1st Quarter 2015
The Patient Protection and Affordable Care Act (ACA) has created a new environment for employer health benefit plan management that is influencing costs, benefit design, delivery, administration, financing and compliance as well as the positioning of health care within the benefits portfolio and the broader total rewards strategy. This article will examine the key pragmatic effects of “health reform” for larger employers to date.
Motivated by ACA provisions designed to put the brakes on rapidly increasing health care costs, employers are adopting numerous strategies for creating greater efficiency in how they purchase health care. This article discusses those strategies and their potential impact on providers.
ACA’s “Cadillac tax” on high-cost group health care plans begins in 2018, yet its expected impact on employers remains an open question. This article discusses the top five open issues about the application of the tax and its administrative requirements.
While ACA largely focused on improving access to health care coverage for the uninsured, its broader and longer term influence may have been its impact on accelerating many of the key trends and strategies that major employers and other stakeholders have been targeting for years. This article looks at some of these trends.
Although employers can shift the cost/risk of health care to external claims payers through insurance, they can never shift the broader impacts of health-related well-being, lost time and performance outside of their organizational boundaries. This article traces the evolution of employer strategies to manage health.
In 2008, the Institute for Healthcare Improvement (IHI) promulgated the Triple Aim, which advocates simultaneous improvements in patient experiences, improved population health and lower cost per capita. In 2010, ACA promised quality, affordable health care for all Americans. It is reasonable, from time to time, to assess ACA’s impact on health care against the Triple Aim principles.
ACA creates a unique opportunity for employers to take a fresh, strategically based total compensation approach to planning. The concept of a total compensation framework is not new; however, using a new methodology to achieve a total compensation approach is now possible.
Although implementation of parts of ACA was delayed until 2015, many firms already were making changes to both their health insurance and their business practices. This article reports results from a survey administered to West Michigan firms in October 2013 requesting information on any changes they had made in response to ACA.
2nd Quarter 2015
The time has come to adopt and implement proven features and solutions to help defined contribution plan participants achieve improved financial wellness and enjoy greater financial security in their retirement years. These include automatic plan features as well as a strategy the authors call The Four Ms—milestones, measurement, monitoring and management—that aptly treats saving for retirement more like a marathon than a sprint. The final strategy the authors discuss is connecting the dots—helping participants make the connection between saving levels and annual retirement income.
A recent study of full- and part-time employees in the United States reveals a welcome statistic for benefits plan managers: 81% of workers trust the financial information provided by their employers. That makes employers one of the most trusted sources of information, ahead of both financial institutions and workers’ own families. In contemplating this responsibility, it is helpful for organizations to examine their retirement plan in light of four drivers: plan design, investment solutions, employee engagement and plan management. This article explores how each of these drivers—supported by some of the latest findings from TIAA-CREF research— can have a significant impact on plan outcomes and retirement readiness.
Financial stress is widespread and results in distracted and less productive employees. Meanwhile, plan sponsors speculate about the extent to which defined contribution (DC) plan automatic contribution and escalation features create savings that are maintained until retirement or are offset by greater debt elsewhere. This article explores how financial wellness initiatives and automatic features may interact in DC plans and the potential for financial wellness initiatives to boost participants in plans with auto features.
Organizations of all sizes are feeling the impact of employees’ lack of retirement preparedness. Most Americans are not saving enough for retirement. The landscape is making it tougher for them to save, and most don’t realize how far behind they are. This is coupled with the fact that employers can no longer provide the generous benefits employees once relied on for retirement security. Instead, they can provide employees with only the resources and tools needed to achieve it. Evidence is growing that retirement education programs built using a holistic model based on behavioral finance principles and reaching employees at every level of retirement preparedness are the key to positive behavioral change and improving retirement funding. Companies making this commitment show dramatic improvements in employee retirement readiness and overall financial wellness.
Retirement wellness is the result of retiring at an appropriate age, saving enough and managing risks appropriately. One of the major risks that often is not addressed effectively is the long-term care (LTC) risk, i.e., the risk of needing help due to physical or cognitive limitations. In 2014, the Society of Actuaries issued a call for papers on the link between LTC and retirement security. This article will discuss the topic of LTC and retirement security broadly, drawing from several of the papers. Some of the topics include the impact of LTC on the individual, family members and caregivers; modeling results showing the impact of LTC on assets needed for a secure retirement; alternative methods of financing LTC; the link between housing decisions and LTC; and some ideas for the future.
The makeup of the summary plan description has remained largely unchanged since its creation under the Employee Retirement Income Security Act (ERISA) in 1974. However, in the intervening 40 years, the field of retirement planning has substantially evolved beyond the time when a survey of key plan features was adequate to inform plan participants about their plan and their plan’s role in their retirement. Adding new language focused on retirement income planning would provide a measure of help toward promoting the retirement security of plan participants.
3rd Quarter 2015
Corporate transactions involving the sale or purchase of another company or division are complex events. While employee benefit plans generally are considered in these transactions, the time and attention devoted to these plans are often minimal. This exposes the parties to additional risks, both in terms of direct costs and in long-term administrative complexities. This article will review the various risks that often are undiscovered during the standard due diligence process. Health plans and retirement plans, including multiemployer plans, and executive compensation plans are all considered.
There is no question about it: Government investigation of Employee Retirement Income Security Act of 1974 benefit plans is intensifying. The Affordable Care Act has increased health plan complexity and added to a long list of required participant disclosures. Government data analysis has resulted in the creation of specific enforcement initiatives, enabling the agencies to focus their energies on those areas that will have the greatest impact on the largest number of participants. Their efforts are reaping rewards. In 2014, the Employee Benefits Security Administration restored almost $600 million to plans, participants and beneficiaries. It is important for plan sponsors to understand the current regulatory enforcement environment and prepare for it.
Economic, technological, regulatory and social challenges across global boundaries have come together to form a “perfect storm” of volatility, uncertainty, complexity and ambiguity (VUCA). Based on the practices of Aon Hewitt Top Companies for Leaders®, this article describes how top companies can lead into this next frontier. A disciplined and fact-based approach to assessment is of fundamental importance. In addition, top companies fully comprehend that a leader’s ability to recognize and understand his or her own strengths and weaknesses— and fill those lingering leadership gaps— is an integral component of nimbly leading in an ever-shifting VUCA world.
Accountable care organizations (ACOs) aim to transform health care delivery and provider payment in a way that improves patient access, engagement and quality of care. If successful, ACOs may help the U.S. health care system to finally evolve from a “diagnose, treat and reimburse mostly acute, episodic health care” approach to one that encourages and compensates health care providers that work with their patients throughout a full continuum of care to prevent and manage chronic conditions. The authors explore the mechanisms for impacting workforce health and provide a checklist to assist employers with evaluating ACOs and assessing feasibility of potential ACO integration with workplace health improvement programs.
Personal financial problems have an impact on the health and productivity of employees, and study after study shows that few workers have the financial literacy to make effective choices. This article discusses what gets in the way for employees trying to manage their finances and especially in trying to save for retirement, what research shows about why typical workplace financial education programs don’t work, and what employers can do to break through the many barriers that employees face in becoming financially fit. The authors recommend employers adopt a whole-person approach to wellness that focuses on the employee’s career, health and wealth goals.
The policy problem addressed by the new
myRA initiative is that roughly half of the private sector workforce is not covered by a pension. The policy assumption is that the pension coverage problem is a supply-side problem. If the assumptions underlying a policy are wrong, the resulting policy probably will not be successful. The
myRA initiative is the latest in the federal government’s decades-long effort of largely unsuccessful policies to extend pension coverage. Like many previous efforts, this initiative is based on the assumption that workers face impediments that prevent them from having the pension coverage they would like. Based on the experience with numerous innovations to individual retirement arrangements, nonparticipation in 401(k) plans and similar plans in other countries and economic theory, we conclude that there is likely to be little take-up of
4th Quarter 2015
The Affordable Care Act has served as a catalyst for the changes currently underway in the U.S. health care system and accelerated change underway over the past two decades. Employers are striving to make sense of an evolving health environment while meeting the needs of an increasingly diverse workforce. To achieve optimal business performance, employers must adopt differentiated solutions that make health care local, personal and specific.
One of the options available to employers under the Affordable Care Act is to drop health care coverage, pay a penalty and provide some form of additional compensation to employees. This article describes a process for evaluating this option, including considerations for establishing the amount of compensation to be provided, if any.
Health care expenses in retirement are the proverbial elephant in the room. Most employees don’t know how big the elephant is. As increasing attention is paid to Medicare solvency and retiree health care issues, it is time to rethink overall benefit approaches and assess what is appropriate and affordable for an organization to help it achieve workforce renewal goals and solve delayed retirement challenges.
Changes to the U.S. health care system are here. As we think about how individuals will pay for health care—while actively employed and while retired—our experiences with 401(k) plans provide some valuable lessons about health care. In order to support employees in this new health care world—a challenge arguably more daunting than the 401(k) challenge we faced 20 years ago—some very different types of support are needed.
Is your health plan truly encouraging employees to be health care consumers? Research in health literacy and patient health engagement may unlock new solutions. This article offers concrete ways employers can shift their frame when designing and communicating health plans, empowering employees to be better self-advocates.
Health care cost increases are showing a resurgence. Despite recent years’ comparatively modest increases, the projections for 2015 cost increases range from 6.6% to 7%—three to four times larger than 2015’s expected underlying inflation. What’s needed is a planning approach that is effective in overcoming all known and yet-to-be-discovered challenges, not just affordability. This article provides detailed guidance in adopting six proven strategic planning steps.
Among the many provisions of the Affordable Care Act, one that initially received lesser attention or concern was the removal of annual or lifetime dollar maximums on group and individual health insurance. However, their removal has aligned with a significant uptick in severely catastrophic claimants—particularly those in excess of $1 million or more. The drivers are several, and alert plan sponsors need to take proper actions to protect the financial viability of their self-funded medical plans.