Guest Column

Can an employer really just drop employee benefits?

December 13, 2013
| By Randy Boss |
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It’s no secret employers and employees alike are anxious about the Affordable Care Act. Timelines, decision trees, minimum benefit requirements, enough new paper notices to destroy an entire rain forest — you name it, there is quite a bit out there that employers are forced to deal with.

Employees, on the other hand, are being inundated by political pundits on both sides of the aisle — many speaking half-truths and spin. Employees are wondering what is going to happen to their care — and more importantly, their family’s care.

When I speak with brokers from around the country, I hear statements of concern (and in some cases fear) of a stampede of employers choosing to cancel their employee benefits, putting them out of a job in the process. I caution them to hit the brakes before they go off this cliff prematurely. It’s advice I feel strongly about.

Why do I feel this way? It has to do with the results of many conversations I’ve had with my employer clients about the prospect of just dropping benefits, knowing full well that by doing so they will be facing government penalties, higher taxes, etc. As if this was just a finance question of what costs less: providing benefits or dropping benefits.

True, dropping benefits adds to the company bottom line immediately. But just dropping benefits is not an easy thing to do — that is not real life. The reason being that employees expect three things from their employers in terms of remuneration: salary, retirement and benefits. If an employer is not cooperative with this compensation “package,” employees quit and go to competitors. That’s why we have human resources to maintain and manage these three items.

It has been my experience that after evaluating the options, employers find it difficult to actually “break” this employee expectation — at least not without dramatic push back, if not open revolt, from their employee population.

The conversation usually goes like this: “Now that there is health care reform, should we drop benefits and pay the fines, or should we play within the guidelines of ACA and continue to provide benefits?”

Instead of giving a direct answer, I reply with a question of my own: “Why do you provide benefits now? Why have you for the past five or 10 years, or even since your company was launched?”

After a bit of discussion and head scratching, they quickly self-discover why it is they offer benefits: because employees expect it as part of the compensation package and it allows them to retain good employees. Yes, some employers will drop benefits altogether, but they probably would have at some point anyway, with or without health care reform, if the financial decision/issue was their only concern. But if it was this easy, a lot more employers would have canceled their health insurance for employees years ago.

The reality is, however, that this is not just a financial decision; it’s just as much a human resource decision. In fact, it’s a very important human resources decision.

How important is it to remain competitive in order to obtain and retain good talent? I spoke to an employer recently who commented that they lost four of their best salespeople because a competitor had a better compensation package, which included benefits.

This is the real world, folks. Employers will find the situation much harder than just not writing a premium check each month. It’s bigger than that — much bigger.

So how do we help our clients and prospects reason through this finance vs. human resources question, to strike a balance to protect the bottom line? Employers need to start looking at benefits not just as a risk transfer process, but a risk management process. How can they have less risk, less utilization and fewer employees with chronic diseases? Those companies that are “better than average” will succeed, continue to offer benefits and remain competitive for talent for years to come.

The ACA is a big distraction not only for employers but for brokers, as well. Sometime in the next 12 to 24 months everyone will be wondering why they didn’t work on risk management in the midst of dealing with the compliance of ACA. Don’t be one of those agents — you need to have a plan beyond 2014. Do it now.

Randy Boss is a certified risk architect at Ottawa Kent in Jenison. He designs, builds and implements risk management and insurance plans for middle market companies in the areas of human resources, property/casualty and benefits. He can be reached at rboss@ottawakent.com.

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