Demand for Financial Wellness Benefits Grows as Employee Financial Health Perception Drops
Welcome to week one of our Fall 2019 Group Benefits Open Enrollment Digital Listening Bulletin. In this bi-weekly newsletter, we’ll take a look at the trends, conversations, and themes that we are seeing dominate the group benefits discussion as many carriers, brokers, heads of HR, and employees go through open enrollment season.
Theme One: Lifestyle Benefits
We’re seeing a lot of use of the term “lifestyle benefits” vs. voluntary benefits. This makes sense; “voluntary benefits” is an industry term that means nothing to a typical employee, or even to a typical head of HR. “Lifestyle benefits” includes anything that improves the life of the employee and potentially her family, whereas voluntary benefits is usually understood as Dental, Vision, and Disability insurance.
This seems to be tied into the “experience economy”, an oft-reported-on trend among millennials who value experiences over things, that may or not be overstated. “Work is stressful”, said Greg DiCarlo, co-founder and CEO of Work2Live, a Florida-based digital employee rewards platform, “…(and employees) want experiences. That’s important to consider when evaluating different benefits.”
Whether work is more or less stressful than it was 30 years ago, mental health benefits are being talked about a lot, by both employers and employees. Online resources, managerial training to identify employees who need help, onsite mental health counselors, and online behavioral therapy are all being implemented by larger employers. For smaller employers, providing mental health benefits is harder—a perfect place for carriers and/or brokers to highlight their offerings in assisting employees navigate these stressful times.
Strategically, packaging benefits together to drive a happy daily life for young employees seems to be a winning strategy this year. Position a comprehensive benefits package as minimizing hassle and stress by focusing on the events that cause stress in life—and showing how these benefits will cancel that stress out.
Theme Two: Financial Wellness is a Big Thing
While “young invincible” workers seem to be OK forgoing medical insurance, betting that they can stay healthy with diet and exercise until they hit middle age, they aren’t feeling as confident when it comes to financial health. These younger workers are more concerned with paying for their pet’s emergency surgery than with the financial ruin that might come with an unexpected diagnosis.
Overall, employees’ assessment of their own financial health is down, even with record low unemployment. In one year, the percentage of employees who rated their financial health as “excellent” or “good” fell 6 points, from 61% to 55%, according to a Bank of America 2019 workplace benefits report.
We continue to see student loan assistance or repayment as a key benefit that is at least being talked about to attract entry-level or early career employees, who are increasingly saddled with six-figure debts, the equivalent of a mortgage on a starter home. However, the high cost of this benefit—which essentially amounts to a cash transfer from the company to the employee—is dampening actual adoption.
Employees continue to struggle with several aspects of financial wellness—retirement savings, financial advice, debt management (particularly student loan debt), and caregiver assistance. Companies that provide comprehensive solutions to help younger employees improve their financial health should be winners this open enrollment season.
Theme Three: Employees are Finally Saying “Enough” on Major Medical Rate Increases
The average price of employer-based healthcare is now in excess of $20,000 / year for a family. This is the second year of 5% rate increases in a row—showing that, if anything, health care cost increases are accelerating, not decelerating. A widely shared New York Times article showed that rate increases are now eating up salary—a hidden effect to workers that is finally getting attention. Young employees, in particular, are realizing that they’re seeing anemic salary increases because of major medical premiums.
Slate’s article highlighting out-of-control rate increases—sourced from the Kaiser Family Foundation study that also provided the chart above—had 500K shares on Twitter. It’s not a coincidence that major Presidential candidates continue to make healthcare their top issue.
Some choice tweets:
$20K health insurance per year is the new normal. Americans are getting screwed. – @ReelTalker
Insuring a single family for a year costs almost as much as a Honda Civic – @hkanji
I never looked at it from this viewpoint, but now I’m even more angry about healthcare. – @thedudeabides
Your compensation is getting devoured by healthcare costs. We pay in premiums what Europeans pay for social welfare in taxes–with none of the benefits. – @Change2win
Health insurers are pirates, stealing billions and providing absolutely zero value. Being “covered” is very often worse than not having insurance at all. – @jordanzakarin
Theme Four: HSA Use Continues to Trend Up, Even as Utilization Struggles
]Not surprisingly, given rate increases, more employees are electing to potentially keep their money by choosing an HSA-qualified plan. That percentage has now reached 23%, up from 2% in 2006. That’s a 21-point increase over 13 years, with a four-point swing over the past year. Some of this is also being driven by employers, who are simply not offering a non-HSA eligible plan to keep employer contributions reasonable.
That being said, employees are still lousy at putting money away in HSAs. The discipline required to save ahead of medical expenses is too much for some to bear, even if they get to keep what they don’t use.
Strategically, brokers and carriers can help employees overcome this understandable reluctance by suggesting default savings rates for accounts; pointing out investment vehicles available once the minimum balance is reached; and educating employees that HSAs are a great way to save for health expenses in retirement. One interesting statistic sure to get HSA-eligible employees’ attention: In 2019, a 65-year old man would need about $144,000 in savings to cover Medicare, supplemental plan premiums, and prescription drug expenses in retirement. For more on details, check out SHRM’s article on HSAs.
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