One size doesn’t fit all: It’s time to reimagine traditional employee benefits. Here’s how to do it

This opinion article first ran in Employee Benefit News magazine. 

Traditional benefit packages are woefully outdated, and the time has come for producers to reimagine what that landscape should look like to help their clients secure better results.

Consider, for instance, that health insurance costs have soared 50 percent over the past 10 years, while employee contributions are up 71 percent and deductibles are up 150 percent, according to the Kaiser Family Foundation. Government research shows these increases have impacted those who can least afford them: Bottom-quartile earners in the South saw a net decrease in pay of as much as $2,352 within that time frame as health insurance cost increases offset wage hikes.

And here we are now in 2021, when Bankrate reports that 58 percent of Americans don’t have $1,000 in the bank. A $3,000 annual deductible for a 27-year-old is hardly a health benefit. Maybe employers should not measure their benefits by what they provide, but how much they charge employees to participate?

Think of it this way: If an employer were to give everyone an automobile as a benefit, would they prefer a $50,000 Lexus that required a $15,000 contribution, or a free $35,000 Ford Taurus? Or better yet, would they prefer to get $35,000 and get to buy what they want?

The current one-size-fits-all nature of today’s programs can’t possibly be best for everyone. A 61-year-old with a heart condition most often has little in common with a 26-year-old triathlete who can’t pay his or her rent. They don’t drive the same cars, wear the same style clothes or like the same music — and they definitely don’t need the same benefits.

Kaiser found that as many as 75 percent of employer-provided health benefits offered only one type of plan in 2019, while those that offered more than one did so through one insurer. Imagine if you only had two or three options from a single pizza place in your area. Everyone would complain.

With most 401(k) plans, employer contributions are provided as a percentage of pay. Yet, when it comes to health insurance, employers charge everyone the same. Lower-paid people are getting less in 401(k) matching because of lower incomes and actually fork over a larger percentage of their pay for health insurance. On average, younger workers are paid less, yet incur far less in healthcare costs — which means they subsidize an older and sicker population.

But the market is recognizing a dire need to provide more equitable benefits. The federal government has also taken steps to change this paradigm. New laws allow employers to earmark dollars for employees to choose their own health insurance on a pretax basis, the first big change in health insurance laws since World War II. In the recent COVID-19 relief bill, employers are allowed to help employees pay down college debt with pretax dollars. Employee emergency funds and loan programs are becoming more common. Amazon is providing free college education. Other programs include wellness, nutrition and smoking cessation programs, financial fitness, help with bad credit and more.

As these new benefits enter the market, there are challenges. Your clients don’t have the budget to provide all these solutions. Human resources departments that are already strapped for time don’t have the capacity to evaluate, purchase, communicate and administer such programs. And many programs only address a subset of the population. Meeting the needs of a broad employee population is not easy. One positive development is that more administrators are surfacing to help employers deliver these solutions to their employees.

If one of the goals is to provide benefits to attract and retain employees, then employers need to think about how beneficial their benefit programs are to all employees. Former Aetna CEO Mark Bertolini, who implemented some of the most progressive employee benefits programs for his employees, says their goal is to help employees be “happy, healthy and economically viable.” Not a bad objective, and one that will likely help employees be more productive.

While employers have great intentions with their benefits, many programs are becoming less beneficial for most of their workforce. The time to turn around this disturbing trend has arrived. The opportunity to reimagine employee benefits is here. Personalized benefits programs will begin to replace the one-size-fits-all programs of today.

The products and services are available. Technology has enabled easier implementation and management of such programs. And new government programs with favorable tax deductions have made it possible for employers to provide employees the funds and then get out of the way.

Now all it takes is for your clients to unlock the door and let employees into a whole new benefits world.

Joe Markland is CEO of Nfor1, an HR and benefits company in Lexington, Massachusetts.