Employee Contribution Strategies: What to Consider

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In today’s healthcare landscape, benefits administrators are contending with many new challenges. In addition to the always-challenging task of coordinating a benefits program that works for everyone (both employees and employers), they are now faced with rising healthcare costs and uncertainty prompted by the passage of the Affordable Care Act.

 In the article The contribution strategy: Central to a high-performing employee benefits program Kelly Pustizzi, vice president of Corporate Synergies, gives some tips for what might be the most important part of your employee benefits program- your contribution strategy. The dollar amount an employer pays towards their employees’ healthcare coverage, and how this amount is determined is the base of a benefits program and often the driving force behind its success.

Pustizzi suggests benchmarking plans and contributions against other employers as well as evaluating your healthcare spend, demographics, organizational philosophy and total compensation package. Defined contribution strategies are also becoming more popular in place of traditional salary- and tenure-based strategies for employers looking to control their liability while offering greater options to their employees. The Affordable Care Act also requires employers to eliminate to eliminate different plan levels based upon organizational hierarchy, which will impact compensation strategies going forward.

Below, Pustizzi lists some questions to consider when evaluating your employee contribution strategy, and ultimately making it stronger. Before you begin, ask yourself:

▪    How do we want to shift costs?

▪    Where do we want to shift costs to?

▪    Should we place more financial responsibility on employees?

▪    Do we want to drive enrollment into a certain plan like a high-deductible health plan?

From there, you’re able to dig deeper:

▪    Is it our goal to transfer risk, or to absorb it?

▪    What are our workforce demographics (average age, gender, educational level, etc.)?

▪    Is there a total rewards strategy?

Note: This is especially important for non-profits who can’t pay larger salaries.

▪    Do we have a strategy to engage employees in health and wellness… if so, what incentives are offered?

Note: It’s critical to educate and incentivize employees as benefits shift to a new model. This is particularly true if you’re going to hold them accountable for their health. Any incentive programs relating to wellness will also impact the overall contribution strategy.

▪    Do we know what percentage of the actual claim costs are being absorbed by plan members through co-pays, deductibles and other out of pocket costs?

There’s a new mindset for employers, and it’s beginning to be understood by employees. This is being driven by a combination of the ACA spurring a move toward defined contribution models and private exchanges, and a focus on member engagement and increased responsibility. For the employer and employees, these are major shifts. That’s why it’s critical to establish a strong strategic foundation to create certainty and understanding around the important issue of cost.

Read the full article on the Employee Benefits News website here

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