The employee benefits landscape has changed significantly in recent years. These changes affect employers who sponsor benefits programs and their workers who receive those benefits. But employee benefits insurance companies face a new future, too. Will it be a growth opportunity? A chance for reinvention? It’s a sure thing that the status quo and traditional approaches won’t be enough.
ERISA, the Employee Retirement Income Security Act, became law more than 40 years ago, effectively forcing many employers into the insurance business. Today, many employers still only grudgingly accept the situation. Other businesses embrace benefits programs as a way to “do the right thing” for their people. However, enlightened employers know that an attractive benefits program is a critical recruiting and retention asset — especially in industries where competition for top-quality talent is fierce.
Employee benefits insurance companies that have not already done so would be well-advised to indulge in some introspection. Taking stock now will help insurance carriers ensure they are strategically positioned for the future.
What’s driving all this change?
The nature of “work” has changed, with an increasingly mobile, far-flung workforce. Through necessity or desire, more people are working well beyond the traditional retirement age of 65. And retirement itself is lasting longer – now 17.6 years for men and 20.6 years for women, compared to less than 10 years in 1970.
Living longer, whether still on the job or in retirement, has significant implications for employee benefits programs. And therefore for benefits insurance companies.
The American Benefits Council has come advice
They say what is needed is “more flexibility, choice, transparency, simplicity, portability and predictability than presently exists.” In fact, the report that details their 2020 Vision is sub-titled, “Flexibility and the Future of Employee Benefits” (italics added here for emphasis).
Although their report is aimed in part at government policy and regulation, it would seem forward-thinking employee benefits insurance companies now have their marching orders.
“Escalation of health care costs will accelerate efforts to find creative ways to meet health coverage needs that are affordable for both employers and employees,” notes the American Benefits Council. The old buyer-seller relationship between sponsor and insurance company must become a solutions partnership. And to succeed, that partnership must include employees, too, as the end-users.
Chalk it up to consumerism. Today’s customers expect to have things their way, but that “way” tends to differ for different generations. So it is now incumbent on employers to tailor benefits programs to the life stages represented within their workforce. For example:
- Millennials are grappling with high student loan debt. They want interesting, innovative work perks.
- Generation Xers are pretty good at saving money. They want flexible scheduling and more “me” time.
- Baby Boomers are finding they can’t retire after all, because they didn’t save enough money.
Employers are looking for innovative benefits options that support business goals — budget, HR, boosting employee satisfaction/loyalty and productivity. Toward that end, they are adding non-traditional offerings to create the most appealing menu of benefits. Trendy lifestyle perks such as on-site day care, shops and/or services, for example. Or non-monetary benefits many workers prefer, such as extra time off, flexible work hours or location.
Insurance companies can’t “cover” all these things. But there are insurance products which haven’t typically been associated with employee benefits programs up till now, at least at most companies. Insurance carriers are perfectly positioned to help employers expand and enhance their benefits offerings, by introducing additional types of coverage aligned with company and employee needs. That might include:
- Life insurance
- Disability insurance
- Long-term care
- Child care and/or eldercare coverage
On the healthcare front, some employers and insurance companies have begun to institute options such as telemedicine, on-site clinics, health “navigator” assistance, etc. Insurers are helping companies offer supplemental coverages such as critical illness or accident insurance that can help employees handle costs not covered by their group medical plan.
When it comes to retirement plans, the American Benefits Council says, “the ongoing shift from a primarily defined benefit to a primarily defined contribution plan environment has focused greater attention on whether employees have what they need in terms of assets and financial education.”
Part of the thinking behind broadening the scope of financial health benefits is that employees who feel more secure in their personal life can focus better on their work.
For instance, benefits insurance companies can help employers educate employees about investment planning and wealth management. As another example, family leave is but a dream for many workers. Although the time off is available, they can’t afford to be off work for a month or three without their paycheck. Insurers could potentially help employers pay workers for this leave.
Leading edge companies may view benefits as simply a cost of doing business, but every business must make a profit to survive and thrive. Employee benefits insurance companies that can help employers ameliorate costs of offering quality, desirable benefits — and help employees reduce their out-of-pocket costs — will become the most sought-after partners.
In fact, benefits insurance companies can now position themselves not only as partners but consultants to sponsors.
The Internet of Everything affects the way we live and work now. Benefits insurance carriers that aren’t taking full advantage of technology risk losing their competitive edge.
Technology can streamline benefits enrollment and management for employees and administrators. Platforms are available that coordinate programs among sponsors, insurance carriers, and employee-customers.
Technology supports and facilitates benefits delivery, too. With online portals and remote access, employees can have on-demand access to their personal benefits-related documents, educational information, even virtual healthcare such as live chat with a nurse.
In their recently-released report, “Protecting Data in the Healthcare Industry,” Osterman Research notes, “The healthcare industry finds itself under cyber attack from many vectors, including ransomware, malware and targeted attacks. While these attacks specifically cause direct harm to IT systems, it’s the flow-on effects that have the industry reeling.” In other words, loss of confidential personal data.
Consumers are worried, for good reason. Healthcare and financial services are favorite targets of cyber criminals. So is their employer’s benefits program safe and secure?
Employee benefits insurance providers can assuage those fears by demonstrating – to sponsors and employees – that they have adopted maximum precautions and protections. It’s a different type of insurance. But the ability to gain and retain confidence and trust surrounding data protection makes that insurance carrier a more desirable working partner.
Bottom line advice
With developments in technology, healthcare, government regulation, and consumer expectations and preferences all rapidly evolving, “strategic positioning” is likely to be a near-term proposition. Employee benefits insurance companies that collaborate with sponsors and end-users to craft solutions and that build on a foundation of flexibility will retain the agility required to respond fastest and best to change.