SHRM Survey Findings: Employee Benefits in California—Health Care April

This is part three of a series of SHRM survey findings examining employee benefits in the workplace of California organizations. The following topics are included in the six-part series titled Employee Benefits in California:  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 Employee Benefits in California—Health Care ©SHRM Introduction

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

How are organizations trying to control the costs of health care? The majority (79%) of organizations are “very concerned” about controlling health care costs. The top three activities organizations have engaged in to control health care costs include 1) increasing the employee share contributed to the total costs of health care (40%), 2) creating an organizational culture that promotes health and wellness (38%), and 3) providing lower-cost generic prescription or over-the-counter drugs (34%). 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 22% of organizations do not plan to increase the employee share; 54% 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. Employee Benefits in California—Health Care ©SHRM Key Findings California

The current expectation of whether employees will take on more of their health care costs is largely unclear. Many organizations (36% in California, 40% nationally) are not sure if employees will be responsible for the majority of health care costs in the next three to five years. However, roughly one-fifth of organizations (21% in California and nationally) expect that employees will cover the majority of total health care costs in that time frame. Organizations are using several strategies to control health care costs, and may continue to add more as organizations comply with the Affordable Care Act (ACA). More than two out of five organizations (44% in California, 45% nationally) increased the employee share contribution in 2013 to battle rising health care costs. Many organizations also promoted health and wellness (38% in California, 41% nationally). Organizations taking this more proactive approach to support preventive health may see positive 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 benefits 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? Employee Benefits in California—Health Care ©SHRM What do these findings mean for the HR profession?

How did your organization’s total health care costs change from the last plan year compared with the plan year before? 6 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. Employee Benefits in California—Health Care ©SHRM 2014

How concerned is your organization about controlling health care costs? Employee Benefits in California—Health Care ©SHRM Note: Only respondents whose organizations provide health care were asked this question. Respondents who answered “not sure” were excluded from this analysis.

Which of the following activities has your organization engaged in for the purpose of controlling the costs of health care? Employee Benefits in California—Health Care ©SHRM 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. Activity California (n = 351) Overall (n = 417) Increased the employee share contributed to the total costs of health care 40%39% Created an organizational culture that promotes health and wellness38%41% Provided lower-cost generic prescription or over-the-counter drugs34%39% Provided educational initiatives related to health and wellness33%45% Offered consumer-directed health plans (e.g., HRAs, HSAs)33%40% Increased employee participation in preventive health and wellness initiatives 31%43% Provided incentives or rewards related to health and wellness25%35% Other5%7%

Employee Benefits in California—Health Care ©SHRM Comparisons by organization staff size 2,500 to 24,999 employees (57%) > 1 to 99 employees (19%) 100 to 499 employees (27%) 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 100 to 24,999 employees were 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 100 to 499 employees (35%) 500 to 2,499 employees (44%) 2,500 to 24,999 employees (60%) >1 to 99 employees (14%) Note: Only statistically significant differences are shown. Organizations with 2,500 to 24,999 employees were more likely than those with 1 to 499 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 2,500 to 24,999 employees (63%) > 1 to 99 employees (12%) 100 to 499 employees (16%) Organizations with 2,500 to 24,999 employees were 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.

Employee Benefits in California—Health Care ©SHRM Which of the following activities has your organization engaged in for the purpose of controlling the costs of health care? (Continued) Comparisons by organization staff size Organizations with 500 to 2,499 employees were more likely than those with 1 to 99 employees to indicate they provided educational initiatives related to health and wellness to control the costs of health care. Comparisons by organization staff size 500 to 2,499 employees (44%) >1 to 99 employees (18%) Note: Only statistically significant differences are shown. Comparisons by organization sector Publicly owned for-profit organizations were more likely than privately owned for-profit and nonprofit organizations to indicate they provided incentives or rewards related to health and wellness to control the costs of health care. Comparisons by organization sector Publicly owned for-profit (44%) > Privately owned for-profit (21%) Nonprofit (15%)

Which one activity has been the most successful in terms of helping your organization control the costs of health care? Employee Benefits in California—Health Care ©SHRM 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. Activity California (n = 281) Overall (n = 365) Increased the employee share contributed to the total costs of health care31%20% Created an organizational culture that promotes health and wellness17%12% Offered consumer-directed health plans (e.g., HRAs, HSAs)14%22% Increased employee participation in preventive health and wellness initiatives 10%13% Provided lower-cost generic prescription or over-the-counter drugs9%10% Provided incentives or rewards related to health and wellness7%9% Provided educational initiatives related to health and wellness6%7% Other6%7%

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

In plan year 2013, did your organization increase the employee share contributed to the total costs of health care? Employee Benefits in California—Health Care ©SHRM Note: Only statistically significant differences are shown. Comparisons by organization staff size 500 to 2,499 employees (58%) >1 to 99 employees (27%) 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 Comparisons by organization sector Publicly owned for-profit (67%) >Privately owned for-profit (39%) Comparisons by organization sector Publicly owned for-profit organizations were more likely than privately owned for-profit organizations to increase the employee share contributed to the total costs of health care in plan year 2013.

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

In plan year 2013, is your organization paying the majority (more than half) of the total health care costs? Employee Benefits in California—Health Care ©SHRM Note: Only respondents whose organizations provide health care were asked this question.

In three to five years, do you believe employees at your organization will be paying the majority of health care costs? Employee Benefits in California—Health Care ©SHRM 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. Percentages may not equal 100% due to rounding.

Demographics Employee Benefits in California—Health Care ©SHRM

Employee Benefits in California—Health Care ©SHRM Demographics: Organization Staff Size n = 310

Employee Benefits in California—Health Care ©SHRM Demographics: Organization Sector Note: n = 322. Percentages do not equal 100% due to rounding.

Percentage Professional, scientific and technical services24% Health care and social assistance13% Manufacturing12% Finance and insurance10% Government agencies8% Educational services8% Transportation and warehousing7% Retail trade7% Whole trade6% Real estate and rental and leasing5% Accommodation and food services4% Administrative and support and waste management and remediation services4% Construction4% Information4% Utilities4% Religious, grantmaking, civic, professional and similar organizations3% Mining2% Arts, entertainment and recreation2% Repair and maintenance2% Agriculture, forestry, fishing and hunting2% Personal and laundry services1% Other9% 20Employee Benefits in California—Health Care ©SHRM 2014 Demographics: Organization Industry Note: n = 328. Percentages do not equal 100% due to multiple response options.

Employee Benefits in California—Health Care ©SHRM Demographics: Other U.S.-based operations only79% Multinational operations21% Single-unit organization: An organization in which the location and the organization are one and the same. 30% Multi-unit organization: An organization that has more than one location. 70% Multi-unit headquarters determines HR policies and practices. 59% Each work location determines HR policies and practices. 5% A combination of both the work location and the multi-unit headquarters determines HR policies and practices. 37% Is your organization a single-unit organization or a multi-unit organization? For multi-unit organizations, are HR policies and practices determined by the multi-unit headquarters, by each work location or by both? Does your organization have U.S.-based operations (business units) only, or does it operate multinationally? n = 324 n = 325 Note: n = 234. Percentages do not equal 100% due to rounding. Corporate (company-wide)78% Business unit/division15% Facility/location16% Note: n = 234. Percentages do not equal 100% due to rounding. What is the HR department/function for which you responded throughout this survey?

SHRM Survey Findings: Employee Benefits in California—Health Care Response rate = 13% 373 HR professional respondents in California organizations from a randomly selected sample of SHRM’s membership participated in this survey Margin of error +/- 5% Survey fielded May 3-June 7, 2013 Survey Methodology Employee Benefits in California—Health Care ©SHRM

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 CostsSHRM Toolkit: Managing Health Care Costs California's Group Health Premiums Outpace National Average Employee Benefits in California—Health Care ©SHRM Additional SHRM Resources

About SHRM Research For more survey/poll findings, visit For more information about SHRM’s Customized Research Services, visit Follow us on Twitter Project leaders: Christina Lee, researcher, SHRM Research Yan Dong, SHRM Research Project contributors: Alexander Alonso, Ph.D., SPHR, vice president, SHRM Research Evren Esen, director, Survey Research Center, SHRM Research Copy editor: Katya Scanlan, SHRM Knowledge Center 24Employee Benefits in California—Health Care ©SHRM 2014

About SHRM Founded in 1948, the Society for Human Resource Management (SHRM) is the world’s largest HR membership organization devoted to human resource management. Representing more than 275,000 members in over 160 countries, the Society is the leading provider of resources to serve the needs of HR professionals and advance the professional practice of human resource management. SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China, India and United Arab Emirates. Visit us at shrm.org.shrm.org 25Employee Benefits in California—Health Care ©SHRM 2014