Mindy Kairey, Global Business Leader,
Health & Welfare Solutions
Lincolnshire, Illinois
The first major market force we're seeing is
an affordability gap. Simply put, the employer's ability to afford the cost of benefits is diminishing, but the employee's need for benefits is not. This gap is only going to widen. It's likely that employers will never be able to provide more than they provide today, and employees will never need or want less.
As this affordability gap increases, the general response from employers is to shift more risk and responsibility onto employees. Employees then face more complex and difficult decisions than ever before about how to maximize the value
of their own and their employers' contributions. As a result, employees are demanding help.
Two additional market forces—the diversity of the workforce and the legislative environment—are adding an element of complexity to an already challenging situation.
These forces add up to a crisis in benefits that has virtually paralyzed some organizations. But other employers are using the situation as an opportunity to reshape the benefits landscape.
As John F. Kennedy once noted, "When written in Chinese, the word 'crisis' is composed of two characters. One represents danger, and the other represents opportunity."
The goal is to find a way for both employees and employers to maximize the value of their contributions across all benefit programs: health, welfare, financial security, and retirement. Some employers are considering ways to reshape how benefits are branded, packaged, and marketed
to employees. For example, rather than presenting benefits as discrete, segregated offers to be managed individually and at different times in their career (retirement benefits at the time of hire, and medical benefits once a year at annual enrollment), employers may present benefits as a portfolio of programs to be managed as an investor manages a portfolio of investments. Looking across a portfolio of benefit programs would allow both the employer and the employee to make informed trade-offs that deliver the greatest short- and long-term advantages to both parties.
Other employers are considering presenting employees with two or three prepackaged alternatives that can be selected based on individual lifestyle.
Supporting employees in their decision making is the next area of opportunity. More sophisticated decision-support tools are needed to help employees better evaluate and manage their options. Hewitt is exploring the development of online modeling tools that offer specific, individualized suggestions based on an individual's lifestyle and financial situation. With proper care and respect for data privacy, an employer might encourage a young employee in good health to allocate more toward his or her 401(k) account rather than buy a dental plan, for example.
While there is consensus among employers about the employee's increased need for guidance, there are mixed viewpoints about how much direction can and should be provided by the employer. This guidance quandary is currently being debated and will no doubt result in a variety of strategies to match employers' points of view.
We're at a crossroads in benefits management today. It's clear that new approaches are needed to bridge the affordability gap and help employees balance their needs for today and for the future. If the situation is handled well, we might even have the potential for employers
to restore benefits to their original purpose—to serve as a powerful tool in recruitment, engagement, and retention.
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There is an increasingly prevalent belief that we're witnessing a "perfect storm" of market forces that have the potential to permanently reshape the benefits landscape in the United States. Some predict that before the end of this decade, these forces will fundamentally change the way benefits are designed, communicated, and delivered to employees.