Record-low unemployment shifts employer focus from reducing benefits costs to long-term engagement strategies

Although the cost of employee benefits continues to rise and healthcare remains a hotly debated political topic, Utah’s highly competitive labor market is forcing employers to rethink their overall total rewards strategy. According to the just-released 2018 Gallagher “Benefits Strategy & Benchmarking Survey,” attracting and retaining talent remains the No. 1 operational priority for two-thirds of Utah’s employers. That figure has increased 14 percentage points from 2017 and is in sharp contrast to the 31 percent of Utah employers who ranked controlling benefit costs as their top priority, a figure that declined 11 percentage points from 2017.

Shifting an organization’s approach from a primary focus on cost control to a broader focus on overall employee engagement is no easy challenge given that today’s workforce is comprised of five very different generations. Employers will need to consider tactics that address their employees’ total wellbeing in order to optimize organizational retention and recruitment efforts while keeping costs maintainable. Incorporating the following three strategies is key to creating or redefining a successful and sustainable engagement plan:

Strategy No. 1: Increase the focus on engagement, culture and employee empowerment through education.

Physical, emotional, career and financial well-being all play a part in driving an employee’s engagement. Thus, investments in the health, financial security and career growth of an organization’s workforce should be a top consideration. Equally important is supporting these initiatives with well-designed employee communication and education.

Incorporate physical well-being components into an overall benefits strategy to encourage employees to live healthy lifestyles. The most popular physical well-being benefits include flu shots, tobacco cessation, health risk assessments and physical activity programs.

Provide financial well-being programs that prepare employees to make better saving and spending decisions. This will help them meet timely goals for a secure retirement while containing compensation costs. Two popular options are financial advisor sessions and financial literacy education.

Also consider investing more in workforce training and development to enhance employee career well-being. This will help your organization earn a reputation for talent management, which, in turn, will attract and productively engage the right employees in meaningful roles to strengthen overall organizational well-being.

Strategy No. 2: Increase benefits choice and flexibility by allowing employees to select a better fit for their different needs and preferences.

To support a variety of lifestyle needs and the diverse requirements of a multigenerational workforce without substantially increasing costs, employers are adding choice and flexibility through a wider range of medical plan choices, voluntary benefits and related options. By offering employees the opportunity to customize their benefits, employers foster greater employee satisfaction and more productive work-life integration.

Provide multiple medical plans with a range of deductibles and include a high-deductible health plan in the mix. The goal is to provide employees with more choices that will better fit their own lifestyles and needs. Make health savings accounts available as a tax-effective vehicle to help employees build a reserve of healthcare funds for retirement.

Expand and change the use of voluntary options, such as coverage for critical illness, legal services, identity theft protection and commuter benefits, to keep benefit offerings distinctly competitive as employee expectations continue to diversify. Include tuition assistance as a voluntary benefit and couple this with debt counseling and student loan forgiveness programs to help employees reduce financial stress.

Strategy No. 3: Explore value-based and innovative health management options to improve healthcare and contain costs.

During the 2008 financial crisis, employers began to increase employee cost-sharing through the design of their healthcare plan structure and requirements by implementing higher deductibles, copays and coinsurance. Today’s stronger economy has slowed this trend and there is now a movement away from cost-shifting. In fact, only 42 percent of Utah employers surveyed by Gallagher increased their employees’ share of these costs in 2018, down from 49 percent in the prior year, and more are adopting plan structures based on incentives and value. This change creates an opening to remove barriers to affordable and desirable healthcare, educate and empower employees, and explore market-level innovations that enforce vendor accountability. Employers can encourage vendors to step up their game by asking how they are helping to drive down physician costs and advocate for an improved quality of care and member experience.

Give employees access to healthcare cost-transparency tools such as cost calculators, apps and other options. Offer disease management programs that can help employees with chronic conditions like asthma, chronic obstructive pulmonary disease, diabetes and other ailments to better control their health outcomes.

Embrace value-based medical tactics, including reduced costs of prescription drugs that treat high-cost chronic conditions, designated centers of excellence for specified procedures, and decision-support consultations before certain elective procedures.

Looking ahead, changes in employer delivery of healthcare point to greater adoption of telemedicine, cost-transparency tools and disease management programs. Telemedicine in particular provides the advantages of employee convenience and potential cost savings for both employees and employers. Of Utah employers surveyed by Gallagher, 71 percent currently offer these services, up 25 percentage points over 2017. 

Jake Turley is area president of Arthur J. Gallagher & Co.’s Benefits and Human Resources division in Salt Lake City.