High rankings for paid time off (PTO), retirement, and medical and pharmacy benefits
Benefits preference surveys are important tools for determining what employees value most, identifying current strengths and key opportunities, and prioritizing related decisions and investments. Yet collective bargaining sensitivities, concerns about unmet participant expectations and the risk of professional exposure have limited their use.
While there are other reasons, the growing need to optimize the power of total rewards to attract and retain talent is overcoming these fears. Conducting surveys every other year builds a quantitative foundation for sharper qualitative insights from formats such as focus groups.
A recent evaluation of three dissimilar organizations compared commonalities and differences in benefit preferences, and focus groups allowed each one to closely examine why. Paid time off (PTO) was the most important benefit for all, followed by retirement and medical and pharmacy benefits.1
Making flexibility and choice the defining element of PTO benefits
Employees have become more vocal about needing more flexibility, including time away from work. A PTO study can help employers determine the factors that are most likely to effectively address this high priority. Findings are also used to assess whether the entire spectrum of absence benefits is market competitive, based on factors such as overall desirability, optimal paycheck protection and financial sustainability.
Specific PTO indicators include thresholds for years-of-service tiers, maximum balances, the availability of a cash-out program and separate holidays. Allowances such as carryover and front-loading may also be evaluated. Shortening timelines for retirement vesting or PTO accrual tiers, from a span of five years to two or three, rewards employee loyalty.
For the employer as well as the employee, a choice of PTO options adds flexibility, especially when time-off requests can't be approved or the requester wants to defer preapproved vacation days. Policies that allow employees to choose other forms of compensation instead of time away from work introduce customization. Some alternatives are converting PTO to cash or a payment toward health premiums, and funding a non-highly compensated employee's retirement account. Another option is donating time to fellow employees who are confronting a medical emergency or recovering from a major disaster.
The importance of competitive retirement plan design and educational opportunities
A retirement study can help determine if plan contribution matching practices and vesting schedule parameters are market competitive. Some employers match employee contributions annually. Others invest an amount every payday along with the employee's 401(k) contribution, allowing participants to benefit from the time value of money as they buy into the markets. Considerations for shorter vesting periods include immediate rather than gradual schedules and matching throughout the plan year instead of at year end.
Many employees are looking for investment and retirement guidance. Offering educational sessions by topic, covering a wide range of interests across career stages, can provide broad support for building deeper knowledge and confidence. An annual calendar with reminders strengthens this value by helping to drive use.
Offering and actively managing medical and pharmacy benefits without increasing costs
Reluctance to take away or change employee programs and services continues in the current labor market, especially high-priority benefits such as medical and pharmacy. Instead, employers are considering ways to shrink costs without requiring employees to share them.
Strategies and interventions in the pharmacy category generally present the most opportunity, including regular contract negotiations and market checks, and the use of a specialized pharmacy consultant. Better terms, discounts and rebates can shift costs out of the health plan without transferring them to employees.
Plan vendors typically cover medication at the end of a presentation, and it's important to stay tuned. As these costs trend upward on the medical services side, employers need ample time to become familiar with management tools available to them and the future impact of the pipeline on gene therapy and other medications. Pipelines for gene and cell therapies are expected to expand to larger populations as oncology innovation increases. Projected growth for the specialty pharmacy market is 8% per year through 2025.2
The increasing role of innovation and technology in decreasing costs and improving health outcomes
Precision medicine, which considers a person's genetics, environment and lifestyle, also brightens the horizon for cost control and population health. This approach is designed to identify the right medication when the initial diagnosis is made, averting trial and error or needlessly maximizing the dose duration of specific therapies. Alternative funding programs are another option when the goal is to remove plan costs without shifting or compromising care. Organizations can use these programs to access patient or manufacturer assistance dollars, which help to absorb medication costs.
Rising adoption of biosimilars is projected to save approximately $100 billion in US drug costs between 2020 and 2024. Compared to branded reference products, these drugs are estimated to be as much as 35% less expensive.2 Health plans that steer members toward the therapy with the lowest net cost can maximize the potential gain for employers.
On a related front, health plans and pharmacy benefit managers (PBMs) are starting to integrate programs into member engagement engines. A key purpose is to alert patients to potentially less expensive sources of medication. Wellbeing and point solution integration also shows promise for helping patients achieve better health outcomes, such as behavior-based reversal of type 2 diabetes.
This tech-enabled approach supports adherence and helps identify opportunities to reduce or eliminate medication when the patient's needs change. Unnecessary expenses that remain in plans can be removed, while an enhanced employee experience can be reached with little or no added cost.
Keeping the workforce aware of the extent of their total rewards is a pivotal requirement. Employees need to understand all the dimensions of their benefits for modernization and customization efforts to succeed. When these options are clearly cataloged and easily accessed, employees can readily see how to use them most effectively, either alone or in combination. Regular communications are also instrumental. For employers, it's a matter of closing the distance — through connections that instill a sense of appreciation for both personal and organizational value.