What's the best way to tell employees that we're having to scale back our health insurance coverage?

One thing I have seen done in the past is offering your employees "new" or "different" coverages. Basically this is the idea many companies use to raise their prices.

'Instead of only one option, we now offer you multiple options:'
Plan I that includes only the bare bones
Plan II that includes the bare bones plus X, Y, Z
Anything additional, you will have to pay for.

Given that I don't really know the context or the resources you are working with, this may not even apply. But, in a nutshell, this is framing a scale-back as a change in structure (where employees are still given a choice). This could take the heat off the organization, particularly if you outsource HR.

Good luck!

Donna:
I applaud many of the answers that our colleagues have provided and would like to add a couple.
- The first is be straight forward. Most cvompanies do a very poor job of explaning the investment they make in "fringe benefits" and the impact those costs have on the company. Treat them like adults.
- Beyond Eric's suggestion about partnering with your employees around things like wellness and prevention partner with your health care provider. Sometimes there are administrative cost reductions by "bundling" things like deductible summissions or reimbursement requests. I worked with our provider to identify the big cost treatments and to target intervention and wellness strategies at those areas.
- As Eric also mentioned a similar safety and prevention program can help on the occupational (Worker's Comp) side. If you don't have an early return to work program for injured workers you should it can save big bucks!
I used a comprehesive integrated approach when I managed HR and saved the company hundreds of thousands of dollars. Didn't hurt my credibility with management or employees either.
The last thing is gather input. I have actually had candid discussions with employees about rising costs and choices. I just told them we have a limited pot of money. We can spend it on health care or raises, or...but we can't do it all. By engaging them as active rather than passive artners you also create a new relationship that will serve you in many capacities.

If I may share my own experience, what we did were the following steps:
a.) rationalize the health insurance program vis-a-vis our historical data on our utilization of medical services (you would be surprised that there are medical services that your supplier is providing and your company is paying for but no is even using it)
b.) survey for a more cost-effective supplier without sacrificing the expected medical care (in my case we shifted to a local supplier instead of relying on a global supplier since this global supplier doesn't have an office in my own country)
c.) form committees to create and implement a communication/ change management plan (tricky but worth it since you empower leaders to be part of this initiative)

I hope my experience could give you pragmatic steps.

All the best to everyone!

Where are you located? I am in Texas. Many here are raising the deductible and getting bridge insurance for a high deductible plan to cover it for a small cost. The are able to keep the same benefits and lower costs. Let me know if you want to know more.. bwallace@bridge-works.com

The best way to tell employees that we're having to scale back our health insurance coverage, is to not scale it back. Contact a Employee Benefit Specialist to find out how you can do that and save money. If you would like more information, please feel free to contact me.

Donna:

This is a situation a lot of organizations have been dealing with for some time. As Julian points out above, sometimes a cafeteria plan can help your employees select the coverage that meets their needs (or pocket book) best.

Some companies show their employees what is happening to their insurance premiums and why. (It's not always about the continuous increases in health care costs. It can be about your claims experience.) It at least helps employees understand why their employer has to make some difficult decisions.

I don't know the size of your organization, but some companies take a proactive approach to managing their health care premiums by partnering with their employees to lead healthy lifestyles and not abusing the health care program they do have. If you have to cut costs now, this won't help much. But, it might be worth considering for the future.

Some companies: (1) provide exercise facilities or help defray health club membership costs; (2) hold health fairs, (3) sponsor brown bag lunches about healthy choices, (4) teach employees how not to abuse their coverage (the emergency room is not their primary care clinic). Perhaps instituting some of these things would help your employees realize that they are responsible for their own health and they can do something about it - and, if they do, your company's claims rates may decline.

If your worker's comp premiums are soaring, too, the company could partner with your employees and agree to share whatever savings the company experiences in workers comp premiums with the health care plan. It's not as easy as it sounds due to the way WC premiums are calculated, but if there were easy solutions to this problem, everyone would be doing them.

Just a few ideas....... good luck.

2 comments to add to the above...

I would look at other general and administrative expenses that could be reduced and re-budgeted to shore up the health insurance cost increase. Let the employees know if you were able to find some help in this way and depending on the expense also let employees weigh in on the decision. For example, if you provide soft drinks and bottled water... gone! Not healthy or good for the environment.

Promise your employees you will address this challenge in the coming year then DELIVER on the promise using wellness strategies. Get the employees involved in the process. You can find many good health and wellness professionals who will present lunch and learns, health fairs, etc. for free as part of their marketing strategy. Aggressive management would reward employees who help manage their personal risks and shift more cost to those who do not.

Be honest about it, they won't like it but they'll understand and appreciate your honesty. Next, form a cross functional team to create some alternative solutions for the issue, let the employees see if they can come up with some alternatives that you both can live with.

One approach is to offer employees an alternative. When an employer terminates a qualified employer sponsored healthplan the employer can still offer a tax advantaged plan whereby employees buy there own individual coverage from any carrier they choose. Changes in the Internal Revenue Code in 2009 allow employers to use an HRA plan (Health Reimbursement Account) to assist employees with cost (see this link for techinical info: http://sales.zanehra.com/bbcg). Any premiums paid by the employee can be treated as "salary reduction" and reimbursed to the employee tax free (20-30% savings to employee based on their respective marginal tax bracket). If the employer wants to contribute a nominal amount (n.b., there is actually no limit) as an additional sweetner that amount is tax deductible to the employer as a business expense. Employer saves payroll taxes and any payroll driven expenses (e.g., workmans comp premium) on the total amount of reduced salaries. The persons covered under the HRA can be discriminatory (e.g, key employees, top management, etc.) just so long as the HRA participants are defined by a class. Employer CANNOT be involved in the actual purchase of the health insurance although they can provide links to carriers, etc. (e.g., from my web site: http://bocabenefits.com/blog/?page_id=936) Many compliance nuances require the use of a specialized administrator. FICA savings should more then offset cost of administration. This cannot be done under existing FSA or HSA approaches and requires specialized knowledge.

As stated by each of you, the health care costs these days are literally putting companies out of business. I believe the cost of health insurance should be shared by both the employee and employer and the reality is that companies will need to offset those costs by shifting more of the responsibilities to the employee. One way I’ve seen this done is by reducing or eliminating certain benefits , such as Short term disability, vision, or dental, and offering supplementary insurance for those employees who want this type of coverage. Why pay STD premiums for a person who doesn’t want or need it. If that is an important benefit for an employee, they will be willing to pay out of pocket for that peace of mind.
For me, Aflac has been a great solution. Individuals can pick and choose exactly what coverage is important to them while keeping the premium costs within their family budget. With employee having more skin in the game they’re more likely to appreciate what they have. Yes, we are shifting some of the costs to the employees, but in the end, they will have the coverage that they want, at a price they can afford and most importantly, they will still have a job. Its solutions like this that will help us get through the health care nightmare. If you would like more information, please feel free to contact me.

Karri

I'm not sure about the employment laws in the U.S. as I am from Canada; however, much of what you have been given already looks good in terms of being honest with your employees, asking them to help in making decisions about what might work for them going forward, etc. The big thing I haven't seen yet brought up however, is that if the benefits are offered in the initial offer letters that employees received; there may be a requirement to provide them with 'consideration' for a new contract or offer letter that asks for the employee's agreement to the new conditions (lesser benefit coverage). You are in essence making fundamental changes to their employment contract. It depends on whether or not they were mentioned in their original offer and in what context. The other thing that you 'may' have to do is provide reasonable notice of the change...it's something I would run past a lawyer to clarify. If everyone agrees and there are no isses - that's the best case scenario - but I believe it would mean a new offer...

In my experience the message that benefits are being scaled back cannot be spun to be anything other than what it is: the company either cannot or has chosen to not absorb more cost for employee benefits.

The worst possible approach is to try to spin or market this as a good thing. Doing so will likely result in one of two things: 1) staff will lose respect for management because they will perceive that management believes they can be fooled (e.g., "you" the staff are not that bright enough to see through the spin), or 2) management doesn't understand the actual impact on people's lives and is, therefore, either clueless or callous.

Part of what is missing from these discussions is the element of choice. If management determines the "best" course of action and announces it then the staff gets to say "They did this to us." A better strategy, but one that requires more work, is to prepare two options that are cost neutral (or nearly so), either of which management can accept. Then, let the staff make the decision.

By treating your staff like intelligent, thoughtful adults management can sidestep the "us versus them" feelings and vest the staff with the sense that they are determining their own fate.This in turn builds staff engagement and brings staff and management into a relationship that feels more balanced, equitable, and collaborative.

Health insurance costs that are rising is predominantly due to a sedantry lifestyle as recognized by the World Economic Forum and WHO.
HR measures at the level of short term interventions would be unsustainable because if employees are feeling engaged, their productivity is high and hence good health ensures low insurance costs.

When organizational growth focusses on individual health and happiness quotients addressed, teams have been found to perform better. This has in a large way resulted in talent retention due to something that is intrinsic as employees feel taken care of and hence it over rules monetary outlooks alone.

Working towards a big picture that focuses on creating a larger whole that is more productive and engaging , where employees feel they are important in the whole picture will ensure that there is more growth in the company rather than manage short term interventions about cost cutting and managing the employees.

It is about looking at living within a system v/s coping with it.
Anything sustainable needs to be addressed at its core and then growth is the outcome at all levels.

--
With Peace
Dr. Shantu
SAHHEAL Healing Consultant
Head - SAHHEAL Learning Studios, India
www.sahheal.com
+91- 9980742102 / 9591000090

SAHHEAL -"Sprinkling Healing, Joy & Peace"

As a benefit consultant/insurance agent I have found that honesty and transparency are the best way to go. Explain that your costs are going up, and what you know of why they are going up.
If you have enough employees, look at offering a second option (or even third) with more cost sharing (higher deductible, coinsurance,etc) but a lower premium. We are big fans of Health Savings Account plans for this type of second plan design. Then increase the employee contritbution for the more expensive plan. Employees can decide which plan they need.
You can also look at offering voluntary plans for STD/LTD, life, vision, and /or dental coverage. This allows the employees who want it to buy it without adding to your costs.
Wellness program can have long term benefits (some say a ROI of $2-4 for every $1 spent) but this is only true if you have very low employee turnover.
We always recommend that employees contribute something to the cost of their coverage. Even if it is only a $5 or 5%. This insures that they are engaged in the process. Also, if something is free, then why not. I will take it because it is free. Oh, yeah it's free so what. But if you pay for something your are much more likely to make sure it is used properly and appreciated.
One other consideration is to provide employees a personalized benefit statement or total compensation statement. This breaks down all the costs associated with their employment - salary, sick days, paid time off, insurance, and any other perks they get- education, meals, clothes, travel and so on. Many people do not realize that their salary may only be 1/2 of the total cost of their employment.
Studies have clearly shown that a good or average benefits package that is clearly communicated and understood is much more appreciated than a deluxe/cadillac plan that is poorly communicated and not understood.
In today's business environment transparency is even more important than before.

"We're scaling back our health insurance coverage."

Honesty is always the best practice! Quite honestly you couldn't be positioned at a better time to convey this type of message, as many probably expect this. It may seem kind of insensitive, but the economy is your perfect reason for making these types of cutbacks and most employees will accept this, as they are just happy to still be employed at this point.

However, make sure you provide them with some tangible information that you can present in a presentation format in efforts to help them connect the dots for them.

I hope this helps.

Lisa