July 2011

Employee job dissatisfaction is running high these days, meaning that, as the economy recovers, they are more likely to seek new employment opportunities. This finding, from a MetLife survey, indicates employers would be well-advised to work now on strategies geared toward improving employee loyalty and retention down the road.

The MetLife survey, its 9th Annual Study of Employee Benefit Trends, reports that upwards of one in three employees hopes to be working elsewhere in the next 12 months. The specific percentage varies from 34% to 38%, depending on company size. Given this inclination to bolt from their current employers, it’s not surprising to see that the percentage of employees who express a very strong sense of loyalty to their current employer has dipped below 50% (now 47%, compared with 59% in 2008). The percentage of employees who feel their company has a very strong sense of loyalty to them has dropped to 33% (from 41% in 2008).

Employers, understandably focused on recession-related business issues, remain unaware of this change in employee perception. From 2008 to 2010, a consistent 57% say they have a very strong sense of loyalty to their employees, and half consistently say their employees have a very strong sense of loyalty to them.

Employers need to be aware of changing employee sentiment and act now to avoid having to face significant retention issues when the economy improves. As the economy rebounds and business picks up, companies can ill afford to lose staff, particularly top performers. Consider a few of the following steps that companies can be taking today to address this:

• Identify top performers and other employees who, for various reasons, you would hate to lose.
• Make whatever tweaks you can afford to the compensation packages of these employees.
• Employee loyalty isn’t created by money alone. Nurture an “all for one and one for all” attitude, by providing access to owners and executives, fostering teamwork, and making corporate strategies and mission a shared vision to the extent possible.
• Look for non-monetary ways to compensate employees, like offering more flexible schedules where possible.
• Show employees that their company appreciates them, through individual and group recognition.
• Make the workplace a place where employees want to be by cultivating a positive, mutually supportive corporate culture.
• Invest in employee training, giving workers the opportunity to advance and your company better and more productive performers.

As the MetLife survey states, “A loyal and satisfied workforce is part of the foundation of business growth. Widening cracks in this foundation may force employers to pay a price in reduced retention and productivity when the job market improves.” Avoid this potentially expensive price tag for your company tomorrow, by attending to issues of employee loyalty, satisfaction and morale today.

Whether an employee is old, young, male, or female, they most likely already understand the value and importance of benefits such as Dental insurance, Health insurance, and 401(k)s.

That said, the consulting and research firm LIMRA surveyed 1,500 U.S. employees and found that 40% of them didn’t know the cost of their Health insurance. Furthermore, of the 60% that felt they did know the cost of their Health insurance, only 15% could actually state a reasonable cost estimate.

The results of the survey, which were published in LIMRA’s What Is $1 Billion an Hour Worth? Employee Perspectives on Benefits research report, were weighted to be representative of the U.S. labor force, including employer size, private/public company, male/female, and full/part-time employment. Here are some of the key findings:

• Although employers frequently have the common misconception that younger employers don’t value benefits as much as their older employers, the survey suggests that younger employees actually value benefits almost as much as their older counterparts. It appears that the different values an employee places on benefits has more to do with life experience than it does life stage, education level, or salary level.
• LIMRA’s survey showed that U.S. employees in general significantly underestimate the Health insurance premium percentage covered by their employer and the premium percentage they pay for non-medical benefits.
• Participants were asked what their number one factor would be when considering two similar job offers, each with comparable salaries. Benefits, such as Dental, Medical, and retirement plans, were the number one factor for 62% of the participants. Other important factors included: An employer’s stability (59%); paid leave (52%); competitive increases in salary (50%); the work environment (42%); an employer’s location (38%); fulfilling, rewarding, and challenging work (37%); an opportunity for personal growth (33%); an employer’s reputation (32%); a fair balance between personal life and work, such as telecommuting and flex time (31%); the growth potential of the employer (27%); monetary bonuses (26%); and an employer’s size (8%).
• Although it’s clear that most employees value benefits, the research found that the majority didn’t understand the costs and didn’t know how much their benefits were worth. This can often make it difficult for employees to make informed, knowledgeable decisions as they decide who to work for and what benefits to select.
• Considering that around 60% of employers have indicated that they plan to continue shifting the skyrocketing costs of benefits toward their employees, employees must know their benefit package’s price components and any potential lifestyle or financial changes facing them if any of these price components were to change in the future. The survey found that an employee’s decisions about their benefit package as a whole was impacted when they understood how much their benefit was currently costing and any projected cost increases for the future.
• According to the survey, most employees say they’re open to paying higher premiums to retain a current benefit plan that they’ve used regularly, such as their dental, vision, or medical coverages. However, a third of the respondents said that they found it difficult to pay for their benefits. Households with less than $25,000 in annual income found it particularly difficult to pay for benefits, but households with twice that amount of income also reported struggling to afford their benefits.

The almost $140 billion dollar a year prescription drug industry is an element of health care that simply can’t be ignored by managers and brokers of benefits as they seek innovative ways of bringing value to their employees and clients.

In American health plans, prescription-related costs are usually 20% to 30% of the total cost. Furthermore, prescription costs are estimated to be rising by 10% to 20% each year. Most employer-sponsored health care plans contain a prescription benefit.

It’s when the prescription benefits are utilized excessively that self-funded employers find themselves at financial risk. Americans increasingly are requesting more and more prescriptions from their health care providers, due in part to prescription manufacturers adamantly and aggressively pushing for usage of their pharmaceutical products. The middlemen in the prescription drug industry are the pharmacy benefit management companies that are trying simultaneously to satisfy both the drug distributors and manufacturers, and the employers and employees that are their end users.

The various aspects of prescription drug pricing must be understood thoroughly to understand the prescription drug industry fully. This is a lengthy and complex topic, but there are several key issues that can help benefit managers and HR professionals begin to better understand the industry.

One key issue is pharmacy benefit management, or PBMs. These create revenue in a couple of different ways, including drug margins and administering rebates or fees. Sponsors and employers are starting to question their PBMs as they’re understanding such revenue-generating issues and are exploring more and more ways to produce cost savings amid the rising cost of health care. Unveiling and understanding the prescription industry pricing model has brought many calls for the PBMs to change their model.

However, the PBMs and drug manufacturers aren’t the real bad guys in cost savings. Each has their own objectives, but the burden of these objectives is often shouldered by the sponsors, employers, and employees.

Real cost savings can be achieved by negotiated, aggressive prescription drug pricing. Considering today’s market, an employer seeing just an 8% to 12% cost savings to their prescription plan could actually manage to save some jobs they might otherwise lose.

Properly structured transparency pricing, especially when combined with real prescription plan management, has the potential to reduce an employer’s prescription risk and bring them substantial savings.

An August 2010 survey sponsored by UnitedHealthcare found that most Americans are concerned with their medication costs, but admit that they don’t know how much new prescriptions cost them or if there’s a less expensive option available to them. Consumers being unaware or unfamiliar with generic alternatives and less expensive alternatives means that many are missing a chance to save on their out-of-pocket drug expenses substantially. UnitedHealthcare has estimated that if members with fully insured plans changed to a generic brand or alternative lower-costing option, the result could be a yearly health care savings of more than $1 billion — $490 million of which would be savings on prescription co-pays.

Other highlights from the study included:

• Thirty percent of those surveyed admitted that they had not taken or skipped a dose of their routine medications due to the high cost of their prescription.
• Sixty percent of those surveyed said that they had concerns regarding the cost of their medications. Of those, almost 70% admitted that they often didn’t know the cost of their prescription prior to purchasing it.
• Yet, when the respondents were asked if they would be willing to switch to a lower-costing 94% answered yes.

The Desire for Information. The survey clearly showed that most Americans purchasing prescription drugs have an interest in learning more about their options, especially lower-costing options. There are several ways that employers can help their employees to understand more comprehensively how much their medications are costing them and discover ways to reduce their out-of-pocket prescription drug spending without compromising the medicinal effectiveness of their medications.

1. Employers might develop communications tailored to providing plan participants information about saving options, recognizing alternative lower-costing medications to their existing expensive medications, and advice and support on how to pursue other options. This can be in the form of a phone call, email, newsletter, or such.
2. A co-pay tier system can be very helpful in communicating the differences in value between drugs. The more fiscally and clinically advantageous medications should be placed on the lowest tier. These are the medications that have little, if any, co-payment. Meanwhile, the more expensive medications with higher co-payments should be placed on higher tiers. Plan members will be able to clearly see the difference in how much they pay for their existing medication and how much they could be saving with an equally effective lower-costing option. Seeing the difference in such a comprehensive manner can motivate the employee to consider trying a lower-costing medication option.
3. Pharmacists can be given specific messaging on what lower-costing and effective options are available to plan participants. As an employee goes to their pharmacy to fill a prescription, the pharmacist will see what alternatives are available at a lower-cost and be able to convey this information to the individual. If the employee feels that a lower-costing medication is desirable, then the pharmacist can contact the doctor that prescribed the medication to approve the change or, in some cases, make the change then and there.
4. A pill splitting or half-tablet program can reduce employee co-pay on medications by 50%. However, a physician must state on the prescription that the pills are to be halved or split.