Companies' Commitment to Employee Benefits Expected to Remain Strong
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Prudential Financial, November 2006
Despite increasing economic pressures, U.S. businesses overwhelmingly view employee benefit programs as important to competing effectively in today's market place, according to "Employee Benefits: 2006 & Beyond," a study released by Prudential Financial, Inc. The study explores current and future employee needs and how employers plan to respond to those needs.
Employers are facing higher medical insurance costs and increased pressure on expenses. Yet, most feel it is important to offer a competitive benefits package and subsidize as much of the cost as possible in order to attract and retain talent. In fact, eight in ten plan sponsors say it's important to offer and subsidize a wide range of employee benefits. And twice as many companies believe it is "highly important" (44 percent) compared to those who feel it's "less important" (22 percent) to offer their employees competitive benefits programs. This trend is true among companies of all size categories, but particularly for larger firms. However, as plan sponsors look to balance employee needs with the bottom line, many will reduce their benefits expenses by increasing employee cost-sharing on contributory plans, offering a wider range of voluntary benefits and introducing more flexible plan designs.
To maintain their current benefits offerings and coverage levels, most plan sponsors will shift costs to employees over the next five years. In fact, twice as many employers expect to increase employee cost-sharing by 2010.
Top cost-sharing strategies include asking employees to shoulder a greater proportion of contributory benefits costs (37 percent) and offering more voluntary benefits, where the employee pays 100 percent of the cost (31 percent). Many plan sponsors (75 percent) also expect to implement consumer-driven health plans and integrated health and disability management initiatives.
As benefits costs continue to increase as a percentage of payroll, the benefits decision making process is becoming more complex with a widening pool of internal and external influencers. As a result, by 2010 plan sponsors say that finance (48 percent), risk management (24 percent) and procurement (15 percent) functions are playing a larger role in helping evaluate and negotiate for the most cost-effective solutions. As benefit choices become more complex and employees shoulder more of the expense, benefit providers will seek external guidance from benefits brokers/consultants (27 percent) and insurance carriers (27 percent) to help build the right solutions.
On average, 11 percent of employers (about 68,000 businesses nationwide) consider themselves "progressive". Thirty-one percent consider themselves "above average," meaning they have a progressive benefit philosophy, but take a slightly more conservative approach in adopting new programs, communication strategies, technology and outsourcing. Across all plan sponsors surveyed, the percent of progressive and forward-thinking companies are expected to increase by 2010 to more that 50 percent of all employers.
