SHRM Survey Findings: State of Employee Benefits in the Workplace—Health Care December 18, 2013

Introduction This is part three of a series of SHRM survey findings examining employee benefits in the workplace. The following topics are included in the six-part series titled State of Employee Benefits in the Workplace: Part 1: Wellness initiatives Part 2: Flexible work arrangements Part 3: Health care Part 4: Leveraging benefits to retain employees Part 5: Leveraging benefits to recruit employees Part 6: Communicating benefits State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Definition For the purpose of this survey, total health care costs includes employer-paid premiums, administration costs and any possible individual medical claims covered by the employer. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Key Findings How are organizations trying to control the costs of health care? The majority (83%) of organizations are “very concerned” about controlling health care costs. The top three activities organizations have engaged in to control health care costs are providing educational initiatives related to health and wellness (45%), increasing employee participation in preventive health and wellness initiatives (43%), and creating an organizational culture that promotes health and wellness (41%). Can employees expect to pay a larger portion of total health care costs in the future? Looking into plan year 2014, 24% of organizations reported they plan to increase the employee share contributed to the total costs of health care, whereas 21% do not plan to increase the employee share, and 55% were unsure. Focusing on the next three to five years, 21% of organizations currently paying the majority or an equal portion of health care costs believe that employees at their organizations will eventually be paying the majority of health care costs. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

What do these findings mean for the HR profession? The current expectation of whether employees will take on more of their health care costs is unclear, but organizations are hopeful that the employees’ share contribution will be smaller than employers’ share contribution in the future. Although there was a decline in the number of organizations raising the employee share contribution compared to 2012, a moderate percentage of organizations still chose to implement such policy to battle health care costs. Nevertheless, many organizations are optimistic that employers will cover a larger amount of total health care costs in the future. Organizations’ strategies to control health care costs have shifted within the last year, and may continue to transform as organizations comply with the Affordable Care Act (ACA). Compared to last year, more organizations shifted the burden of high health care costs to their employees (e.g., increasing the employee share contribution). This year, however, organizations placed more emphasis on encouraging awareness and engagement of health and wellness. Organizations taking this more proactive approach to support preventive health may see outcomes such as fewer health care claims. As health care costs continue to increase, HR professionals will have to determine modifications to their organization’s health benefit plan, and whether these changes will have any impact on their organization’s overall total rewards strategy. For instance, will trimming or eliminating health care benefits hinder an organization’s ability to attract and retain talent? State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

How did your organization’s total health care costs change from last plan year compared with the plan year before? Note: Only respondents whose organizations provide health care were asked this question. Respondents who answered “not sure” were excluded from this analysis. Percentages may not total 100% due to rounding. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

How concerned is your organization about controlling health care costs? Note: Only respondents whose organizations provide health care were asked this question. Respondents who answered “not sure” were excluded from this analysis. Percentages may not total 100% due to rounding. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Which of the following activities has your organization engaged in for the purpose of controlling the costs of health care? Activity 2013 (n = 417) 2012 (n = 405) Provided educational initiatives related to health and wellness 45% 52% Increased employee participation in preventive health and wellness initiatives 43% 44% Created an organizational culture that promotes health and wellness 41% Offered consumer-directed health plans (e.g., HRAs, HSAs) 40% 42% Increased the employee share contributed to the total costs of health care 39% Provided lower-cost generic prescription or over-the-counter drugs 50% Provided incentives or rewards related to health and wellness 35% Changed health care provider* - 3% Other 7% 2% Note: Only respondents whose organizations provide health care were asked this question. Respondents whose organizations had not conducted any activities to control the costs of health care were excluded from this analysis. Percentages do not equal 100% due to multiple response options. An asterisk (*) indicates that this response option was not asked in 2013. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Which of the following activities has your organization engaged in for the purpose of controlling the costs of health care? Comparisons by organization staff size Organizations with 500 to 24,999 employees are more likely than those with 1 to 99 employees to indicate they provided lower-cost generic prescription or over-the-counter drugs to control the costs of health care. Comparisons by organization staff size 500 to 2,499 employees (51%) 2,500 to 24,999 employees (64%) > 1 to 99 employees (27%) Organizations with 100 to 24,999 employees are more likely than those with 1 to 99 employees to indicate they increased employee participation in preventive health and wellness initiatives to control the costs of health care. Comparisons by organization staff size 100 to 499 employees (47%) 500 to 2,499 employees (59%) 2,500 to 24,999 (49%) > 1 to 99 employees (25%) Organizations with 500 to 2,499 employees are more likely than those with 1 to 499 employees to indicate they provided incentives or rewards related to health and wellness to control the costs of health care. Comparisons by organization staff size 500 to 2,499 employees (63%) > 1 to 99 employees (16%) 100 to 499 employees (31%) Note: Only statistically significant differences are shown. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Which one activity has been the most successful in terms of helping your organization control the costs of health care? Activity 2013 (n = 365) 2012 (n = 380) Offered consumer-directed health plans (e.g., HRAs, HSAs) 22% 15% Increased the employee share contributed to the total costs of health care 20% 25% Increased employee participation in preventive health and wellness initiatives 13% 17% Created an organizational culture that promotes health and wellness 12% 11% Provided lower-cost generic prescription or over-the-counter drugs 10% Provided incentives or rewards related to health and wellness 9% Provided educational initiatives related to health and wellness 7% 5% Changed health care provider* - 4% Other 0% Note: Only respondents whose organizations provide health care and conduct some kind of activity to control the costs of health care were asked this question. An asterisk (*) indicates that the option was not asked in the 2013 survey. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

In plan year 2013, did your organization increase the employee share contributed to the total costs of health care? Note: Only respondents whose organizations provide health care were asked this question. Respondents who answered “not sure” were excluded from this analysis. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Comparisons by organization staff size In plan year 2013, did your organization increase the employee share contributed to the total costs of health care? Comparisons by organization staff size Organizations with 500 to 2,499 employees were more likely than organizations with 1 to 99 employees to increase the employee share contributed to the total costs of health care in plan year 2013. Comparisons by organization staff size 500 to 2,499 employees (57%) > 1 to 99 employees (33%) Note: Only statistically significant differences are shown. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

In the next plan year, does your organization plan to increase the employee share contributed to the total costs of health care? Note: Only respondents whose organizations provide health care were asked this question. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

In plan year 2013, is your organization paying the majority (more than half) of the total health care costs? Note: Only respondents whose organizations provide health care were asked this question. Percentages may not total 100% due to rounding. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

In three to five years, do you believe employees at your organization will be paying the majority of health care costs? Note: Only respondents whose organizations provide health care were asked this question. Respondents whose organizations indicated that employees were paying the majority of total health care costs were excluded from this analysis. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Organization Demographics State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Demographics: Organization Staff Size State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Demographics: Organization Sector State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Demographics: Organization Industry Percentage Professional, scientific and technical services 21% Health care and social assistance 17% Manufacturing 15% Government agencies 12% Finance and insurance 10% Educational services 9% Religious, grantmaking, civic, professional and similar organizations 5% Accommodation and food services 4% Administrative and support and waste management and remediation services Construction Mining Transportation and warehousing Arts, entertainment and recreation 3% Information Retail trade Real estate and rental and leasing 2% Repair and maintenance Utilities Whole trade Agriculture, forestry, fishing and hunting 1% Personal and laundry services Other 7% Note: n = 375. Percentages do not equal 100% due to multiple response options. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Demographics: Other Is your organization a single-unit organization or a multi-unit organization? Does your organization have U.S.-based operations (business units) only, or does it operate multinationally? Single-unit organization: An organization in which the location and the organization are one and the same. 39% Multi-unit organization: An organization that has more than one location. 61% U.S.-based operations only 80% Multinational operations 20% n = 381 n = 381 For multi-unit organizations, are HR policies and practices determined by the multi-unit headquarters, by each work location or by both? What is the HR department/function for which you responded throughout this survey? Multi-unit headquarters determines HR policies and practices. 59% Each work location determines HR policies and practices. 4% A combination of both the work location and the multi-unit headquarters determines HR policies and practices. 37% Corporate (company-wide) 73% Business unit/division 16% Facility/location 11% n = 244 n = 244 State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

SHRM Survey Findings: State of Employee Benefits in the Workplace—Health Care Survey Methodology Response rate = 11% 441 HR professional respondents from a randomly selected sample of SHRM’s membership participated in this survey Margin of error +/- 5% Survey fielded May 3-22, 2013 State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

Additional SHRM Resources SHRM Research Findings: Health Care Reform—Impact of Health Care Coverage and Costs SHRM Research Findings: Health Care Reform—Challenges and Strategies Health Care Reform Resource Page SHRM Toolkit: Managing Health Care Costs State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

About SHRM Research For more survey/poll findings, visit www.shrm.org/surveys For more information about SHRM’s Customized Research Services, visit www.shrm.org/customizedresearch Follow us on Twitter @SHRM_Research Project leaders: Christina Lee, researcher, SHRM Research Project contributors: Alexander Alonso, Ph.D., SPHR, vice president, SHRM Research Evren Esen, manager, Survey Research Center, SHRM Research Copy editor: Katya Scanlan, SHRM Knowledge Center State of Employee Benefits in the Workplace—Health Care ©SHRM 2013

About SHRM The Society for Human Resource Management (SHRM) is the world’s largest association devoted to human resource management. Representing more than 250,000 members in over 140 countries, the Society serves the needs of HR professionals and advances the interests of the HR profession. Founded in 1948, SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China, India and United Arab Emirates. State of Employee Benefits in the Workplace—Health Care ©SHRM 2013