Changes
Respondents said their organizations were implementing or planning to make additional changes to improve care in the next three years by:
• Using electronic health records (85 percent).
• Using evidence-based or predictive-modeling technology tools (66 percent).
Likely coverage delivery changes cited by respondents include reallocating primary care to nurse practitioners or other appropriate caregivers, comparing patient treatment outcomes and cost, increasing focus on patient care collaboration, and using social media to facilitate communication between health care providers and patients.

Most popular employee benefits identified

In a time of muted pay growth, a survey has identified the most popular employee benefits extended to UK workers.

Chief amongst these is a pension scheme, followed by healthcare provision and a salary sacrifice scheme, the Chartered Institute for Payroll Professionals (CIPP) have found.

“With pay rises few and far between the overall remuneration package is of vital importance to ensure employees feel valued,” commented Diana Bruce, Senior Policy Liason Officer at the CIPP.

“An employer may not be in a position to provide a bonus or pay rise but they can certainly help their employees by providing benefits such as a good workplace pension scheme where both the employer and employee can save on tax and National Insurance Contributions.”

With the introduction of automatic enrolment next year it is very encouraging to see a high percentage of employers already offering a pension scheme, the CIPP note. Salary sacrifice schemes continue to be a popular benefit, however the government does make the administration increasingly difficult for employers; the changes to Employer Supported Childcare in April 2011 being a prime example.

Other employee benefits which were rated highly in the survey were membership body fees, childcare and a car allowance. The results were taken from 380 people surveyed across the country in all professions and sectors.

Good Wellness Starts From Bottom — and Top

Rising health care costs aren’t just a challenge for big companies with expansive health coverage. Small businesses are feeling the pinch of skyrocketing costs, as well. Yet many smaller employers still haven’t tapped into wellness programs to help ease the pain of year-over-year insurance increases.

A recent survey by, a free online wellness resource, found that 28 percent of smaller companies (with 10 to 99 employees) supported wellness programs or were in the process of starting one, compared with 78 percent of companies with 100 to 2,499 employees.

While cost is always a concern for small businesses when considering a wellness initiative, the study suggests that small companies simply are unaware of the real financial benefits of wellness, said Lisa Gable, executive director of the Healthy Weight Commitment Foundation, in a recent UPI report.

Only 20 percent of polled small businesses said they strongly agreed that wellness benefits exceed costs, compared with 38 percent of larger companies, Gable said. However, Gable cited a National Business Group on Health study that shows employers can gain as much as $3.27 for every $1 spent on wellness. “Smaller companies have an even greater stake in the health and productivity of their workforce than larger employers,” Gable said.

These programs don’t have to be expensive to be effective, especially if they are championed by employees themselves. The Atlantic Eye Institute of Jacksonville, Fla., wanted to start a wellness program but couldn’t afford an outside consultant. So, they tapped Rochelle Cordero, a staff member, to start and manage a wellness program for the entire practice, which has more than 30 employees. Cordero was excited about the program and happily took on the endeavor, according to a report by American Medical News.

Cordero took advantage of free and low-cost resources, such as The President’s Challenge, which aims to increase participants’ physical activity. She also started a smoking cessation initiative and a lunchtime walking program. Under her direction, the practice also started supplying jump ropes and weights for staffers to use during breaks.
The practice is a strong example of how a small company can use internal resources to kick-start a wellness initiative that can save employers money and improve employees’ well-being.

“Any small company can do wellness for a low cost,” Fiona Gathright, president of Wellness Corporate Solutions, told American Medical News. “This is not something that has to cost a lot of money.”

While support from the rank-and-file can elevate a wellness initiative, leadership from the employer is key to any program’s ultimate success, experts say. Take Borislow Insurance Agency Inc. in Massachusetts, an independent employee benefit advisory firm and a United Benefit Advisors member with 26 employees, which started its own wellness program to serve as an example for its clients.

The addition of a new on-site gym — including access to personal trainers — is a testament to the commitment that the firm’s leaders have made to wellness.
“We have a leadership team that supports all of our initiatives, not only financially but really participate and are in there on a daily basis encouraging us to be as healthy as we can be,” said Karen L. Kelly, the firm’s director of health and wellness, in a recent Boston Business Journal report.

‘Best Companies’ Take Collaborative Approach to Benefits

Over the past decade, the “best” U.S. companies have adapted their benefits offerings to meet changing employee needs, according to The Principal Financial Group’s annual 10 Best Companies for Employee Financial Security competition.

The program honors growing companies (with five to 1,000 employees) for their commitment to outstanding benefits. The 2011 winners exemplify three major transformations that have taken place over the last 10 years, according to The Principal Financial Group, an employee benefits provider. These trends are:

• Shifting from do-it-for-them to do-it-with-them. As benefit programs have shifted from the employer making most decisions to employees facing more choices and taking personal financial responsibility, the “best companies” continue to share significantly in the cost. They engage employees through collaboration and strong education to help them make the best use of their benefit dollars.

All winners provide employer-paid one-on-one meetings with benefits specialists and financial professionals to help employees make informed benefit decisions. Companies use a wide range of methods to reach employees, from payroll stuffers to webinars. Employees are encouraged to help run benefit programs.

• Changing from cookie cutter to customized. The last decade witnessed a significant trend toward customized benefit programs tailored to specific employee needs and demographics. Winners actively designed their programs to engage employees, targeting young workers (with 529 tuition-savings plans, adoption insurance and mortgage assistance) and older workers (with 100-percent-paid long-term care insurance and phased retirement), for example.

In addition, “best companies” actively engaged employees in helping to shape benefit programs, using employee surveys, focus groups and employee committees to understand their needs and wants. Most offer flexible scheduling to accommodate changing life stages.

• Viewing security as financial and physical. “Best companies” use a holistic approach that ties financial security to an increased focus on wellness as a way to lower health care costs for both the company and the employee. Winners recognize reducing financial and health stress leads to greater engagement and higher productivity, which ultimately leads to a stronger bottom line. In addition, winners are more likely to offer biometric screenings, health risk assessments and health coaches, and to reward employees for making healthy choices by tying medical insurance premium discounts to wellness participation and offering health savings accounts or health reimbursement arrangements.

Nov. Webinar: Wellness Programs and Compliance

The Latest on Wellness Programs: What Can Employers Legally Do to Increase Participation?

Tuesday, Nov. 8
2 p.m. ET / 11 a.m. PT

Employer wellness programs are now a part of the benefits landscape. And employers that have tried the “soft” approach to implementing these programs (e.g. health risk assessments and biometric screenings) are now looking for ways that they can actually improve the wellness of their employees. That means greater incentives to participate in wellness programs — and sometimes even penalties for refusing to do so.

At the same time, employers are constantly reminded of the legal constraints they face in attempting to increase the level of wellness program participation. In this webinar, we’ll summarize those constraints and offer concrete examples of steps employers have taken to raise the participation level in their wellness programs. We’ll also look at some of the wellness-oriented provisions of last year’s health care reform legislation.

Kenneth A. Mason, Partner – Spencer Fane Britt & Browne LLP
Ken heads the Employee Benefits Group. He concentrates on ERISA and other aspects of employee benefits law, including tax and fiduciary issues, retirement and welfare plans, executive deferred compensation, federal employment discrimination statutes and issues unique to governmental and other tax-exempt employers.

Julia M. Vander Weele, Partner – Spencer Fane Britt & Browne LLP
Julia practices in the Employee Benefits Group and is a member of the ERISA Litigation Group. Prior to Spencer Fane, Julia was in-house counsel for Fortis Benefits Insurance Company, where she managed ERISA litigation and advised senior management on ERISA issues.

Please contact us if you’d like to register for this webinar or if you have any questions.

Note: This webinar event has been submitted to the Human Resource Certification Institute to qualify for 1.5 recertification credit hours.