The employee benefits space is changing rapidly. From new consumer-centric platforms that are vastly improving the way benefits are being delivered, to employee wellness programs that are integrated directly into plan designs, to “virtual care” health benefits that can be accessed from anywhere – there’s no doubt that the employee benefits landscape is evolving before our eyes.
But what’s the largest trend? Companies are simply demanding more
Behind all of these innovations is one macro trend I’m seeing across the board. In an effort to improve the value they receive from their total spend – companies are finally starting to demand more from their benefits and benefits providers.
Yes, they still see a need to provide what are considered “traditional” benefits (life insurance, dental, vision, 401k, etc), but they now want these to be merely components of a holistic, integrated benefits program.
They’re demanding a program that provides the traditional benefits – but also the latest innovations like wellness benefits, lifestyle spending options, and proactive healthcare tools that empower employees to make their own decisions.
Does this remind you of anything?
To me, this trend aligns fairly well with the shift from defined benefit pensions to 401ks. In this case, defined benefit pensions would be like traditional insurance benefits. The employee doesn’t have to do a lot, but they also don’t have many choices about how to prepare for their own retirement. Their employer tells them how much they’ll get and when they’ll get it.
On the other hand, the introduction of 401ks completely reversed the amount of control the employee had over their retirement planning. They received many more options, but of course they also had to take on much more responsibility for their financial futures.
This shift took time because employees had to be educated on how to make these choices and they also had to be given the right tools. But perhaps most importantly, employees needed to be given the financial incentive. And that incentive was, “if you put in the effort to take a proactive approach today, you’ll likely enjoy a better retirement tomorrow”.
We’re in the “early adopter” stage
Just like healthcare benefits today, many skeptics thought that it would be too complicated for employees to manage their own retirement. But employees (especially early adopters) began to adapt and the shift towards 401ks has continued over the last 20 years or so.
When it comes to health benefits, we’re entering that same “early adopter” stage – where many employees are excited to begin making their own health and wellness decisions.
I’m not saying there’s no longer a place for employer-sponsored benefits, but many organizations are realizing that the model of just continuing to pay more and more every year doesn’t work.
Not only because it’s expensive and not sustainable, but also because employees don’t get the best value for their dollar. In that model, every employee gets a one-size-fits-all benefits plan which can’t be tailored to meet their health needs or stage of life. Frankly, it’s more like a “one-size-fits-none”.
The three enablers of benefits change: Tools, knowledge, and financial incentive
The number of early adopters will continue growing for a couple of reasons. First of all, millennials are simply demanding more personalization and flexibility in their benefits. That trend isn’t going away. Secondly, this personalized approach helps organizations increase the value of their total rewards because they can offer more desirable benefits.
But just like the switch to 401ks, organizations need to provide their employees with three key things; the tools, the knowledge, and the financial incentive. That’s the main challenge they’re facing right now – how do you provide all three?
One solution we’re offering our clients is a unified, digital wallet. The wallet gives each employee a clear understanding of exactly which benefits they have. It also provides financial incentive because they are being given responsibility for choosing the right benefits, and managing their health over time.
Then finally, it’s the tool that makes picking benefits easy – whether you want more insurance, more benefits dollars to spend today, or you want to save tax-advantaged dollars for retirement.
While this “employee driven” approach to offering benefits is something many large organizations are jumping at, it’s just one of several key trends we’re seeing right now. To get the full picture, I’d highly recommend this webinar we co-hosted with our friends from Payscale: “The New Total Rewards: Compensation & Benefits Trends for HR Leaders”.
It’s a wonderful resource that will provide plenty of food for thought as you head towards making critical benefits decisions in the fall.