Health Care Remains Employers' Top Rewards Challenge

Employees are most worried about retirement readiness and job security, survey shows

By SHRM Online staff Mar 19, 2012

The 2012
Top Five Total Rewards Surveyfrom consulting firm Deloitte and the International Society of Certified Employee Benefit Specialists (ISCEBS), an annual barometer of benefits management challenges facing organizations, revealed that U.S. employers ranked their top rewards priorities for 2012 as follows:

The cost of providing health care benefits to active employees.

The willingness or ability of employees to pay for benefit plan coverage and to manage their reward budget.

The ability of reward programs to attract, motivate and retain the talented employees needed to run the organization effectively.

The ability to adjust to and comply with health care reform legislation.

Clear alignment of a total rewards strategy with business strategy and brand.

The phrase “total rewards” refers to all compensation, benefits, perquisites and other direct and indirect payments to employees.

Health Care

Survey respondents, representing a diverse cross-section of U.S.-based employers by industry and size, cited the cost of health care and the impact of health care reform legislation as a top concern—the fourth consecutive year that the cost of health care topped the list.

While companies seemed to have aggressive ideas for cost-containment measures, most lacked plans to make changes to employer-sponsored coverage required by the Patient Protection and Affordable Care Act (PPACA). The survey found that 48 percent seemed to be taking a wait-and-see approach, indicating no plans to make changes to their coverage. Of those planning to make changes, 17 percent were simply looking to avoid the new mandates by making plans to consider dropping employer-sponsored coverage for full-time employees and pay the penalties.

Another 37 percent were planning to maintain their grandfathered health plans as long as possible, and 23 percent were considering reducing the hours below the threshold for part-time employees to avoid mandatory health coverage. (To learn more, see "More Drop Grandfathered Status to Control Costs.")

Retirement Readiness

Employers and employees are troubled by retirement readiness. Asked to identify their top three challenges on a personal level, 83 percent of respondents said they continue to be concerned about their ability to afford retirement and post-retirement health care. More than 40 percent of respondents planned to delay their retirement—an increase from 34 percent in 2011. Employers are hoping to help ease some of the burden, with 36 percent of those surveyed planning to provide employees with better tools to plan for retirement.

Differing Opinions: Employer vs. Employee

Among the most interesting contrasts in employer-employee responses, employees ranked health care costs fifth overall while employers ranked it the number one total rewards challenge. Financial concerns, such as affording retirement, inflation, job security and investment performance, dominated personal challenges. In contrast, employers were focused on more strategic concerns around talent, health care reform and rewards program strategy and alignment.

Additional Survey Findings

An overwhelming majority (85 percent) of respondents believed that benefit costs per employee will rise over the next five years as a result of PPACA.

More than two-thirds (68 percent) of employers planning a redesign of their rewards program expect to re-evaluate their benefits strategy in light of PPACA.

The majority of survey respondents (70 percent) were considering expanded wellness programs to help manage health care costs.

Overall, one in five organizations had integrated social media into their total rewards communication campaigns.

Outsourcing is gaining high marks among employers, but organizations are still looking for improvements. ​

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