Public and private employers can take steps to ensure competitive, sustainable benefits
COLUMBIA, S.C. (March 27, 2012) — Employers across America face unprecedented challenges in providing competitive employees benefits while still controlling costs. Public sector employers face additional obstacles from revenue shortfalls and increased public scrutiny of government spending. Yet employers — both public and private — have access to many proven solutions that can help them control and even reduce costs while continuing to offer a strong benefits package.
That’s one of the key findings in a new white paper released today by Colonial Life & Accident Insurance Company. “Preserve and Protect: How Public Sector Employers Can Provide Excellent Benefits While Controlling Costs” uses proprietary and industry research and case studies to explain the reasons for the growing cost pressures and show the effectiveness of multiple strategies to contain employee health benefits costs.
The cost of family health care coverage has doubled in the last decade, increasing 9 percent in 2011 over the previous year.1 At the same time, state and local governments are facing significant financial stress from the most recent recession: Their revenues declined 22 percent from 2008 to 2009.2
“In today’s economy, most people realize changes in benefits programs are inevitable,” says Pat McCullough, assistant vice president and public sector practice leader at Colonial Life. “But many employers, especially those in the public sector, aren’t taking advantage of the opportunities available to them. They’re more likely to be able to continue offering competitive programs if they find ways to make them more cost-effective.”
Top five cost-control strategies
The white paper examines five strategies research shows to be effective in controlling costs:
• Wellness initiatives — Wellness initiatives were among the top cost-control strategies implemented by employers in a recent survey of government financial officers. Nearly 80 percent of survey respondents have added wellness initiatives to their benefits program, and 90 percent of those recommend them to others; nearly two-thirds recommend them strongly.3 That aligns with a Society for Human Resource Management report showing 75 percent of employers supply their workforce with wellness resources and information.4
• Pretaxing benefits/Section 125 participation — Equaling wellness programs as a highly implemented and recommended cost-control strategy is establishing Section 125 plans and maximizing employees’ participation in pretax benefits programs. More than three quarters — 77 percent — of employers in the government financial officers survey say they offer pretax benefit plans, and 86 percent of those recommend this option.3 In fact, at 73 percent highly recommended, it was the most enthusiastically endorsed strategy of the survey options, and only 3 percent were unlikely to recommend it.
• Benefits communication and education — Employers can transfer the cost of benefits plan communication to their benefits suppliers and can outsource an enrollment system and open enrollment management rather than maintaining these responsibilities in-house. Although this shift in benefits communication and enrollment responsibilities is well-recommended by those using it, it’s not yet widely implemented. In the government financial officers survey, only 31 percent of employers were using an external service provider for benefits enrollment and 52 percent had shifted benefits education and communication expense to suppliers. However, 78 percent of those who outsourced enrollment would recommend it, and 84 percent recommended using a benefits carrier to handle benefits education and communication.3
• Voluntary benefits — One underutilized solution to the benefits cost problem is to move noncore benefits to employee-paid voluntary benefits. This strategy is another example of a change that fewer public sector employers have yet to implement, but those who do give it very high marks. Only about a third of employers in the government financial officers study said they have moved noncore benefits to employee-paid voluntary coverage. However, 87 percent of those employers recommended this strategy, and 70 percent recommended it strongly.3
• Dependent verification — Providing insurance coverage for dependents who are no longer eligible drives up benefits costs for employers. Health plan audits can reveal a significant number of ineligible participants, including dependents who are over age or who aren’t a blood relative or a spouse, or former employees who haven’t been removed from the plan. The potential cost savings offered by dependent verification can be considerable, and the service is sometimes available at no cost to the employer.
Dollars and sense
Government employers who implemented strategies such as these report significant savings in their employee health care benefits. More than half — 55 percent — of participants in the government financial officers study saved at least 6 percent, and 40 percent of them saved more than 10 percent.3 Other studies show employer return on investment for wellness initiatives ranging from $3 to $6 for every dollar spent.5
The Colonial Life white paper illustrates how government employers can save money and preserve the value of their benefits packages by carefully selecting the most effective combination of strategies for their situations and needs, including enlisting the often-free support of qualified benefits providers. By considering factors such as the organization’s size, political environment, cost management goals, impact on employee health and access to care, government employers can select from a range of options with the potential to significantly affect their health benefits costs.
“Focusing on the right cost-saving measures could have a significant impact on the bottom line while minimizing the impact on employees,” says Tom Cochran, chief executive officer and executive director of the U.S. Conference of Mayors. “Thoughtful implementation of strategies appropriate for each employer can help them continue to offer a stable benefits package in a more financially sustainable way.”
The complete white paper is available in Colonial Life’s online newsroom at ColonialLife.com.
About Colonial Life
Colonial Life & Accident Insurance Company is a market leader in providing insurance benefits for employees and their families through the workplace, along with individual benefits education, advanced yet simple-to-use enrollment technology and quality personal service. Colonial Life offers disability, life and supplemental accident and health insurance policies in 49 states and the District of Columbia. Similar policies, if approved, are underwritten in New York by a Colonial Life affiliate, The Paul Revere Life Insurance Company, Worcester, Mass. Colonial Life is based in Columbia, S.C., and is a subsidiary of Unum Group, one of the world’s leading providers of employee benefits. For more information, call Colonial Life at (803) 798-7000 or visit www.coloniallife.com. Colonial Life offers exceptional opportunities to join its expanding sales force of more than 13,000 career agents in one of the fastest growing segments of the insurance industry. The company provides award-winning training that has received national recognition for excellence. For more information about Colonial Life, call the company at (803) 798-7000 or visit www.ColonialLife.com
1 Kaiser Family Foundation study, as reported in “Health Insurance Costs Rising Sharply This Year, Study Shows,” The New York Times, Sept. 27, 2011.
2 State and Local Government Finances Summary: 2009, U.S. Census Bureau, October 2011.
3 Government Finance Officers Association, “Containing Health Care Costs,” 2011.
4 SHRM, 2011 Employee Benefits--Examining Employee Benefits Amidst Uncertainty, July 2011.
5 “Workplace Wellness Programs Can Generate Savings,” Health Affairs, February 2010; and Edington, D.W., 2010 Health Management Research Center, University of Michigan, Zero Trends Business Case: 2010 Cost-Benefit Analysis and Report, Workplace and Workforce Health and Wellness.
Contact: Jeanne Reynolds