january 22, 2015 shrm survey findings: 2014 strategic benefits— health care

January 22, 2015

SHRM Survey Findings: 2014 Strategic Benefits—Health Care

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Introduction

The 2014 Strategic Benefits Survey, administered annually since 2012 by the Society for Human Resource Management (SHRM), is used to determine whether various employee benefits are leveraged to recruit and retain top talent. This research study, split into a six-part series, features the following topics:

Part 1: Wellness Initiatives Part 2: Flexible Work Arrangements Part 3: Health Care Part 4: Leveraging Benefits to Retain Employees Part 5: Leveraging Benefits to Recruit Employees Part 6: Communicating Benefits

Definitions

For the purpose of this survey, total health care costs include employer-paid premiums, administration costs and any individual medical claims covered by the employer.

2014 Strategic Benefits Survey—Health Care ©SHRM 2015

Introduction and Definitions

• Total health care cost changes: In 2014, one-fifth (20%) of respondents from organizations that provided health care coverage to their employees indicated their organization’s total health care costs decreased compared with the previous plan year. In previous years, fewer respondents reported decreases: 2013 (10%) and 2012 (9%). However, the percentage of respondents who indicated their organization’s total health care costs have increased has remained about the same over the last three years (69%-74%).

• Controlling the costs of health care: About four-fifths (79%) of respondents from organizations that provided health care coverage to their employees indicated their organization is “very concerned” about controlling health care costs.

For the purposes of controlling the costs of health care, about one-half of organizations provided educational initiatives related to health and wellness (56%) and/or lower-cost generic prescription drugs (48%); more than two-fifths increased employee participation in preventive health and wellness initiatives (46%), created an organizational culture that promotes health and wellness (45%), offered consumer-directed health plans (e.g., HRAs, HSAs) (44%) and/or provided incentives or rewards related to health and wellness (43%).

About one-fifth (19%) of respondents indicated offering consumer-directed health plans was the most successful activity in terms of helping control the costs of health care; 17% indicated the most successful activity was increasing the employee share contributed to total costs, and 16% indicated offering a variety of preferred provider organization (PPO) plans. 3

Key Findings


• Controlling the costs of health care (continued): One-half (50%) of respondents indicated their organization increased the employee share contributed to the total costs of health care compared with the previous plan year.

Looking into plan year 2015, about one-quarter (26%) of respondents reported their organization planned to increase the employee share contributed to the total costs of health care; about one-half (51%) were unsure.

Focusing on the next three to five years, about one-fifth (19%) of respondents from organizations currently paying the majority or an equal portion of health care costs indicated they think employees at their organization will eventually pay the majority of health care costs; one-third (33%) were not sure.

• Most valuable non-health care benefit: One-half (51%) of respondents indicated they think the non-health care benefit employees will value most in the next three to five years is retirement savings and planning.


Key Findings (Continued)

• Managing the cost of health care is likely to remain a key focus of HR professionals for the foreseeable future. Over the last three years, organizations have continued to express concern about controlling health care costs, and these concerns are unlikely to abate anytime soon, especially in light of the implementation of the employer mandate of the Affordable Care Act.

• Most employers continue to see their health care costs rising year after year, putting pressure on HR to continue to look for cost savings. Over the last three years, more than two-thirds of respondents indicated their organization’s total health care costs increased compared with the previous plan year (69%-74%).

• A better understanding of how costs are being successfully managed could have a significant impact. A small but growing number of organizations that provide health care coverage to their employees experienced a decrease in their total health care costs—an unexpected counter-trend to years of rising costs. A better understanding of the reasons behind these exceptions to the dominant trend of rising costs will be important for gaining an insight into how the proportion of costs borne by organizations and employees will evolve in the future.

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What Do These Findings Mean for the HR Profession?


• Wellness initiatives look set to continue to be a critical part of organizations’ strategies for controlling health care costs. Organizations are adopting a variety of wellness offerings for employees in an effort to promote a healthier workplace. Studies have shown that wellness programs have an impact on health care costs, though the return can take three to five years to see.

• Looking ahead, a growing number of employers are likely to ask employees to contribute more to their health care costs. Shifting health care costs to employees carries a risk of decreasing employee job satisfaction. In a healthier job market this could have real implications for attracting talent, causing some employers to rethink their cost-shifting strategies. In some cases, HR professionals may need to make a strong business case for continuing to invest in employee health care benefits despite the cost.

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What Do These Findings Mean for the HR Profession? (Continued)


2014 Strategic Benefits Survey—Health Care ©SHRM 2015 7

Key Findings

Health Care

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What do these findings mean for the HR profession?

Change in Total Health Care Costs from Last Plan Year Compared with Previous Plan Year


Increased

Remained the same

Decreased

69%

11%

20%

72%

19%

10%

74%

17%

9%

2012 (n = 399)

Note: Respondents whose organizations provided health care coverage were asked this question. Respondents who answered “not sure” were excluded from this analysis. Percentages may not total 100% due to rounding.

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Organization Concern About Controlling Health Care Costs


Very concerned

Somewhat concerned

Not very concerned

Not at all concerned

79%

20%

1%

0%

83%

16%

1%

0%

84%

16%

1%

0%

2012 (n = 437)

Note: Respondents whose organizations provided health care coverage were asked this question. Respondents who answered “not sure” were excluded from this analysis. Percentages may not total 100% due to rounding.

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Activities Organization Engaged in for the Purpose of Controlling the Costs of Health Care


Activity2014(n = 359)

2013 (n = 417)

2012 (n = 405)

Provided educational initiatives related to health and wellness 56% 45% 52%Provided lower-cost generic prescription drugs 48% 39%* 50%*Increased employee participation in preventive health and wellness initiatives 46% 43% 44%

Created an organizational culture that promotes health and wellness 45% 41% 45%

Offered consumer-directed health plans (e.g., HRAs, HSAs) 44% 40% 42%

Provided incentives or rewards related to health and wellness 43% 35% 40%Increased the employee share contributed to the total costs of health care 40% 39% 52%

Offered variety of PPO plans (i.e., high and low deductibles, co-pays, etc. – employees pay more for PPOs with lower deductibles, lower co-pays, etc.)

40% - -

Offered HMO (health maintenance organization) insurance 17% - -Provided discounted over-the-counter drugs 11% 39%* 50%*No longer offer PPO health plans 5% - -Other 7% 7% 2%

Note: Respondents whose organizations provided health care coverage were asked this question. Respondents whose organizations had not conducted any activities to control the costs of health care were excluded from this analysis. Percentages do not total 100% due to multiple response options. *A combined question on providing lower-cost generic prescription drugs and over-the-counter drugs was asked in 2013 and 2012.A dash (-) indicates that the option was not asked in the respective survey.

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Most Successful Activity in Terms of Helping Organization Control the Costs of Health Care


Note: Respondents whose organizations provided health care coverage and conducted one of more activities to control the costs of health care were asked this question. Percentages may not total to 100% due to rounding. *A combined question on providing lower-cost generic prescription drugs and over-the-counter drugs was asked in 2013 and 2012.A dash (-) indicates that the option was not asked in the respective survey.

Activity2014(n = 335)

2013 (n = 365)

2012 (n = 380)

Offered consumer-directed health plans (e.g., HRAs, HSAs) 19% 22% 15%Increased the employee share contributed to the total costs of health care 17% 20% 25%

Offered variety of PPO plans (i.e., high and low deductibles, co-pays, etc. – employees pay more for PPOs with lower deductibles, lower co-pays, etc.)

16% - -

Increased employee participation in preventive health and wellness initiatives 12% 13% 17%

Created an organizational culture that promotes health and wellness 8% 12% 11%

Provided educational initiatives related to health and wellness 6% 7% 5%Provided lower-cost generic prescription drugs 4% 10%* 12%*Provided incentives or rewards related to health and wellness 4% 9% 9%Offered HMO (health maintenance organization) insurance 4% - -No longer offer PPO health plans 2% - -Provided discounted over-the-counter drugs <1% 10%* 12%*Other 7% 7% 0%

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In the next plan year, does your organization plan to increase the

employee share contributed to the total costs of health care?

In the current plan year, did your organization increase the employee share

contributed to the total costs of health care compared with the previous plan year?

Note: Respondents whose organizations provided health care coverage were asked this question. Response options provided were “yes/no/not sure.” Respondents who answered “not sure” were excluded from this analysis. Only “yes” responses are shown.

Yes

50%

45%

47%2012 (n = 410, 439)2013 (n = 389, 406)

Yes

No

Not sure

26%

23%

51%

24%

21%

55%

22%

18%

60%

Note: Respondents whose organizations provided health care coverage were asked this question.


Change in Employee Share Contributed to Total Costs of Health Care from Last Plan Year Compared with Previous Plan Year

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Ratio of Total Health Care Costs Paid for by Employers Versus Employees

In the next 3 to 5 years, do you think employees at your organization will be paying the majority (more than half) of

total health care costs?

In plan year 2014, is your organization paying the majority (more than half) of

total health care costs?

Note: Respondents whose organizations provided health care coverage were asked this question. Percentages may not total 100% due to rounding.

Yes

No

Not sure

19%

48%

33%

21%

39%

40%

15%

50%

35%

Note: Respondents whose organizations provided health care coverage were asked this question. Respondents whose organizations indicated that employees were paying the majority of total health care costs were excluded from this analysis. Percentages may not total 100% due to rounding. 2014 Strategic Benefits Survey—Health Care ©SHRM 2015

Yes, the organization is pay-ing the majority of health

care costs

No, the organization and employee pay an equal share of the health care

costs

No, the employee is paying the majority of the health

care costs

93%

4%

3%

92%

5%

3%

90%

6%

3%

2012 (n = 438, 421)2013 (n = 402, 390)

Most Valuable Non-Health Care Benefit in the Next 3 to 5 Years


Note: Respondents who answered “not sure” were excluded from this analysis. Percentages may not total 100% due to rounding.

Non-Health Care Benefit2014

(n = 335)

Retirement savings and planning 51%Flexible working benefits (e.g., telecommuting, compressed workweek) 19%

Leave benefits 12%

Preventive health and wellness (e.g., flu vaccinations, smoking cessation program) 8%

Professional and career development benefits (e.g., professional training) 6%

Family-friendly benefits (e.g., adoption assistance, elder care referral service) 2%

Housing and relocation benefits 0%

Other 1%

2014 Strategic Benefits Survey—Health Care ©SHRM 2015 15

Key Findings

Demographics

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Note: n = 320. Percentages do not total 100% due to multiple response options.

Percentage

Manufacturing 27%

Professional, scientific and technical services 14%

Health care and social assistance 14%

Finance and insurance 12%

Government agencies 9%

Educational services 7%

Transportation and warehousing 5%

Construction 5%

Real estate and rental and leasing 5%

Retail trade 4%

Utilities 3%

Demographics: Organization Industry


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Key FinDemographics: Organization Industry (Continued)

Note: n = 320. Percentages do not total 100% due to multiple response options.

Percentage

Mining, quarrying, and oil and gas extraction 3%

Arts, entertainment and recreation 3%

Wholesale trade 3%

Repair and maintenance 3%

Accommodation and food services 2%Administrative and support, and waste management and remediation services 2%

Agriculture, forestry, fishing and hunting 2%

Information 2%

Religious, grant-making, civic, professional and similar organizations 2%

Personal and laundry services 0%

Other industry 8%


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Key FinDemographics: Organization Sector

Privately owned for-profit

Nonprofit

Publicly owned for-profit

Government

Other

53%

23%

13%

9%

2%

n = 317


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Key FinDemographics: Organization Staff Size

n = 304

1 to 99 employees

100 to 499 employees

500 to 2,499 employees

2,500 to 24,999 employees

25,000 or more employees

26%

39%

19%

12%

4%


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Key FinDemographics: Other

n = 319

U.S.-based operations only 75%

Multinational operations 25%

Does your organization have U.S.-based operations (business units) only, or does it operate multinationally?

n = 320

n = 207

n = 208

Single-unit organization: An organization in which the location and the organization are one and the same.

38%

Multi-unit organization: An organization that has more than one location.

62%

Is your organization a single-unit organization or a multi-unit organization?

For multi-unit organizations, are HR policies and practices determined by the multi-unit headquarters, by each work location or by both?Multi-unit headquarters determines HR policies and practices.

58%

Each work location determines HR policies and practices.

3%

A combination of both the work location and the multi-unit headquarters determines HR policies and practices.

39%

Corporate (companywide) 79%

Business unit/division 12%

Facility/location 9%

What is the HR department/function for which you responded throughout this survey?


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SHRM Survey Findings:

Survey Methodology

• Response rate = 10%• 380 HR professionals from a randomly selected sample of SHRM’s membership

participated in this survey• Margin of error +/- 5%• Survey fielded April-May 2014

Survey Methodology


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For more survey/poll findings, visit shrm.org/surveys

For more information about SHRM’s Customized Research Services, visit shrm.org/customizedresearch

Follow us on Twitter @SHRM_Research


About SHRM Research

Project lead:Karen Wessels, researcher, SHRM Research

Project contributors:Evren Esen, director, SHRM-SCP, Survey Programs, SHRM Research

Alexander Alonso, Ph.D., SHRM-SCP, vice president, SHRM ResearchJennifer Schramm, manager, SHRM-SCP, Workforce Trends and Forecasting, SHRM Research

Copy editor:Katya Scanlan, SHRM Knowledge Center

http://www.shrm.org/surveys

http://www.shrm.org/customizedresearch

http://www.shrm.org/customizedresearch

http://twitter.com/SHRM_Research

http://twitter.com/SHRM_Research

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Founded in 1948, the Society for Human Resource Management (SHRM) is the world’s largest HR membership organization devoted to human resource management. Representing more than 275,000 members in over 160 countries, the Society is the leading provider of resources to serve the needs of HR professionals and advance the professional practice of human resource management. SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China, India and United Arab Emirates. Visit us at shrm.org.


About SHRM

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january 22, 2015 shrm survey findings: 2014 strategic benefits— health care

Documents

total costs of health

health care coverage

health plans

preventive health

total health care cost

administration costs

benefits definitions

leveraging benefits