Living benefit riders to life insurance policies: Pricing considerations and strategy
Adding benefit riders to policies provides meaningful coverage for those who need it, and carriers usually can do so at a relatively low cost.
In today’s historically competitive labor market, offering the right benefits has become an important strategy for employers trying to attract and retain top talent. This is especially true as costs for healthcare, childcare, and other necessary goods and services continue to rise while salary budgets remain relatively tight.
Here are five of the most noticeable benefit trends that we’ve seen develop in 2019, all of which are likely to continue in the new decade.
Employers are continuing to find ways to contain health plan costs.
Americans face some of the highest healthcare costs in the world. This has a major impact on America’s employers, who are collectively the largest purchasers of healthcare in the United States, providing benefits to more than 153 million people. 1
As the costs associated with employee health plans increase, employers are finding new and creative ways to reduce their own costs and liabilities. According to the nonprofit National Business Group on Health (NBGH)’s Large Employers' Health Care Strategy and Plan Design Survey for 2020, around 41% of large U.S. employers are planning to use some combination of cost-management tactics to reduce projected increases to health plan costs. 2
In a joint effort to manage costs and improve employee well-being, more than half of the employers surveyed by NBGH plan to steer their employees toward expanded telehealth benefits, including mental health counseling and app-based physical therapy consults. 3
The most recent annual Northwest Benefits Survey conducted by Milliman highlighted other specific ways in which companies have contained health plan costs. 4 Twenty-one percent of survey respondents said they had switched to a different pharmacy formulary, or list of prescription drugs covered by insurance, as an effort to manage costs. Other tactics cited in the survey include:
Employees are having to fund more of their health plan.
The most common way employers choose to reduce health plan costs is by increasing the employee contribution for single coverage and family coverage, with 24% and 26% of companies that participated in the Northwest Benefits Survey choosing those respective options. The survey also showed an 11.5% increase since 2018 in individual and family deductibles for high-deductible health plans (HDHPs) as well as a 7% reduction in no charges for employee-only coverage. 5
These results reflect a general trend that has persisted over the past couple of decades: as increases in premiums and deductibles drive up the cost of employer-sponsored healthcare plans, employees are shouldering an increasing percentage of total healthcare costs.
As tracked by the Milliman Medical Index (MMI), the trend of employees paying more of their own total healthcare costs was disrupted briefly from 2017 to 2018, with employer contributions increasing by 5.1% while employee cost grew by only 1%, possibly due to low unemployment and a relatively strong economic outlook.6 In 2018 to 2019, the old pattern resumed, and the MMI estimated growth of employer versus employee contribution rates at 3.6% versus 4.0%. The question arises as to whether the growing potential for an upcoming recession may exacerbate the shift of healthcare costs from employer to employee.
To attract and retain employees, employers will continue to offer increased flexibility and paid time off.
As the changing composition of the American workforce and family has produced more and more single-parent and dual-earner households, many workers are confronting the challenge of juggling caregiving responsibilities for kids and/or other loved ones. 7 In 2019, Connecticut and Oregon became the most recent states to pass a paid family leave bill, joining California, New Jersey, Rhode Island, New York, the District of Columbia, Massachusetts, and Washington, which will launch its paid leave program in 2020.8
In response to such societal changes, as well as competition to attract and retain the best employees in a tight labor market, many employers are also offering more flexibility and paid time off (PTO) as a key benefit for their workers. Among the companies that participated in the Northwest Benefits Survey, an increasing number said they offered paid maternity leave, with an average duration of 30 days, and slightly shorter durations for paternity and adoption leave.9
Despite the focus on expanding parental leave policies, offering more flexibility and PTO benefits is crucial to attract and retain employees who are caring for family members other than kids. According to research by AARP, approximately 40 million people in the United States are caring for an adult family member, and 60% of them are employed. The nation’s caregiving population is also growing increasingly younger—AARP estimated about a quarter of all caregivers are Millennials between the ages of 18 and 34. 10
Employers will offer more benefits to support employee financial wellness.
Millennials now make up the largest percentage of the U.S. workforce 11 and many of them say benefits and perks matter even more than salary increases when it comes to taking and staying in a job. 12 To attract and retain these younger workers, more employers are offering student loan assistance, financial counseling, and other benefits aimed at supporting employee financial wellness.
A survey of employers by the Employee Benefit Research Institute (EBRI) found that 11% were contributing to student loans as of 2019, but that 24% of them were planning on offering this benefit. 13 One relatively new benefit that some companies are offering is a program that allows employees to contribute to their 401(k) while putting their employer’s matching contribution toward their student loan debt. At some other companies, employees can exchange their accrued but unused PTO or vacation for payments against their student loans. 14
Such benefits in the area of student loan debt repayment, when included in a competitive total rewards package, could affect where new college graduates go for their first position in the workforce. Tuition reimbursement, another popular benefit aimed at promoting employee financial wellness, was offered by 73% of the companies participating in the Northwest Benefits Survey. 15
Employers will continue to provide convenience-based options that promote work-life balance.
Benefits can be an important tool to increase employee retention and discourage burnout, especially when it comes to convenience-based options that help make people’s lives easier and promote that all-important, ever elusive work-life balance.
Of the companies in the Northwest Benefits Survey, 31% offered transportation benefits including a mass-transit subsidy program, with an average monthly subsidy of $69. A greater percentage (43%) offered paid relocation benefits to help their employees manage the considerable expenses involved in house-hunting and moving. On-site fitness facilities is another popular benefit (55%), while a smaller percentage of employers surveyed offered on-site or near-site health clinics (15%) or on-site or third-party childcare (3%).15
In an effort to further support their employees, an overwhelming majority (96%) of the companies surveyed offered their employees the benefit of a formal Employee Assistance Program (EAP). While EAPs differ greatly in the range of services they offer, many employers use them to provide their employees with additional help dealing with personal or work-related issues that may affect their job performance or well-being.
In such a competitive market, employers can’t afford to ignore such convenience-based options and perks. Along with healthcare, flexibility, and PTO, these benefits can help companies attract the talented employees they need, but also keep them happy, healthy, and productive.
For more information, please contact Dave Evans at [email protected]
1 “Employer strategies to reduce health costs and improve quality through network configuration.” Peterson-Kaiser Health System Tracker. (September 25, 2019). Retrieved on October 18, 2019, from https://www.healthsystemtracker.org/brief/employer-strategies-to-reduce-health-costs-and-improve-quality-through-network-configuration/.
2 Large Employers' 2020 Health Care Strategy and Plan Design Survey. National Business Group on Health (NBGH). Retrieved on October 18, 2019, from https://www.businessgrouphealth.org/benchmarking/survey-reports/2020-report/.
3 Miller, Stephen. “Employers’ Health Costs Could Rise 6% in 2020.” Society for Human Resource Management. (August 20, 2019). Retrieved on October 18, 2019, from https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2020-large-employer-health-costs-expected-to-rise.aspx.
4Milliman, 2019 Northwest Benefits Survey.
5Milliman, 2019 Northwest Benefits Survey.
6 Milliman, 2019 Milliman Medical Index. (July 25, 2019). Retrieved on November 20, 2019, from http://www.milliman.com/mmi/.
7Brainerd, Jackson. “Paid Family Leave in the United States.” National Council of State Legislatures. (August 2017). Retrieved on November 20, 2019, from http://www.ncsl.org/research/labor-and-employment/paid-family-leave-in-the-states.aspx.
8State Paid Family Leave and Insurance Laws, August 2019. National Partnership for Women and Families. Retrieved on October 18, 2019, from http://www.nationalpartnership.org/our-work/resources/economic-justice/paid-leave/state-paid-family-leave-laws.pdf.
9Milliman, 2019 Northwest Benefits Survey.
10Pyrillis, Rita. “Paid Leave for Caregivers Being Used to Attract Millennials.” Workforce. (May 27, 2019). Retrieved on October 18, 2019, from https://www.workforce.com/2019/05/27/paid-leave-caregivers-attract-millennials/.
11Fry, Richard. “Millennials are the largest generation in the U.S. labor force.” Pew Research Center. (April 11, 2018). Retrieved on October 18, 2019, from https://www.pewresearch.org/fact-tank/2018/04/11/millennials-largest-generation-us-labor-force/.
12 “4 in 5 Employees Want Benefits or Perks More Than a Pay Raise; Glassdoor Employment Confidence Survey (Q3 2015).” Glassdoor. (October 2, 2015). Retrieved on October 18, 2019, from https://www.glassdoor.com/blog/ecs-q3-2015/.
13 Lucas, Lori, and Jack VanDerhei. “2019 Employer Approaches to Financial Wellbeing Solutions Survey.” EBRI Issue Brief. (September 26, 2019). Retrieved on October 22, 2019, from https://www.ebri.org/content/2019-employer-approaches-to-financial-wellbeing-solutions .
14Dickler, Jessica. “At this company, you can trade a vacation for student loan relief.” CNBC. (February 7, 2019). Retrieved on October 18, 2019, from https://www.ebri.org/content/2019-employer-approaches-to-financial-wellbeing-solutions.
15Milliman, 2019 Northwest Benefits Survey.
16Milliman, 2019 Northwest Benefits Survey.