Controlling employer costs for healthcare benefits is a top priority among finance executives, according to a new study.
Prudential Financial and CFO Research Services found that 70 percent of company executives are concerned about controlling employer costs for company provided healthcare benefits with 65 percent saying they are likely to shift a larger portion of costs for healthcare coverage to employees.
“The solution seems to be to shift the responsibility from the employer to the employee and in the process giving employees more authority, choice and a wider range of coverage options at a lower price,” said Sam Knox, director of research for CFO Research.
Employee choice programs include voluntary and flexible benefits. In an employee-choice model, each employee is provided with a fixed amount of funding for benefits and employees select their benefits using those funds as well as their own funds.
Today, only 15 percent of respondents describe their current program as an employee-choice strategy.
“The takeaway for insurers is that CFOs are continuing to look for ways they can offer benefits to employees while managing costs through voluntary benefits where employees chose and fund their own healthcare plans,” Prudential Life SVP James V. Gemus told Insurance Networking News. “Insurers are underwriting voluntary benefits. That’s not new. But the voluntary benefits trend are growing and gaining in strength.”
About 71 percent of executives who said their companies are likely to replace some employer-paid benefits with voluntary benefits and 56 percent agreeing that offering more voluntary benefits is a cost-effective way to increase employee satisfaction with benefits.
“This tells us that more and more companies are adopting voluntary benefits around their protection products,” Gemus said. “The opportunity to add value as far as insurance is concerned is accelerating.” Protection products include life, disability, long-term care, dental and critical illness.
The 2012 study also found that 43 percent of respondents are likely to transfer defined benefit plan risk to a third party insurer within two years in order to reduce or eliminate the effects of funded status volatility. That’s up from 30 percent in 2010.
“Risk transfer has emerged in the UK in recent years and is making its way to the U.S.,” said Gemus.
In a buyout risk transfer strategy, insurance companies take over some or all of a plan’s obligations and fund them with annuities. In a buy-in risk transfer strategy, the sponsor purchases annuities as assets of the plan.
In fact, about 45 percent of CFOs have talked to their boards about risk transfer as a solution to the rising costs of employee benefits and specifically health care, according to the study.
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