2016 Benefits Strategy and Benchmarking Survey Presentation · Competitive healthcare plan options vs. cost pressures • Two-thirds of employers (67%) agree or strongly agree that

2016 Benefits Strategy & Benchmarking Survey GARY HARDMAN | OCTOBER 19, 2016

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™

2016 Benefits Strategy & Benchmarking Survey

• Fielded January to March 2016 • 3,107 participants

• 300+ questions covering the total

rewards spectrum

• For a copy of the Executive Summary please go to:

www.ajg.com/nbs2016

© 2016 GALLAGHER BENEFIT SERVICES, INC. 2


Geographic Distribution

© 2016 GALLAGHER BENEFIT SERVICES, INC.


Organization Size



Type of organizations



KEY FINDINGS & IMPLICATIONS



1. Similar operational and HR priorities to maximize human capital investments

Top Operational Priorities Top Human Resource Priorities


Attract & retain a competitive workforce

Control benefit costs

Grow revenue / sales

Attract talent

Retain talent

Control benefit costs


2. Split levels of confidence in benefit program strategies



3. The need for strategic improvements to a data-driven, proactive approach

9 © 2016 GALLAGHER BENEFIT SERVICES, INC.


4. Emerging innovation in medical and pharmacy benefits


Innovation Adoption Projections by 2018


Implications

• Employers are experiencing increasing regulatory complexity, competition for talent and upward pressure on costs

• Diverting time, focus and energy away from strategic planning

• Yet only thoughtful, data-driven strategic planning can aid escape of these environmental pressures



HUMAN CAPITAL STRATEGY



Attracting and retaining a competitive workforce tops the list



Attracting and retaining a competitive workforce tops the list



Potential to drive performance through benefits and compensation overlooked



Few take a data-driven, multi-year approach to benefits planning



MEDICAL BENEFITS



Competitive healthcare plan options vs. cost pressures

• Two-thirds of employers (67%) agree or strongly agree that

medical and pharmacy are cornerstone benefits, key to successful recruiting and retention efforts

• Most employers report that they provide: – Access to quality medical services (93%) – Affordable premiums (74%) – Out-of-pocket costs (66%) – Competitive benefits within their industry (78%).



Innovation Adoption Projections by 2018

• CDHP (51%)

• Eligibility Audits (43%)

• Telemedicine (42%)

• Narrow Networks (27%)

• Special Pharmacy Provider (26%)

• Private Exchange (23%)


Innovation through value-based benefits


Health benefit-related costs continue to rise at an unsustainable rate A large majority of employers expect their revenues to increase slightly or remain about the same (77%)



Eligibility audits to ensure appropriate utilization • 28% of employers

conduct eligibility audits

• This practice is nearly twice as common among large employers at 52%


Look Ahead to 2018: • 15% of all employers and 26% of large employers plan

to get onboard by 2018


Cost-sharing tactics are on the rise



Pharmacy cost challenges

Half of employers rank high prescription drug costs in their top 3 healthcare cost challenges – Nearly one-in-three (32%) also rank specialty drug costs



Tactics to combat rising pharmacy costs


20%

6%

9%

10%

Use a Specialty Pharmacy Provider to manage specialty biologic medication

More plan to utilize Specialty Pharmacy Provider by 2018

Carve out their prescription drug coverage, almost doubling last year’s rate of 5%.

More expect to carve out Rx by 2018


The future of defined contribution and private exchanges Employers cite cost (72%) and employee engagement and accountability (44%) as the biggest drivers of their decision to adopt defined contribution



Benefits Exchange 101


Private Active Employee Exchanges

Public Exchanges

Private Retiree Exchanges

Private Individual Exchanges


How a Private Exchange Works


Employer sponsored benefits marketplace – Medical – Ancillary – Voluntary

Fully or self-insured option

Employee shopping experience – Budget determined – Employer selects the carrier(s) – Employees purchase products


How a Private Exchange Works


• An online marketplace where employees shop for benefits to fit their needs

• Employees shop using money given to them by their employer


Defined Contribution Strategy


Medical Insurance All Other


Private Exchange – Key Considerations


• Is a long term strategy

• Works with self-funded and fully insured plans ‒ Same general risk considerations as current

• Medical trend still exists ‒ Not a silver bullet to cost escalation

‒ Engagement opportunities for better decision-making can effect trend

• Plan sponsorship ‒ Fiduciary responsibility

‒ ERISA compliance obligations

‒ PPACA compliance obligations


Private Exchange – Key Considerations


• Defined contribution funding philosophy

• Customization and control

– Optional based on employer desire

• Benefits administration platform

– Current contract obligation

– Does it support the objectives?

• Future cost increases

– Will you contribute as much as you did in the past?


WELLNESS PROGRAMS



Wellness gains momentum as a strategy for enhancing increasing employee engagement and productivity— while driving down costs

Employers that invest in wellness programs emphasize the importance of:

1) Reducing healthcare costs (62%) 2) Creating a desirable culture (41%) 3) Improving employee experience and satisfaction (34%)


46% Offer a wellness program


• Promoting and improving employee health and wellbeing is a top priority for most employers (69%)

• Yet only half are confident their organization has a

strategy to effectively meet that objective – 15% disagree or strongly disagree that they do


Wellbeing prioritization vs. strategic confidence


Top components of wellness programs



Expanding the definition of wellness



EMPLOYEE COMMUNICATIONS



Lacking a comprehensive communication strategy leads to dissatisfaction



Delivering the best results in employee communications

The three outcomes rated most helpful in maximizing communications effectiveness are:

1. Employees understand the full value of their compensation and benefits (71%)

2. Employees are well-informed and up to date on their benefit choices (61%)

3. Insight into what employees think and feel is collected and used to inform future communications (36%)



EMPLOYEE ENGAGEMENT



Employers recognize the importance but don’t feel they’ve achieved high enough levels


• 42% of employers don’t

think their employees are engaged

• Employers struggle with

turnover, yet only 1 in 3 have conducted an engagement survey within the last two years


Targeted improvements for employee engagement



LIFE INSURANCE, DISABILITY & VOLUNTARY BENEFITS



Life insurance: A cost-effective way to help employees plan for the future

Although most employers offer group term life insurance, nearly 9 out of 10 limit coverage to 2x salary or less.



Short and long-term disability offerings increased in 2016



Traditional and new voluntary options to support wellbeing



Thank You

Gary Hardman Area Vice President Arthur J. Gallagher & Co. 8110 E 32nd Street No, Suite 100 Wichita, KS 67226

(316) 977-9797

[email protected]

Documents

2016 Benefits Strategy and Benchmarking Survey Presentation · Competitive healthcare plan options vs. cost pressures • Two-thirds of employers (67%) agree or strongly agree that