Two ways health execs can help employers manage health benefit programs

Wage increases are not keeping pace with healthcare cost increases, according to two new surveys.

Employers expect healthcare costs to increase by 5.5% in 2018, up from a 4.6% increase in 2017, according to the 22nd annual “Best Practices in Health Care Employer Survey” by Willis Towers Watson.

Despite uncertainty about the future of healthcare legislation, employer confidence in offering employee healthcare benefits has reached its highest level since the passage of the Affordable Care Act in 2010, according to the survey. The survey also showed that. 92% of employers are “very confident” their organization will continue to sponsor health benefits in five years.  

The survey was completed between June 2017 and July 2017. Results reflect respondents’ 2017 health program decisions and strategies. Results provided are based on 555 employers with at least 1,000 employees.

Future outlook: Employers’ benefit strategies

“Executives at managed care organizations are facing the same challenges as leaders at employers across the wide range of industries face-how to attract and retain talent,” says Julie Stone, a national health care practice leader at Willis Towers Watson.   

Sejen

In that regard, total compensation including health benefits and salary are critical to maintaining a competitive edge, says Laura Sejen, managing director, Human Capital and Benefits at Willis Towers Watson.

The data show that healthcare costs will rise 5.5%. However, a second survey, The Willis Towers Watson Data Services Salary Budget Survey, shows  employee salaries will increase just 3%. 

According to the second survey, U.S. employers expect to hold the line on pay raises in 2018, with increases projected to average 3% for most groups of employees. The survey also showed that employers continue to reward their top performers with significantly larger raises as part of their overall efforts to retain their best performers and strengthen their commitment to paying for performance.

Exempt employees who received the highest performance ratings were granted an average salary increase of 4.5% this year, about 73% larger than the 2.6% increase given to employees receiving an average rating, according to the survey. 

Meanwhile, annual performance bonuses, which are generally tied to company and employee performance goals, are projected to hold steady or decline slightly in 2018 for most employee groups. Discretionary bonuses, generally paid for special projects or one-time achievements, are also projected to hold relatively steady compared with bonuses awarded last year and budgeted for this year.  

The salary budget survey was conducted between April 2017 and July 2017, and includes responses from 819 companies representing a cross section of industries.

Employers are rethinking how to administer limited salary budgets to keep their best and brightest Sejen noted.

“As the survey results show, some organizations are moving away from differentiating increases based on an employee’s previous year’s performance altogether while others are focusing on rewarding employees for skills development,” Sejen says. “So, while organizations may be forecasting 3% increases, the landscape of how and when they are giving increases varies considerably.”

Next: Managing costs

How employers plan to manage healthcare costs

Employers are pursuing a wider array of approaches to reduce healthcare cost and risk-both through improved program efficiencies and members’ health engagement, says Stone.

Stone

These areas of focus will include encouraging patients to use preferred providers for healthcare delivery, e.g., telemedicine, centers of excellence, and high-performance networks; emphasizing better outcomes and cost savings in high-priority clinical conditions, such as diabetes, musculoskeletal health and mental health; and selecting partners based on their ability to achieve demonstrably improved outcomes, as well as hold the line on cost. "Employers also aim to enhance employee engagement by increasing choice of benefit plans, improving decision support, and offering health wearables and mobile apps,” Stone says.

Two ways health execs can help

Based on the survey findings, there are two ways healthcare executives can help employers managed their benefits:

1.   Healthcare cost management.

“Cost management of health benefit programs remains the top priority for employers in 2017 and 2018,” says Stone. “While employers made significant progress over the last few years refining their subsidy and vendor/carrier strategies, many are now looking to other aspects of their health benefit programs in order to improve health and dampen future cost increases. Over the next three years, they will seek to improve patient engagement, expand the use of analytics, and efficiently manage pharmacy costs and utilization. Yet, with rising concerns about affordability, employers are challenged to keep costs low without overburdening employees financially.”

2.   Salary budget management.

Most companies are not under any significant pressure to increase their salary budgets in the near term,” says Sejen. “Companies are relying more on variable pay, such as annual incentives and discretionary bonuses, to recognize and reward their best performers. At the same time, they are rewarding star performers with significantly larger increases while granting minimal increases to their weakest performers."