Some years ago, after a particularly bad experience, I asked our associate vice president of benefits how much we were paying the person who helps us decide which health benefits to offer to employees. When he replied, I told him that I was sure I could provide at least as much aggravation for substantially less cost.
My story is all too common.
In my opinion, there are some important truths about health benefits that employers should consider in order to maximize the dollars they spend on them: First, it’s imperative to remember that benefits are a vitally important way to attract and retain employees—so the better the benefits, the higher probability of retention. Second, most large health benefits administrators have low net promoter scores because they aren’t doing a great job interacting with a company’s employees—wasting employees’ time and increasing costs. And third, it’s critical to choose benefits administrators that take advantage of new, technology-enabled, customer-focused health providers in the marketplace. All of this means that there are significant opportunities for companies to get many more benefits from their health benefits spending.
Health Benefits: The Hard Truth
Let’s examine these ideas one at a time.
Benefits matter to employees. A 2016 Aflac survey reported that 60% of employees were likely to take a job with lower pay but better benefits. The same survey noted that 42% of people said that improving benefits is the one thing employers could do to keep them in their job. Sixteen percent of respondents said they had left a job or turned down an offer in the preceding 12 months because of the benefits offered. Another survey found that 55% of the respondents said that health insurance was the single most important benefit affecting their job satisfaction. Health benefits matter for attracting and retaining workers, particularly in tight labor markets and for crucial jobs—and data show this is true even for younger workers.
But health benefits are costly. The 2018 Kaiser Family Foundation survey noted that average family premiums were $19,616. With employees contributing $5,547 toward coverage, the average employer spends $14,069 per employee. For an employer with 2,500 employees, that’s $35 million per year.
Unfortunately, that money is not doing what it could, because too many employers are using the wrong health insurance administrators and not holding them accountable. Many of the companies administering health benefits are failing in their fundamental task of serving companies—and their employees. PeopleMetrics’ 2013 Most Engaging Customer Experiences study noted that "across seven different B2C verticals, health insurance had the lowest net promoter score" with "few customers trusting their insurance providers to do what’s in their best interest." The average NPS score in that survey was -20.
What’s more, employees waste time interacting with their health insurance providers. At my urging, Gallup recently asked a random sample of people how much time they spent in the prior week both on and off the job dealing with health insurance issues. Dan Witters, Gallup’s research director for the National Health and Well-Being Index, told me he estimated more than $14 billion in lost productivity to non-farm employers from time spent hassling with health insurance companies. And that cost does not include the psychological consequences of people’s attitudes toward the employers who choose plan administrators and benefits providers.
This level of bad service is not inevitable. Technology, increasingly implemented by start-ups in the healthcare space, can now predict and manage health care costs while providing a more employee-friendly service. The health insurance industry is ripe for disruption and is attracting enormous outside investment. One recent article noted that "between 2010 and 2017, the value of investments in digital health increased by 858 percent" with more than $40 billion invested this decade.
Even now, employers can find vendors (both health insurance administrators and providers) that will do better, if they are willing to use newer and more innovative organizations. As healthcare has moved from a B2B to a B2C model, a number of providers focusing more on customer engagement have emerged and their net promoter scores are showing the true benefits of a new, customer-first approach: one benchmarking study found that Collective Health (on whose advisory board I sit) had a net promoter score of 70, Plansource 74, and Kaiser-Permanente 40.
Where Do We Go From Here?
Here are some straightforward but important things companies can do to fix their approach to benefits. First, and most fundamentally, companies should change their decision criteria for benefits to focus on things besides cost. That will require expanding the range of measures substantially, because what gets measured receives management attention.
For example, measure employee satisfaction with health benefits administrators and use that information to find administrators that aren’t wasting employees’ time and creating dissatisfaction. Measure how much time your people are spending, at work and off the job, on administrative work related to healthcare and see if, just as in other parts of your operations, you can eliminate a lot of this waste. The hassle factor of dealing with health insurance admins and providers is one of the most enormous and largely unnoticed costs of the current way of administering health care.
As another measure, consider the fact that health insurance is, believe it or not, presumably designed to promote health. So why not use health indicators as outcome measures? Things such as work days lost to sickness, people’s self-reported health, measures of health behaviors, biomarkers related to health status. In the narrow fixation on the costs of health claims and benefits administration, companies are not seeing the whole picture. A 2017 article noted that too few analyses of the costs of illness included productivity loss estimates in their economic evaluations. A study of more than 51,000 employees working for 10 employers found that health-related productivity costs were almost2.5 times larger than direct medical and pharmacy costs.
Having seen all of this at close range in my years on a Stanford committee overseeing our health insurance benefits, I have come to one conclusion that will fix a lot. If outside "experts" recommend suppliers with net promoter scores that are negative or in the single digits, maybe it’s time to get some new experts, people who will help your organization get greater value from your important expenditures on the benefits that are crucial to the well-being of your employees—and your company.
Photo: Creative Commons
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