Employees Worry About Health Benefit Reductions

Faced with rapidly escalating medical costs and increasingly complex insurance plans, most employees are concerned about health care affordability and reductions in health benefits; furthermore, they want assistance from their employers in managing health care, according to two recently published surveys.

A study conducted by human resources services firm Hewitt Associates found that nearly 80% of the more than 18,000 U.S. employees surveyed worry that health care coverage will ultimately become unaffordable. More than half believe selecting the health care plan that best meets their needs—and using the plan effectively—is becoming more complex every year.

Despite these concerns, most employees are not taking responsibility for managing their own health care, according to the study. Just 34% of the workers surveyed reported tracking their current health care expenses, and fewer than half said they take the time to estimate future health care expenses. While the majority of respondents said their employers provide sufficient tools and information for choosing and using the plan, only half said they use the tools.

Jennifer Murphy, health care communication leader, Hewitt Associates, commented, "As health plans become more complex, it's critical that employers have a year-round strategy that includes ways to promote the tools and educate employees and their families."

Employees enrolled in high-deductible health plans (HDHPs) with health savings accounts (HSAs) find managing their plans particularly challenging, the study found. Just 30% of respondents enrolled in HSA-qualified HDHPs indicated they understood and were satisfied with their choice; 48% said they would not choose the same plan again. When asked why they chose an HDHP, 40% said they were attracted by the lower premiums.

"As health care costs continue to rise, HSAs are great vehicles for helping employees save for future health care expenses, but they can be ineffective or confusing to employees if they aren't using them in the right way," said Murphy.

Similarly, a survey of more than 12,000 employees by human resources consultancy Watson Wyatt showed that 69% of workers are worried their employer will increase out-of-pocket health care costs through higher deductibles and co-payments over the next three years. Results also showed that 53% of respondents are concerned that, over the next two years, their employers could reduce their health care benefits by limiting coverage or access to providers.

The survey clearly revealed that employees place considerable value on their employer-provided health care benefits, with two-thirds of respondents saying the quality of job-related health care benefits is an important factor when deciding whether to remain with an employer. Researchers noted, however, that in a 2006 survey of employers, none of the respondents cited health care coverage as a key reason top-performing employees leave.

Ilene Gochman, director of organization effectiveness at Watson Wyatt Worldwide, said, "As their concerns escalate, employees will increasingly consider health care benefits when deciding whether to stay with their current companies. And if the trend continues, these benefits could become a real differentiator as employers try to hold on to key talent."

While employees are most worried about their health care benefits, they are also concerned about their retirement benefits, according to the Watson Wyatt study. Some 43% of the employees surveyed said they are concerned their employer will reduce retirement or retiree medical benefits in the next three years, while 30% of respondents covered by a defined benefit plan said they worry their company will freeze or terminate the plan within three years. Meanwhile, researchers observed, the survey showed that employers tend to underestimate the impact retirement benefits have on retention.

"It's not surprising that employees are concerned about benefits reductions, given the changing relationship between employers and employees," said Laury Sejen, director of strategic rewards at Watson Wyatt. "Employers can help ease those concerns by explaining the competitive pressures they face in the marketplace and associated trade-offs in reward programs. By clearly communicating their total rewards strategy, management can pave the way to better employee understanding of their total package and acceptance of any benefit changes that need to be made."