Right mix
How to give employees what they want? First, ask them
by Beth Ewen Marybeth Voves has worked to keep employees satisfied with their benefits in a wide variety of firms, from 1,700 employees to 12. Now she advises client companies about employee benefits for EideBailly in Bloomington, the accounting and consulting firm. She believes there’s a right mix of benefits for every employee group, and points out ways for small employers to find theirs.
Upsize: How challenging is the area of employee benefits for smaller employers?
Marybeth Voves: Extremely. The total benefits, including the expensive, mandated items like unemployment insurance and worker’s comp, can make up 40 percent of the total compensation. That’s a huge chunk of change.
I don’t know that small businesses have their arms around it, and a lot of it is mandated. And yet, employees have little appreciation for the mandated benefits.
Upsize: What do employees appreciate?
Voves: As a small-business owner, they need to know what the majority of their employee population is. Are they Generation Xers? Are they boomers? Gen Xers want their money and their flexibility, while we who’ve been out in the work world know the value of the soft benefits.
Upsize: Is health insurance still the biggie?
Voves: Everyone always will resonate with health insurance. That’s the No. 1 product to purchase. The pendulum has swung back, from the dollar-one coverage plans coming from the rise of the HMOs, health maintenance organizations, in the 1980s, all the way back to almost traditional indemnity. A deductible of $500 is not uncommon today.
Upsize: Those large deductibles are becoming even more common with health savings accounts.
Voves: HSAs mandate a big-deductible plan, like $1,000 to $1,200 deductible for a single person. An HRA is a similar model, but those are employer funded. An HSA is generally employee funded. An HRA is a transition model, helping employee groups who have been in the HMO model, before they step all the way to the HSA. It can get pretty complicated.
Upsize: In fact, employees are confused, aren’t they?
Voves: That’s a second important piece. You’re only going to benefit if you do a thorough job educating employees. I was in HR management at all sizes of employers, 1,700 people, 12 people. The biggest thing is, employees don’t understand what their benefits are.
Upsize: How can a small employer do this educating?
Voves: Because the consumer-driven health plan area has been so active, I’ve seen the vendors get much more active in pushing the information out there. It’s important for small-business owners to leverage their resources. Make the vendor supply the information. Make the broker step up.
Upsize: What effect is the trend toward consumer-driven health care having?
Voves: I would say we’ve all experienced, or know someone who has experienced, the high cost of health care. Yet, if I have cancer, I want an MRI. We want the best. There needs to be a connection of the dots.
The whole HSA model with the $1,000 deductible, because it’s so new, only a year and a half in, we don’t know the effects of it. What if I have a $1,000 deductible, and I have a sore throat. I won’t go to the doctor because it costs me $300? You wonder the risk. I won’t get it checked? I’ll bring it to the office? We just don’t know what the long-term effects will be.
Upsize: Does it help to educate employees about the cost of health care?
Voves: Employees have begun to understand the increase in cost’s impact on the business. A piece of research I uncovered: It used to be that 34 percent of people were aware of the cost impact. It’s now 60 percent. That’s a huge increase. They’re at least at step one, awareness.
Upsize: What are the best ways to manage the cost?
Voves: Employers have changed the design of their plans, by raising the deductible. Then you do the math and that lowers the premium. It’s important to help employees understand the difference in cost between going to the ER for strep throat and going to a place like MinuteClinic.
Upsize: That’s an interesting addition in Minnesota, MinuteClinic. [Clinics in Target stores and other retail locations, staffed with nurses who treat a defined number of common ailments.] Under one plan I know of, for example, which is a Blue Cross plan, it’s free to the patient to go there, with no co-payment.
Voves: What that company has done is say, “We want to incent them to go to the clinic, because it’s a much cheaper delivery of care.”
Upsize: At the end of the year, what happens? Your company’s usage of the health care system is reviewed, and the premiums are adjusted?
Voves: In theory. In theory. That’s where the insurance broker should do the legwork, to see if can you impact this premium. The smaller employers, though, all you need is the one bad case, the premie or the cancer, and you get hit. There’s not a whole lot you can do about that.
Upsize: Tell me more about what different age groups want in benefits.
Voves: The whole conversation of Generation Xers, it really applies to the group just out of college. When you started your career, what did you want? Money and flexibility. So an employer might say, we’re not going to concentrate on insurance products. Maybe we’ll bring in a voluntary plan, like AFLAC or Contintental. Then, maybe we’ll structure to provide more flexibility, to provide more incentives, to sweeten the pot to retain those people.
Upsize: How do you find out what employees want?
Voves: A simple survey, giving a list of benefits, and asking people to rank them. Then the employers have to make the tough choices.
Another funny statistic I found: The younger population is more interested in retirement. 93 percent of the workers between 19 to 26 believe a 401(k) is an important benefit. Only 37 percent have participated, though.
Upsize: Many business owners hire a firm to administer their benefits. What should they look at when considering outsourcing vs. in-house?
Voves: The pieces that are easily outsourced are, No. 1, payroll, everybody outsources that. No. 2, FSA or flexible spending accounts. No. 3, selection of the insurance by using the brokers, that’s a form of outsourcing.
There are some who say they’re going to outsource the whole benefits piece. I’m not sure that is cost-effective for the small employer, because the volume isn’t there.
Upsize: Remind our readers of the mandated items, and the costs.
Voves: It varies from industry by industry, but there is worker’s compensation, unemployment, FICA — the employer has to pay in as well as the employee, and COBRA. Outsourcing COBRA [state- and federal-funded health coverage when employees leave jobs] is really risk management, because if you do that wrong just one time you’ll get thousands of dollars in fines.
Upsize: Do employees complain when premiums rise?
Voves: They’re never happy about it. If I’ve come from corporate America and I’ve taken this into my small business, and whoops, my cost went way up and I have to do a major restructuring, employees are getting whiplash.
It helps if the employer tries to get them engaged from the outset, so it’s the employees’ job to manage benefits, not just the employer’s. It’s always easier to improve your benefits than to have started too high and have to restructure.
Upsize: So employers should be cautious in what they offer.
Voves: You’ve got to know the resources to find the right mix for your house. Develop a relationship with a broker that has demonstrated knowledge in your type of employees, No.1. No. 2, make sure the broker is going to help with education. No. 3, the employer has to share cost information with the employees. They can say, ‘you know it’s $6000 a year in health insurance premiums that I’m paying you each year.’
[contact] Marybeth Voves is business development manager, employee benefits for EideBailly, the accounting and consulting firm in Bloomington: 952.918.3631; mvoves@eidebailly.com; www.eidebailly.com
