Today’s landscape has the potential to empower consumers while radically changing the way we envision and leverage employee benefits. Government regulation, spiraling healthcare costs unattached to outcomes, big data, and a massive new generation joining the workforce are the four main factors driving the future of non-wage compensation. That future begins today. With careful consideration of these four factors, a new generation of healthy consumers is within reach.
#1 Regulation and the ACA
The passing of the Affordable Care Act (ACA) in 2010 already feels light years away in some respects. In the brief time since, millions of Americans have taken advantage of the new baselines that the ACA set for medical insurance carriers. These include eliminating pre-existing condition and lifetime maximum clauses, covering preventive services, providing more options for coverage, and helping us get the most from our premium dollars by requiring that insurance companies spend the majority of dollars collected on health-related expenditures, rather than overhead costs like administrative, marketing, or cushy employee and client retreats.
Though the ACA is far from flawless or complete, even those politically opposed to the Act would have a hard time denying the fact that millions of Americans have gained more choice in insurance options through the creation of exchanges. More than 12.7 million are now covered on public exchanges while another eight million enjoy coverage under a private exchange.
These numbers will continue to grow as innovative companies leverage the individual insurance market to offer additional choices to workers at better price points than they can obtain independently. This vastly expanded network means more Americans have the freedom to choose the price, insurance carrier and coverage level that best suits their needs.
All of that said, the ACA has not significantly reduced health care costs, which remain onerous and excessive. The lack of meaningful change in cost since the implementation of the ACA is worthy of additional debate. For me, it’s best highlighted in a recent Kaiser Family Foundation 2015 Employer Health Benefits Survey:
Most market fundamentals have stayed consistent with prior trends, suggesting that the implementation has not caused significant disruption for most market participants. Premiums for single and family coverage increased by 4% in 2015, continuing a fairly long period (2005 to 2015) where annual premium growth has averaged about 5%. The percentage of employers offering coverage (57%) is similar to recent years, as is the percentage of workers in offering firms covered by their own employer (63%).
Clearly, there’s still work to be done on the ACA, but it’s lasting baseline requirements have set a new foundation that’s here to stay.
#2 The disconnect between health care costs and quality
Let’s talk about the outrageous price tags for health care services in this country. It’s no secret that our health care costs are the highest in the developed world. We spend $8,713 annually in health care for each US resident, ahead of the number two country (Switzerland) by a whopping 40 percent and over 2.5 times that of the average developed nation. Most shockingly — and counter to some of the rhetoric you might hear during this campaign season — we spend more in public health dollars per citizen than all other countries on the list except Norway and the Netherlands. In fact, our public health spending alone would cover the entire public and private health spend per capita for countries like Australia, Japan, Ireland, Finland, France and many more.
Surely, we must have better health care, health technology and patient outcomes if we pay that much, you ask? Unfortunately, we don’t. A study by the influential medical journal The BMJ highlights some our issues. It concluded that medical error is the third leading cause of death in the nation — responsible for 251,000 deaths per year. That’s more than suicide (41,000), firearms (31,000) and motor vehicle deaths (31,000) combined. In my own research on the topic, I was astonished to discover that the highest rated hospital for safety in my home state of California achieved a paltry 69 out of 100 successful outcomes. Simply put, we overpay for care that is at best mediocre, often unsafe, and at worst deadly.
The health care industry is in need of fundamental change and there’s a real opportunity to disrupt the existing status quo. Increasing investment in smart people and companies trying to solve this cost/quality disconnect are evidenced where I live in Silicon Valley. Rock Health shows us that $8.8B (yes, that’s billion) has been invested in digital health over the last two years alone. You can bet your bottom dollar that these investments will drive big changes to the system in the coming years, just as they have fostered and developed nascent technologies in other sectors. Investors, employers and consumers alike are seeking answers to gain positive health outcomes that are less costly, more efficient and ethically-driven.
#3 Medicare claims data
When CMS released Medicare claims data for the first time, it was a move of unprecedented transparency and a huge win for entrepreneurs and data scientists looking for a way to help solve the cost, value and quality dilemma. The data contains information on services and procedures provided by over 986,000 physicians and health care professionals. This offers us insight and comparisons of physicians, specialties, locations, types of medical services and procedures delivered, payment and submitted charges, and more.
Why is this a game changer? In today’s society, data is king. It is already sparking a tidal wave of innovation and transparency within health care and insurance. Tools, technologies, apps, quality metrics and accountability for doctors and medical facilities are fast on the way.
#4 A new generation joins the workforce
We’ve gone over three of the biggest things that will usher in a new era of benefits, but the single most influential factor is the changing workforce and the introduction of Millennials. Much has been written about Millennials, but regardless of anecdotes, we certainly cannot ignore the numbers. Ninety-two million strong, they outnumber all previous generations, including baby boomers.
Goldman Sachs created a great infographic that dives into the details of this new workforce. Among the highlights for me are the trend towards delaying major life events, including marriage, buying a car, and becoming homeowners. Millennials tend to focus on access, rather than ownership (think Uber and AirBnB). Take note. Uniquely, they have less spending power compared to their parents, thanks in large part to massive student-debt — a staggering 43 percent of 25 year olds have student debt at a mean balance of over $20,900, according to the Federal Reserve.
Another key takeaway for those of us in benefits is how this generation views health and wellness. Unlike prior generations, who typically focus on the absence of disease and illness when defining health, Millennials spotlight eating right, exercising and limiting or abstaining from smoking and alcohol consumption as their definition of health.
The Goldman report defines another aspect that Millennials both expect and utilize, which is starting to have a huge impact on employee benefits:
Millennials have come of age during a time of technological change, globalization and economic disruption. That’s given them a different set of behaviors and experiences than their parents. They’re also the first generation of digital natives, and their affinity for technology helps shape how they shop. They are used to instant access to price comparisons, product information and peer reviews.
Today’s antiquated and clunky experience with benefits systems and the health care infrastructure remains frustrating and non-intuitive — two adjectives that are decisively incompatible with the needs and expectations of Millennials. While other industries have quickly moved beyond hard copies and filing systems to make access quicker and more efficient, our industry is in dire need of a 21st century makeover.
Beyond all of this, the changing generational needs of our workforce are not met by the existing benefits paradigm. Employers pay copious amounts of money for medical benefits that most of their healthy, young employees will not take advantage of anytime soon. Yet, those same employees often have little-to-no access to benefits that would make a meaningful impact on their lives, such as reducing their student debt or obtaining loans. This signals a shift to us in the benefits world towards benefits dollars that are driven by the consumer, rather than the company.
Tackling today’s problems with tomorrow in mind
Insurance companies and the ACA provide only part of the solution to finance our expensive, low-performing and antiquated health care system. How long will modern consumers put up with an experience so out of step with every other aspect of their daily lives?
The spotlight is shifting squarely onto the underlying cost of care and lack of quality that erodes American spending power, savings and economy. Coupling newly freed data with technologies and innovation that meet the needs and expectations of a new workforce generation will change the way health care and benefits are consumed, paid for and delivered.
It’s time for a fresh look at how we spend our health care dollars while giving the workforce freedom to choose a more personalized approach is the benefits of tomorrow — and that starts today.
This article was originally published on BenefitsPRO
Nate Randall, Founder and President of Ursa Major Consulting recently had the opportunity to speak with Human Resource Executive Online regarding recent EBRI research which found the number of workers reporting satisfaction with their health benefits dropping 10 percent between 2012 and 2015, while the number of those who would rather have fewer benefits and higher wages has gone up 10 percent in that time.
"Assessing employee preferences" may be the most critical piece of the puzzle when it comes to designing benefit programs in 2016 and beyond, says Randall.
View the full article here.
Last week was the 5th annual Human Resources Executive Health and Benefits Leadership Conference from Las Vegas. I’ve attended many events over the years, and there is no better employee benefits-focused event in the nation in my opinion. It brings together engaged professionals for two and a half days of learning, sharing and problem solving. If you haven’t attended it yet, mark your calendars for next April. Until then, here are three trends I noticed from this year’s conference:
Aligning Global Benefits
Companies of all shapes and sizes are trying to simplify the management of benefits for employees overseas. This trend will continue as long as there’s a desire to centralize governance to headquarters, align philosophy, and create a consistent global employee experience. But progress in this arena is tempered by a few current shortcomings which will need to be rectified including a lack of seamless global solutions, an unwillingness by providers to work with small employee numbers abroad, and a shortage of subject matter experts.
Flexibility with Private Exchanges
Despite the specter of being linked to a contentious piece of legislation and the stain of calling something an ‘exchange’, the word from organizations that have gone down the private exchange path is overwhelmingly positive. Giving employees and their families more ownership and choice over how to spend a large chunk of their total rewards dollars is a definite positive. The latest trend? More companies are working with independent advisors to better understand how they can best put to use this new benefits model. I predict that over time the so-called exchanges will morph into what I dub Flexible Benefits 2.0; this will free up even more of those valuable benefits dollars so employees have increased control over how to spend them.
Financial Wellness Matters
Financial Wellness is the new black. Many benefits managers feel the need to do something in this space, not least because financially sound employees are less stressed and more productive in the workplace. Up until now, a lack of solutions and offerings that could move the needle has threatened the viability of the movement. In some cases, former predatory lending schemes and employee purchasing programs masquerade as answers while causing short term damage and a sense of buyer beware. I’m already seeing new solutions coming to market that address this void. Coupled with funds from long term benefits, this new trend may help many employees meet their most acute, near-term financial needs.
If you’re interested in a closer inspection of these thoughts and more, I had the opportunity to sit down with HR Happy Hour for a discussion during the Benefits Leadership Conference. Check it out on the podcast below:
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