HR Strategy

Are corporate health care costs a crisis, or not?

This time of year, we tend to see a lot of press around the rising costs of health care in the US. The prestigious Kaiser Family Foundation notes that “Annual premiums rose 5% to $19,616 for an employer-provided family plan in 2018.”

That sounds scary – I know my salary did not go up 5%. So, I’m taking home less pay, right? Well, yes and no.

In another recent article, Kaiser Family Foundation’s Drew Altman notes that, at least recently, there is no crisis. Here’s his chart showing how health care, as a portion of total compensation, has fared over the last decade or so:

There is definitely an increase over the last few years, but it may not be as bad as it seems. However, as Altman notes, “Even if health costs have not been growing recently as a percentage of compensation, there still can be sticker shock, with the average cost of a family policy around $19,000 per year, about the cost of a Honda Civic.” Yikes!

What this graph and his analysis has not captured is the cost shifting that has happened to a lot of US workers over this time. We’ve seen the growth of high deductible health plans and rising PPO deductibles and other cost shifting such as eliminating copayments or adding additional tiers of coverage for specialty medications.

So, while the premiums as a percentage of total compensation have been steady over the past few years, I know that many people who require some basic level of health care treatment are feeling much more of an impact at the point of sale.

The first Kaiser article cited above also notes “The average 2018 general deductible for individual-worker coverage was $1,573, according to the survey, up from $1,505 last year and $1,135 five years ago. Those averages don’t include plans that lacked such deductibles.” Here’s the chart showing the rise in the annual deductible over the past decade or so:

So, while premiums and employer costs may not feel like a crisis, health plan consumers, your employees, are absolutely feeling the crisis. We’re expecting employees and their families to pay for a lot of their health care costs (and those costs keep growing, as well) and that trend is definitely unsustainable.

Without this cost shifting, the total compensation chart above would look very different. So, unfortunately, I think the crisis is real!

 

Should employers pay off student debt?

higher ed costIt is the season for graduation, so student debt is on my mind. I have a child graduating high school in a few weeks, which means I am thinking a lot about the cost of higher education.

Student debt is out of control – let’s just get that out of the way. Yes, higher education has become very expensive and many people cannot afford the retail costs. Many students do get some forms of financial aid (including scholarships, grants and loans) but many put themselves into way too much debt for an education that may be marginally better than one at a lower cost alternative.

So, in an attempt to attract younger employees (who are mired in this debt) some employers are now helping to pay off their employee’s student loans. Sounds like a great way to attract talent, right?

It could be, but as the article notes, this does not tackle the larger issue of why higher education is so expensive.

Offering this cash pay-off may also create a disincentive for those who are currently debt-free. What if you put yourself through college, working two jobs in the process, and emerged with a degree and no debt? Good for you, right? So, how do your total rewards compare to your peer who accumulated debt? Are you, the employer, rewarding someone more for having this debt? Is that what you want to reward?

I know that student debt is not necessarily a choice, and that these payments really do not amount to a lot for any individual. However, based on the Employer Participation in Student Loan Assistance Act noted in the article, some want these payments tax-free up to $5,250/year (or $437.50/month).

Payments that high can create a bigger total reward gap among your peer employees. This gap may already exist within your organization, depending on which employees cover their dependents (if any) on their health care benefits, for example. In that case, you may be rewarding families more than single employees.

I am more concerned about yet another employer-funded benefit emerging instead of tackling the greater issue of overall cost of higher education (and educating potential students on the true value of higher education at different price points).

That said, tread lightly in this direction, should you choose. It is really hard to take away a benefit in the future, so offer only with this caveat in mind. As we saw with Starbucks recently, jumping too quickly into a response can also lead to a swift backlash.

Implicit Bias is Real! Now do something about it, please…

This is the first thing we should all understand – we ALL have our preconceived notions and regularly apply them to what we know. Humans are made to compartmentalize things. It is how we organize, think and learn.

These preconceived beliefs can get in the way of what we say and do everyday. This has been bothering me for a while – partly due to the “me too” movement, but also out of the “Black lives matter” and other recent groundswelling movements.

This kind of thinking can keep us from imagining women as surgeons, minorities as leaders, or even keep us from hiring the best person for the job. Maybe you don’t realize you do this, so how can you (1) recognize this type of behavior and (2) change your ways?

If you are looking for the magic switch, I have none for you. However, science can certainly help us. This Scientific American article helps put some framework around what I have been mulling over for a while.

In the article, it notes that “A majority of people taking [the Implicit Association Test (IAT)] show evidence of implicit bias, suggesting that most people are implicitly biased even if they do not think of themselves as prejudiced.” So, we are mostly biased and don’t know that we have a problem. We are mostly living with our heads in the sand on this issue.

What scares me most is reading sentences like:

Race can bias people to see harmless objects as weapons when they are in the hands of black men, and to dislike abstract images that are paired with black faces.

-and-

White applicants get about 50 percent more call-backs than black applicants with the same resumes; college professors are 26 percent more likely to respond to a student’s email when it is signed by Brad rather than Lamar; and physicians recommend less pain medication for black patients than white patients with the same injury.

Yikes!

So what can we do about this? I think first and foremost, admit you have a problem! This is something we ALL deal with – it does not mean you are a bad human being or even racist, sexist or ageist. It does mean that we need to fight the urge to make decisions based on our “gut” feelings. Those data are clearly flawed!

Consciously associate differing opinions with your own. Get outside of your “bubble” and hear different points-of-view. Don’t let these other opinions rile you, but truly listen. You can certainly disagree, but it is okay for others to have different opinions from your own. No one needs to “win” in the point-of-view game.

Instead, I would urge you to have more conversations with diverse people. Get different points-of-view – especially when hiring! Try to get a lot of opinions on a candidate, and make sure your interviewers are from different genders, races, age groups and religious leanings.

Lastly, remember that you have a problem and you are really fighting against human nature to tackle it. Recognize when making decisions that it might be playing into the process. Really push yourself to understand why you make certain decisions. Even consider removing names from resumes when reviewing your candidate pool.

Whatever works to keep your options and minds open – the world will be a better place and you will have a better team as a result, for sure!

Uncertainty Is Certain in 2018 Healthcare

Wow, this has been an exciting week – the health care bills / withdrawals / repeals abound, but no resolution is in sight.

We do know that repealing the Affordable Care Act (ACA) will leave millions more without health coverage than under the current regulations – the CBO put the number at 32 million by 2026 (but, we’ll also lower the deficit by $473 billion).

While that does not seem to have support from the Senate, the uncertainty of the health care regulations is creating a lot of turmoil for insurance companies. How can you plan for the future, when the future of the health care rules might change?

NPR and Kaiser Health News (KHN) set out to see how much this uncertainty is costing consumers. If you were not aware, the insurance premiums were due to the respective state insurance boards in June. Many companies have been asked to revisit their rates and make adjustments, but what does all of this uncertainty do to the pricing?

A lot depends on the Federal subsidies in the marketplaces. If the current administration stops these subsidies in an effort to “gut Obamacare markets,” it will eliminate the “affordable” out of the Affordable Care Act for millions of Americans and many (especially healthier) people will be forced to drop their coverage due to the sharp premium increases.

It ends up, this uncertainty may cost consumers a lot next year. Per the NPR / KHN report, “In Pennsylvania, premiums next year without the subsidies would increase by an average of 20 percent, compared with 9 percent if they remain intact.”

The Pennsylvania Insurance Department further states that “Statewide average rate increases will be 36.3 percent if the individual mandate penalty is eliminated and cost-sharing reduction funding is also cut off.”

Average premiums in Pennsylvania in 2017 (without subsidies) are $533/month. That means, 2018 may have the following average premiums for those in Pennsylvania:

ACA Chart 2018

That’s just one state’s projections, and keep in mind that these are average statistics in Pennsylvania. Some will experience less and some more that what is noted above.

I am not sure who could lose their up to 64% subsidy (average of $340/month or $4,080/year in 2017) and then potentially shoulder an additional $2,300+ premium increase next year due to policy changes. That could be about $6,400 in additional premiums next year alone.

It does look like there may not be a full understanding of what health care premiums are from our current leader. I think $12-a-year premiums sound great, but even those of us with employer subsidized coverage don’t have that kind of deal.

Whatever the future holds, I hope we do not take coverage away from millions, either through mandate or affordability. Many employers are also struggling with affordability issues, and certainly do not receive any Federal assistance.

I do agree that all sides need to come together and come up with something to help fix the situation we are now in. There will be winners and losers in this process, but keeping the uninsured as the ongoing loser hardly seems fair.

However, this uncertainty may kill us before we ever get there…

Do you work in manufacturing? It might be time to revisit your HR policies…

I heard this report on the way to the airport this morning and this it deserves a mention: the women are coming to fill vacant manufacturing jobs! Maybe even the oil and gas fields?

So, what has traditionally been a male-dominated employer space may shift a bit toward attracting the female population.

What does this mean for you? Well, lots of things, but I focus on HR issues, so we’ll stick to that aspect of the implications.

Benefits

Make sure your policies are up-to-date and as female-friendly as possible. Do you have PTO or sick/vacation plans (young/healthy prefer PTO but once kids or illness is in the picture, employees prefer separate sick/vacation policies)? How about your maternity policies and coverage? How do you compare to your competitors on this front. It is a war for talent out there!

Training

Unfortunately, this also means that you probably need to beef up your sexual harassment policies and training. I’ve been in plants before, and women tend to put up with a lot of off-color remarks. However, I am also a bit older and used to living in that environment – younger women may not be so tolerant. Get ahead of any issues on this front.

What should happen if a field or plant worker becomes pregnant? What will you do with her job – keep her on it or move her to a desk role? What are the risks/implications of each? Please don;t consider termination! That will not end well…

Other

Do you have a locker area for women? Lactation rooms close to your work sites? Is your safety gear available in female sizes?

You can see how this relatively modest shift can quickly change the dynamics of your work environment, and it is probably long overdue. Wasn’t Rosie the Riveter over 70 years ago?

rosie

Will your older employees EVER retire?

According to a new Career Builder survey conducted by Harris Poll, they don’t plan to do so any time soon. One of the main reasons, according to the survey team, is financial uncertainty.

According to the survey results, “one third of workers ages 60+ (34 percent) say they aren’t sure how much they’ll need to save in order to retire.” These are employees typically within 5 year of retirement, and they don’t even know if they are near or far from being able to do so. That’s a problem not only for your employees, but also for employers who now have a large chunk of older workers who are probably ready to go, but not financially able to do so. Your employee engagement and productivity may be headed downhill.

The survey found that “when asked if they’re currently contributing to retirement accounts, more than 1 in 4 (26 percent) workers 55+1 said they do not participate in a 401(k), IRA or other retirement plan.” My guess is that if the employee is not participating, then neither is the employer; meaning, these people probably have little to no savings for retirement.

What’s worse, based on the survey results, “30 percent of U.S. workers ages 60 and older plan to retire at age 70 or older. Another 20 percent don’t believe they will ever be able to retire.” That’s 50% of workers age 60+ who plan to stick around for an additional ten years or longer!

What if those employees have health issues and/or are not fully engaged? What if they become disabled and cannot work, or insist on trying to work while not at 100%?

This seems like a looming HR crisis. How can we educate employees to save? The “head-in-the-sand” approach that seems to be prevalent with older employees is a huge disservice to themselves (and you).

Consider looking at your contribution data and specifically check on your age 50+ population. Are they currently saving? Are their savings on-track? What resources do you have to help educate them about what they need to do today to retire when they are ready?

Please take the time and effort to address this issue before it becomes a crisis for your HR department (and your employees!). They will thank you for it!

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1 CareerBuilder commissioned study of 3,411 employees ages 18 and over (employed full-time, not self-employed, non-government) between November 16 and December 6, 2016, of which 971 are ages 55+.