Prudential Identifies the Top 5 Trends

Prudential’s Fifth Annual Study of Employee Benefits: Today and Beyond illuminates the effects of changing workplace demographics and the economic environment on emerging  employee benefits. The report’s core findings are that these 5 trends are driving employee benefits today. In this post, we will review the first important trend – the rise of an employee-driven benefits model:

  1. An employee driven benefits model is arising.
  2. Worker productivity is the next frontier in benefits cost management.
  3. Benefits enrollment is being redefined to help workers make better choices.
  4. An increasingly diverse workforce must be addressed.
  5. The realities of preparing for a secure retirement are changing.

Trend #1: An Employee Driven Benefits Model

Employees Appreciate Their Employer-Provided Benefits Less  

This is an alarming trend that underscores an acute need for better communications to enhance the understanding of and appreciation for the benefits that the employer provides. Since 20% to 30% of every dollar in compensation that an employer provides is in the form of a “hidden paycheck” comprised of benefit contributions that an employee may not be fully aware of, a better understanding of this will enhance employee satisfaction and loyalty. In just 3 years, from 2007 to 2010, there has been a precipitous erosion in employee appreciation for their benefits program:

  • 17% decrease (55% to 38%): “My employer provides a wide range of benefits.”
  • 6% decrease (32% to 26%): “My employer paid for most of all benefits.”
  • 10% decrease  (53% to 43%): “My benefits are highly valuable.”

Employers are adjusting their benefit strategies

To respond to rising costs, economic conditions and healthcare reform, employers are cutting back benefit contributions and options. Cost sharing was at the bottom of the list of employer priorities in 2007, and is now near the top. Brokers/Consultants now place cost sharing at the top of their benefit strategies. Comparing 2007 to 2010:

  • 16% increase in sharing cost of benefits with employees  – 54%- up from 38%.
  • 17% increase in implementing Consumer-Directed Health Plans (CDHPs) – 51% – up from 34%.
  • 70% of Brokers/Consultants are recommending CDHPs.

The Growth of Voluntary Benefits

Voluntary benefits, which are elective and paid 100% by the employee are growing in importance.  While few employers  (35%) may yet fully appreciate the role it can play in reducing benefit costs, there has been a 7% increase in the number of employers who say that offering voluntary benefits increases the value their overall compensation package (up from 59% to 66% over 3 years.) As a result, in the past year 20% of employers have added a voluntary benefit option while only 8% have dropped one. The expectation is that voluntary benefits will play a more integral role in the benefits equation.

  • 86% of employers offer at least one voluntary benefit.
  • 44% offer 3 to 5.
  • 43% of employers and 63% of brokers expect participation to increase.

The rise of employee-driven and voluntary benefits places a greater burden of information on the plan participant. Another key finding of the study shows that employees are increasingly looking for more guidance and regarding their options. More than 33% say they are specifically seeking more advice on critical illness benefits, disability insurance and long-term care insurance.

Upcoming:

Upcoming posts will highlight the other emerging trends identified in Prudential’s Fifth Annual Study of Employee Benefits: Today and Beyond.

  1. An employee driven benefits model is arising (Part 1.)
  2. Worker productivity is the next frontier in benefits cost management – link to part 2.
  3. Enrollment is being redefined to help make better choices – link to part 3.
  4. An increasingly diverse workforce must be addressed  – link to part 4.
  5. The realities of preparing for a secure retirement are changing – link to part 5.

Snap! principle of employee driven benefits:

The trend toward employee driven benefits also creates a more acute need for better employee-directed communications and service.

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