Administration December 13, 2018

Employers Struggling to Understand Retirement Patterns of Employees

Most organizations appear to underestimate the financial challenges facing older workers, and thus the likely timing of retirements, Willis Towers Watson says.

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Willis Towers Watson published a white paper, “Working late: Managing the wave of U.S. retirement,” exploring employer’s lack of confidence when it comes to tracking their employees’ plans for when and how to retire.

“Older workers can be some of employers’ most important employees—valued for their knowledge of industries, companies, and customers, and their contributions to organizations’ continuity and future success,” the white paper says. “However, demographics of the U.S. working population illustrate that the pace of their departure is increasing, as 83% of employers report a significant number of employees at or approaching traditional retirement age.”

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According to Willis Towers Watson, just over 80% of organizations acknowledge the importance of their older workers and managing the retirement process. Yet only about half believe they understand the process well, and just one-quarter feel they have found an effective approach.

“There are also important disparities in perception—between managements’ views of when pending retirements will occur, and the plans of the workers,” the white paper says. “Employers are concerned both about increasing retirements and the resulting loss of seasoned employees’ skill and experience, as well as rising numbers of delayed departures leading to higher salary and benefit costs.”

Accordingly, Willis Towers Watson finds firms are taking a new look at retirement patterns, developing new strategies for balancing the supply and demand of older workers’ talent, and integrating their workplace programs for physical, social, and financial well-being.

When asked why managing the orderly retirement of employees is important, 83% of those surveyed ranked “orderly transfer of knowledge of the organization” as their top concern, while 60% pointed to “concerns over workforce productivity.” About one-third pointed to “roadblocks in promoting younger employees.” Interestingly, the costs of keeping on older workers was relatively less important—a top three concern for just 20% or so of those surveyed.

“These workforce concerns are nearly universal, ranking high at firms with both younger and older work forces, and irrespective of the structure of their benefit programs,” the white paper says. “Complicating management’s task of developing strategies for orderly retirements is a sizable misunderstanding of employees’ motivations and circumstances, in particular their perceived retirement resources and freedom to stop working.”

Among employees, 69% say they hope employers will make working past conventional retirement age easier. Most older employees, about two-thirds, would prefer to remain at their current employers, even if a comparable job was available elsewhere.

“Still, 55% of employees over 50 expressed a desire to retire as soon as they can afford to,” the white paper says. “For many, however, reaching that goal could be delayed. More than half of older employees report financial worries, and a significant minority—about a third—feels stuck in their jobs. Accordingly, many older employees expect to defer retirement until after age 70.”

From the employer perspective, most organizations appear to underestimate the financial challenges facing older workers, and thus the likely timing of retirements, Willis Towers Watson says.

“Seventy-one percent of employers believe that most of their older employees are likely to have adequate funds to retire when they choose, and 77% expect that most of their older employees are not likely to need to work into their 70s for financial reasons,” the white paper says. “Many employers also seem to misunderstand employees’ motivations for working longer. While over half of employees would prefer a fast track to retirement, only one in five employers believes that their people are eager to leave, and would retire at the point they qualify for benefits.”

According to the white paper, employers in many cases plan to make it easier for older employees to work longer and support knowledge transfer in the next few years.

“At about one-third of employers, older workers can downshift their roles from management positions to working as individual contributors,” the white paper says. “Such programs may be expanded to half of organizations by 2020. Other measures include shorter work weeks, or scaling back to part-time or part-year employment at many organizations. Roughly half of companies currently engage former employees who are drawing retirement benefits as consultants or contingent workers. About as many hire people who have retired from other firms with relevant industry experience.”

Benefits December 13, 2018

Predictions for Employer Actions to Reduce Health Care Costs in 2019

Transformation in health care delivery, focus on high-dollar claims and drug costs, and continued movement to account-based plans are among the list for what employer health benefit providers and advocates see happening in 2019.

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Health care costs continue to put economic pressure on employers and employees, and the pace of meaningful and sustained change is slower than needed.

More employers are driving transformation in health care delivery by either directly contracting, partnering with their health plans, or working with other third parties to promote value-based care. Nearly half of the employers surveyed by the National Business Group on Health (49%) are pursuing one or more of these strategies that focus on improving access and convenience in addition to better quality and lower cost. The NBGH predicts it will spread to more localities in the future.

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Chris Byrd, executive vice president, WEX Health Operations & Corporate Development Officer, also says there will be more use of value-based plan designs and narrow networks in 2019.

Tyler Harshey, Actuarial and Finance Group practice leader at Mercer, says while jumbo employers are typically the trailblazers, in 2019, midsized employers will take the lead with a couple of truly radical benefit strategies: Reference-based pricing solutions as a replacement for traditional open access broad network solutions, and swapping their own traditional employer-sponsored plan for health reimbursement accounts (HRAs) that employees use to shop coverage on the individual market.

Byrd adds that the new year will also see increased focus on high-dollar claims and specialty drug costs. According to the NBGH, the push for more straightforward, simple and streamlined supply-chain pricing and contracting models is reaching a tipping point; 2019 may well be the year the paradigm shifts. Over 90% of employers surveyed by the NBGH would welcome an alternative to the rebate-driven approach to managing drug costs.

“Aggressive change in pharmacy management is bringing greater transparency: a better line of sight into PBM [pharmacy benefit manager] acquisition costs and new pricing approaches: net cost model, point-of-sale rebates, removing rebates from the equation in lieu of other financial incentives, or focusing on outcomes, to name a few. Combined with the vertical vendor integration taking place, employers can expect administrative and operational challenges over the next few years,” says Lisa Oswald of the performance audit group at Mercer.

Rich Fuerstenberg from the Leave, Absence and Disability team at Mercer says a number of factors are driving an increase in both the prevalence and the size of extreme claims, and 2019 will be the year they start to appear with greater frequency. “What’s harder to predict is what the employer response will be. Will they pay these ongoing jumbo claims and move on? Or will they take action?” he queries.

With the severity and frequency of catastrophic claims, employers will increase their stop-loss insurance levels and those that don’t buy it now will reconsider, says Dan Davey with Mercer’s Stop Loss Center Of Excellence. “We’ll see growing interest in alternative funding options, such as single parent captives and group captives, and carrier consolidation to create the scale necessary to handle the volume of catastrophic claims. Carriers will more closely scrutinize charges and payment practices of major medical carriers and PBMs,” he says.

According to the NBGH, employers are rethinking consumerism. Today’s consumer places a premium on simplicity, convenience and personalization. Navigators, concierge services and virtual resources are expanding to help consumers take some of the complexity out of accessing care and to better anticipate and address their unique needs. For the first time, the NBGH annual survey shows a 9% decline in the number of employers offering only consumer-directed health plans (CDHPs) and it expects this percentage to grow in future years reflecting a movement towards increased choice.

However, while most employers continue to offer a choice of health plan offerings—both consumer-directed and traditional, Byrd expects employers to continue to nudge employees toward CDHPs. “As awareness of the various advantages CDHP’s offer spreads, eyes will open to the additional value of consumer health accounts as a budgeting and financial discipline tool to help those who struggle to make ends meet ensure that they have funds available when confronted with healthcare expenses,” he says.

Wade A. Symons, JD, CEBS, with the regulatory resources group at Mercer, says the firm expects final rules on HRAs and action on health savings account (HSA) expansion will create a lot of buzz in 2019, but the complexity of the rules, administrative challenges and delayed effective dates will push real change off into future years.

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