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Compensation & Benefits

Published November 2008

Taming Employee Benefits Programs

 

  David Weldon

Benjamin Franklin said, "An ounce of prevention is worth a pound of cure," and that certainly is the approach being adopted by leading organizations looking to contain rising health care benefit costs.

Medical insurance is far and away the most expensive benefit offered by organizations, and it can be a budget buster. A new research study published in July 2008 from research firm Aberdeen Group found the cure isn't in reducing medical care coverage, but in finding ways to make it less needed.

For example, include wellness programs and disease management programs, both of which attempt to rein in the need and cost of other health care by keeping employees more healthy to begin with. If a company is aggressive about containing costs, it may tie employees' participation in such programs to the amount they pay into the company health plan or how much they must provide in health-service co-payments.

The study, "Taming the Benefits Management Beast: Driving Costs Down and Satisfaction Up," surveyed more than 330 organizations regarding their investments in benefits management programs and in systems to manage those programs. Aberdeen collected data against 10 metrics assigned to distinct workforce management elements, including improvements seen in revenue, recruiting and retention. Data revealed best-in-class organizations are achieving significant gains in the areas of employee job satisfaction, employee retention, benefits cost per employee and administrative burden on human resources.

Pressure Points
In addition to driving health care coverage costs down, the next top goal with benefits management programs is to drive retention rates up, survey data revealed. Indeed, 49 percent of all organizations surveyed cited employee retention as a top concern.

A competitive employee benefits program is critical to attract and retain skilled workers. But organizations naturally want to reduce the cost of individual employee benefits. The problem is freezing or reducing benefit program budgets to cut costs can put the program out of balance with employee demands. To remain competitive with the overall benefits plan requires that employees be involved in plan management while organizations work to find the right balance of need-to-have and nice-to-have offerings.

Heal Thyself
Having identified the symptoms of an ailing benefits program, many organizations stand in their own way when attempting a cure. Survey data revealed the following challenges to managing a benefits program effectively:

• 72 percent cite budget as the top challenge.
• 24 percent cite employee resistance to change.
• 18 percent cite a lack of automation in benefits data collection and management.
• 15 percent cite a lack of overall benefits program visibility.

Budget challenges need no explanation, but what about resistance to change? Interviews with companies revealed employees can become concerned when traditional benefits plans are altered, fearing they are being asked to pick up more of the cost.