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2015 bswift Benefits StudyThe tech-enabled evolution (not revolution)from paternalism to consumerism
JUNE 2015
Published by:
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BackgroundMany pundits within the health insurance and benefits world have been talking
about a “revolution” in benefits. Most notably, they’ve been predicting rapid
employer adoption of private exchanges on the premise of presenting employers
with a radically new and different value proposition.
Rich Gallun, CEO, bswift, sees the situation differently: “The trends in the
employer market speak to an ‘evolution’—a journey that has been occurring
incrementally over the past 15 years—away from paternalism and toward
consumerism.” Taking a close look at what a private exchange offers employers,
Gallun notes: “The culmination of years of iterative technology development has
made it possible for employees to take ownership of their benefits, particularly
during the annual shopping and enrollment period, but also all year round
through deeper engagement with available health care tools and resources.”
Laurel Pickering, President and CEO of the Northeast Business Group on Health,
expands on two initiatives in which large employers are investing to reduce costs
and improve the quality of their health benefits programs: “First is offering High
Deductible Health Plans (HDHPs). Today, employers are implementing these
plans much more rapidly. Second, as a continuation of the consumer choice
logic that began with HDHPs, private exchanges have captured the attention
of benefits administrators over the past year. Private exchanges with defined
contribution allow employees to spend and save their benefits dollars as they
choose. While today private exchanges are primarily a vehicle for consumer
choice and administrative outsourcing, their future rests on their ability to
engage and support consumers in health spending and health choices.”
The 2015 bswift Benefits Study shows modest early adoption rates for private
exchanges for active employees (5% of employers with more than 500
employees, as of early 2015) and questions the adoption numbers reported by
many studies and the media, given the absence of a standardized definition of
the term “private exchange.” To help employers understand the trends “on the
ground” for 2015 and 2016, the focus of this study is on the practical initiatives
in which employers are investing today to reduce benefits costs while engaging
employees in a more consumer-centric, retail experience. The ultimate goal is
that employees could truly manage their own health and benefits investment.
This year’s report provides further evidence of an overall “megatrend” toward
consumerism by way of a sustained increase in the use of the following
initiatives: 1) employee self-service (online enrollment); 2) wellness incentives
and outcomes-based wellness programs; and 3) defined contribution with more
plan choices (especially HDHPs) and benefits options for employees.
Key FindingsEmployers push for more employee “skin in the game” for wellness: 40%
of large employers with wellness incentives
now offer annual incentives of $500 or
more, up from 29% in 2013. After many
years of gradually introducing wellness
program incentives and evaluating their
potential, employers are now using
significant incentives to encourage
employees to improve their health.
Biometrics continue to grow in usage by employers: The use of biometric tests
has grown to 49% of large employers
with wellness programs, and completion
of biometric tests continues to be one of
the top incentivized activities — by 67%
of those large employers with wellness
incentives.
Smoking cessation programs, social fitness and nutrition challenges make huge gains: For large employers with
wellness programs, the offer of smoking
cessation programs jumped from 52%
in 2014 to 71% in 2015, and social
challenges increased from 26% to 34%.
Employers are continuing to expand their
commitment to wellness programs and
expand avenues for employees to engage
in health improvement.
Premium discounts and surcharges remain top incentives; contributions to HSAs and HRAs are growing as use of cash incentives decreases. The most common type of incentive for
large employers is premium discounts/
surcharges, used by 61% of respondents
that offer wellness incentives. From 2014
to 2015, cash and gift cards declined
from 56% to 45% of large employers,
and HSA/HRA contributions increased
from 17% to 22%, demonstrating
employer interest in tax-advantaged
payment mechanisms.
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The study was conducted in January and February 2015 among 500 benefits
decision makers at organizations that offer health benefits. Respondents were
required to be employed at organizations with 50 or more employees and
to have responsibility in HR/benefits/insurance, designing benefits plans and
selecting benefits carriers.
The respondents were divided into two groups: large employers with more
than 500 benefits-eligible employees and small employers with 50 to 500
benefits-eligible employees. This study focuses first on data collected from large
employers; key findings for employers with 50 to 500 employees appear at the
end of the study.
Companies Remain Committed to Workplace Wellness2014 marked another year of steady progress for workplace wellness programs.
Although some academics continue to question the efficacy of wellness
programs, the employer community remains committed to workplace wellness
and to putting more employee “skin in the game.” Inspired by positive results
from their own implementations as well as those of their peers, 85% of large
employers continue to invest in wellness programs, with significant upticks in
the use and dollar amount of wellness incentives and also in the deployment of
“social” wellness initiatives such as fitness challenges.
Increasing numbers of employers are also realizing the positive impact that
health and wellness programs can have on both presenteeism and corporate
culture. One need only scroll through the pages of the latest Fortune 100 Best
Companies to Work For list to recognize that workplace wellness programs
are part of the framework that defines leading companies. And employees
are responding: In a related Fortune survey, employees evaluate current and
prospective employers based on their commitment to health initiatives.
Wellness initiatives continue to be an integral component of employee benefits
offerings, with many CEOs and HR leaders believing that these programs are
among their most valuable contributions to their employees. Brad Wolfsen,
Senior Vice President, bswift, notes: “In short, workplace wellness has become
part of the fabric of American business culture.”
Key Findings (continued)
Adoption rates for private exchanges are more modest than have been widely publicized and predicted: 5% of large employers
reported that they currently have a
private exchange in 2015, and of those
that do not, 6% are considering a private
exchange for 2016.
Consumer choice and defined contribution are on the horizon: 17% of large employers are considering
defined contribution for 2016; of those
employers, the top initiative is to add
more health plan options in 2016.
Employee self-service continues to grow, but many employers are not taking full advantage of automation: The use of employee self-service for
enrollment continues to grow every
year; surprisingly, however, 25% of
large employers still do not offer online
enrollment options for new hires, and
18% do not provide automated alerts to
remind new hires of looming enrollment
deadlines.
The growing complexity of benefits takes a toll on HRIS/payroll vendors: The decline in market share for
HRIS/payroll vendors in the benefits
administration marketplace (from 60%
in 2013 to 45% in 2015) and the low
Net Promoter Scores (NPS) registered by
these vendors suggest that the demands
of benefits technology are escalating,
and these vendors are having difficulty
keeping up.
The 2015 bswift Benefits Study, commissioned by bswift and conducted by
Employee Benefit News, investigates trends in benefits technology, wellness
programs and defined contribution/private exchanges, comparing this year’s
numbers to those reported in 2013 and 2014.
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Employers Push for Greater Employee “Skin in the Game”40% of large employers rate health cost savings as the primary objective for wellness programs (Figure 1). As a result, most employers (79% of large employers with wellness programs) seek to align employee
incentives with their own and shift from a paternalistic approach for health benefits to a more consumer-based
model that leverages the power of wellness incentives.
But some of these employers are voicing concern that the Affordable Care Act (ACA) regulations released
last year place restrictions on their efforts. The latest rules have certainly created a challenge for employers
that feature incentives for wellness programs, particularly those paying incentives to employees based on
health outcomes. “It’s not as easy to move to outcomes-based,” notes David Olsen, Director, Benefits, Lennox
International, referring to the impact of the ACA regulations. “We needed to come up with alternative
standards, ensure our plan documents incorporated wellness appropriately, provide extensive legal review
of the requirements and develop a robust communication strategy to ensure we communicated the
requirements of the program in a comprehensive and compliant manner.”
Despite these challenges, however, more employers have moved to outcomes-based programs (Figure 2). In
2015, 26% of large employers with wellness programs offer incentives for meeting or exceeding biometric
thresholds.
Michael Dermer, Senior Vice President and Chief Incentive Officer, Welltok, observes: “There has been
significant growth in the total incentives used by employers over the last five years. With that growth, there is
also the desire for more immediate-term ROI and the need to optimize the use of those dollars.”
1%
2%
2%
16%
37%
40%
1%
1%
6%
19%
33%
40%
Reduced employee absences
Increased employee productivity
Employee retention/satisfaction
Health outcomes
Employee engagement/participation
Health costsavings/avoidance
2015 2014
Figure 1—Key Performance Indicators (KPIs) for Wellness Programs, Large Employers What is the most important metric you use to evaluate the success of your wellness program?
>500 employees Base = Employers offering wellness programs Source: SourceMedia Research, 2014, 2015
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Indeed, to help motivate employees to take charge of their health, employers are increasing the dollar
amount available for wellness incentives; 40% of employers now offer incentives of $500 or more, as
compared to 36% in 2014 and 29% in 2013 (Figure 3).
Premium discounts and surcharges continue to be the most frequently used incentive type (Figure 4). This year also saw a major shift toward funding Health Savings Accounts (HSAs) and Health Reimbursement
Arrangement (HRA) accounts (as opposed to cash rewards), as these consumer-directed accounts gain
greater market share. The employee and employer tax advantages of pre-tax HSA and HRA contributions
combined with HDHPs make account-based contributions better than cash for maximizing the value put in
the employee’s pocket.
40%
40%
>500 employees Base = Employers offering incentives for wellness programs Source: SourceMedia Research, 2013, 2014, 2015
15%
34%
51%
53%
74%
24%
62%
56%
65%
77%
26%
45%
53%
67%
72%
Meeting or exceedingbiometric thresholds
Wellnesseducation/classes
Tobacco use/tobacco non-use
Completion of biometric tests
Completion of HealthRisk Assessments (HRA)
2015 2014 2013
Figure 2—Incentivized Wellness Programs, Large EmployersFor which of the following wellness programs, if any, does your organization offer incentives (i.e., “carrots”) or disincentives (“sticks”)?
>500 employees Base = Employers offering incentives for wellness programs Source: SourceMedia Research, 2013, 2014, 2015
12%
10%
10%
33%
30%
26%
25%
24%
24%
26%
27%
33%
3%
9%
7%
2013
2014
2015
Less than $50 $50 to $249 $250 to $499 $500 to $1,000 More than $1,000
Figure 3—Investment in Wellness Incentives per Employee, Large Employers What is the annual dollar amount per employee for wellness incentives?
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Employers Continue to Expand on Wellness Programs in the Workplace2015 saw a signifi cant increase in smoking cessation programs, up about 20 percentage points over last year’s
numbers, with 71% of employers offering these programs (compared to 52% in 2014). “Smoking cessation is a
relatively easy incentive to implement,” notes Gene Baker, Vice President, Total Rewards, Iron Mountain. “There
is universal agreement that tobacco is unhealthy, and smoking cessation programs are effectively the gateway
program for wellness.”
While the vast majority of employers (77%) rely on self-reported affi davits from employees, 23% now use
biometric tests to validate their employees’ tobacco-free status. As the cost of biometric tests decline and
available incentives increase, it makes sense that employers are adopting a “trust but verify” approach to
these incentives. This is consistent with the larger number of employers that now also leverage dependent
verifi cation programs (as discussed in the “Employee Self-Service” section below).
In tandem with the increase in clinical outcomes as the criterion by which to measure wellness program
success, employers’ use of biometric tests (specifi cally blood pressure, cholesterol and BMI) is also growing.
By developing health profi les of its employee population, employers can target areas of focus and track the
progress of their wellness programs over time.
“Capturing health data enables us to identify employee pockets to target for improvement, whether it is a particular
location or subsidiary. We also need to be able to show our leadership that we’re making strides in improving our
employees’ overall health,” states Keith Kolodgie, Director of Employee Benefi ts Services, MaineHealth.
>500 employees Base = Employers offering incentives for wellness programs Source: SourceMedia Research, 2013, 2014, 2015
Figure 4—Types of Wellness Incentives, Large EmployersWhat types of incentives or disincentives does your organization use?
Additional paid time off (e.g., vacation days)
Reduced co-pay/co-insurance
Eligible for richerplan and/or
lower deductible
Additional contributionsto a Health Savings
Account (HSA) orHealth Reimbursement
Arrangement (HRA)
Cash, gift cards or sweepstakes
Health insurancepremium discounts,
credits, surchagesor penalties
61%
64%
64%
45%
56%
48%
22%
17%
12%
8%
6%
4%5%
6%
2%2%
3%
2015 2014 2013
7%
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The use of social challenges to support fitness and weight-loss initiatives is increasing, from 26% of employers
in 2014 to 34% in 2015. Making wellness a year-round program can have a favorable impact on employee
engagement rates and also serves to shift the workplace social dialogue to health and nutrition (Figure 5). “We are seeing employers use social challenges more often and for longer periods of time — their goals are to
make healthy behavior and wellbeing a workplace standard,” states Dr. Rajiv Kumar, Founder and CEO, ShapeUp.
This year reveals a marked recovery in wellness participation rates over last year. Nearly half of large companies
reported achieving participation rates over 50%. This represents a return to 2013 levels following the 2014 dip
to 39%, most likely the result of the distraction that ACA regulations wrought on employers last year.
The data shows that employee participation rates are impacted by the dollar amount of incentives. Only 12%
of employers offering annual incentives of less than $50 generate employee participation rates of higher than
50% (Figure 6). On the other hand, 67% of employers offering between $500 and $1,000 in incentives and
79% of employers offering more than $1,000 have participation rates of 50% or higher.
This demonstrates the power of incentives to drive employee participation in wellness programs.
While incentives go a long way toward motivating high levels of participation, the dollar amount of the
incentive alone does not guarantee high participation. No employer wants to be among the 21% of large
employers offering more than $1,000 in incentives and still suffering low participation rates (50% or less).
Program and incentive designs, in addition to effective employee communication, also matter.
1%
5%
33%
17%
29%
52%
52%
5%
13%
26%
41%
57%
52%
2%
16%
24%
34%
49%
58%
60%
67%
71%
Discounts on healthy food
Clinics and/or medical professionals/coaches at worksite
*Subsidized gym memberships
Biometric tests
*Lifestyle modification coaching(e.g., weight loss) online or via phone
Health Risk Assessments (HRA)
*Mental health/emotional wellnesscoaching online or via phone
Smoking cessation
2015 2014 2013
Fitness/weight loss challenges or activities
>500 employees Base = Employers offering wellness programs Source: SourceMedia Research, 2013, 2014, 2015*Data not available for all years
Figure 5—Employee Wellness Programs, Large Employers Which wellness programs or initiatives did/does your organization currently have in place for its employees?
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Private Exchanges: Modest Start; No Common DefinitionConsulting firms Accenture and Oliver Wyman both predict that as many as 40 million individuals will enroll
in private exchanges by 2018, which could represent up to 33% of employees nationally. PwC estimates that
nearly half of all employers have either implemented or are considering using a private exchange for active
employees before 2018. Largely driven by expectations of higher revenue, sponsors of private exchanges—
looking to position messages about the value of consumer choice and the potential for cost savings—
are investing heavily. Every major insurer and national broker/consultant appears to have a
private exchange strategy.
The findings in the bswift Benefits Study show that the rate of private exchange adoption has been modest to
date, with some progress expected for 2016 (Figure 7). 5% of large employers self-reported that they are in
private exchanges as of 2015. Of those currently not offering a private exchange, an additional 6% of these
large employers are “considering” a private exchange for 2016 and possibly more in the years thereafter.
>500 employees Base = Employers offering incentives for wellness programs Source: SourceMedia Research, 2015
Less than 25% 26% to 50% 51% to 75% Greater than 75%
7%
4%
14%
30%
14%
24%
63% 25% 6% 6%
47% 16% 13%
35% 41% 11%
39% 28%
43% 36%
More than $1,000
$500 to $1,000
$250 to $499
$50 to $250
Less than $50
Figure 6—Participation Rates by Incentive Amount, Large EmployersIn 2015, what is the employee participation rate of your wellness program? (with breakouts by the annual dollar amount per employee for wellness incentives)
6%
77%
17%
Base = >500 employees Source: SourceMedia Research, 2015
67%
71%
Do you consideryour 2015 benefits program to be a private exchange?
Don’t know/not sure
5%Yes
No
Don’t know/not sure
Among those not offering a private exchange in 2015, are you consideringa private exchange for 2016?
83%
11%
Figure 7—Private Exchanges 2015 Actual vs. 2016 Considering, Large Employers
2015 2016
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Real confusion exists in the marketplace regarding the ambiguity (or variation) surrounding the definition of a
“private exchange.” According to Mike Smith, Director of Exchange Solutions, Lockton Benefit Group:
“Many people are confused by the various approaches to private exchanges. Some define a private exchange as
a vibrant marketplace of expanded plans and choices for employees, powered by decision support technology
and underlying defined contribution. Others say it’s a metallic structure of plans (platinum, gold, silver and
bronze) from competing carriers, underwritten on a fully insured basis. Still others say a private exchange is just
benefits administration on steroids and sometimes ‘free’ with the inclusion of voluntary benefits.”
Two components defining private exchanges seem universally held: first, expanding plan choice for
employees or “consumers”; and second, leveraging consumer-facing technology to help users make more
educated and personalized decisions. Michelle Dietz, Associate Vice President of Partner Integration, Unum,
puts it this way:
“We hear discussions about whether private exchanges are growing or whether they will survive long
term. While the terms ‘exchange’ or ‘marketplace’ might change, what will remain is the shift towards
technology-enabled benefits. Platforms help employers offer a wider set of benefits choices among the
employee population, fostering the personalization of benefits. Employers want to help employees make
selections, and they want to do it using a platform that offers some employer advantages too, such as ease of
administration and compliance reporting.”
“When asked if they are considering a private exchange for next year,” notes Don Garlitz, Senior Vice
President, bswift, “the majority of our clients would say ‘no.’ And many that say ‘yes’ are often just
adding more health plan options to their employee offering—especially an HDHP and sometimes also a
narrow network.”
The results of this year’s Benefits Study lead us to the view that a private exchange is a benefits offering that
presents multiple benefit and plan choices—with employees engaged as consumers, selecting plans that best
fit their individual needs, often with help from shopping and decision support tools. The health plan designs,
network arrangements, supplemental plan offerings and funding models may vary widely from employer to
employer, but the constant theme is a focus on tech-enabled, consumer choice and engagement.
Consumer Choice Is a Real Trend: Defined Contribution, Decision Support and Expanded Plan ChoicesThis study identifies three prevailing employer trends. First, the percentage of employers using defined
contribution for health and welfare benefits is increasing (Figure 8). The number currently utilizing a defined
contribution approach is small, but significantly more employers will be looking at it for 2016.
67%
71%
Figure 8—Defined Contribution, 2015 vs. 2016, Large EmployersIs your organization currently offering or considering a “defined contribution” approach for any of its health and welfare benefits for active employees?
Don’t know/not sure
Base = >500 employees Source: SourceMedia Research, 2015
10%
12%
77%
Offering for 2015 Considering for 2016
28%17%
55%
Yes
No
Don’t know/not sure
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Second, one third (33%) of all large employers currently provide employees with decision support as part of
the shopping and enrollment process (Figure 9).
Third, a growing contingent of employers intends to introduce more plan choices, network options and carrier
options (Figure 10). More employers are offering HDHPs to employees today (58% of large employers in 2015,
up from 53% in 2014, based on the bswift Benefits Database), and more employees are choosing these plans
(27% of employees with a choice of HDHPs and other plans in 2015, up from 21% in 2014) (Figure 11).
Figure 9—Decision Support Tools, Large Employers As of January 2015, do you/will you offer decision support tools at the point of enrollment that help employees select health and/or other benefit plans?
Don’t know/not sure
Base = >500 employees Source: SourceMedia Research, 2015
Yes
No
Don’t know/not sure
33%
55% 12%
Figure 10—Expected Health Plan Changes, 2014 vs. 2015, Large EmployersWhich of the following health plan changes do you plan to make as a result of implementing a “defined contribution” approach?
50%
More health plan options
More carrier choices
More network options
Move from self-insuredto fully insured
Don't know/not sure
2015 2014
50%
40%
20%
10%
17%
6%
9%
6%
28%
38%
>500 employees Base = Employers offering or considering a defined contribution approach in 2016
Source: SourceMedia Research, 2014, 2015
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When spending their own money, consumers show an increased appetite for HDHPs and less rich plans.
Historically, contribution practices often had employers funding HDHPs with fewer absolute dollars than
traditional plans, and employees thus stayed with richer health plans. But as employers look to more of a
defined contribution model, the after-contribution cost advantage of HDHPs for employees is increasing
HDHP participation rates. Similarly, on the public exchanges (as well as on some private exchanges with a pure
defined contribution approach), consumers show a tendency toward HDHPs and silver/bronze plans.1
In the public exchanges, the rate at which consumers are choosing “narrow network” plans has been
relatively high. Employer-based private exchanges are expected to follow a similar path as narrow networks,
high performance networks and Accountable Care Organizations (ACOs) become more widely available.
These multiple network options may or may not include multiple health carriers as well.
For employers and employees seeking to save money, time will tell whether cost advantages will be driven by
carrier, by network or by ACO. As Laurel Pickering notes: “There is a new term in health benefits: it’s ‘network
optimization,’ which is getting the most out of the network in terms of cost and quality. There is increasing
recognition on the part of employers that if we get people to the best providers, good outcomes will follow.”
In addition to more health insurance plan options, private exchanges frequently incorporate a variety of
supplemental insurance programs such as accident, critical illness, pet insurance, legal coverage and other
voluntary plans. Jessica Moser, Vice President of Channel Development, MetLife, notes: “These days it’s all
about choice, which can be delivered through a broad range of voluntary benefits that complement existing
health care plans.”
Employers Value Flexibility Over a One-Size-Fits-All ApproachEmployers are signaling a preference for flexibility in terms of the benefits they offer their employees and how
they make their products available. According to Moser: “For employers trying to balance varying demands,
flexibility is the name of the game and is about the employer’s needs just as much as it is about the needs of
the workforce. Whether it’s a private exchange or technology platform offered through brokers, independent
companies or carriers, there are lots of choices to suit all employer needs.”
2013
2014
2015
Don’t know/not sure
Base = >500 employees Source: bswift Benefits Database, 2014, 2015*Among employees with a choice between High Deductible Health Plans and other plans
Figure 11—Consumerism: High Deductible Health Plan Participation Growth
2014
2015
58%
53%
27%
21%
% Employers Offering % Employees Choosing*
1http://files.kff.org/attachment/examining-private-exchanges-in-the-employer-sponsored-insurance-market-report p.10
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The confusion surrounding private exchanges and defined contribution has subsided a bit, with fewer
employers unsure about what defined contribution will mean for their organizations (Figure 10). The barrage
of attention from consultants and the media has helped educate employers on the practical realities of private
exchanges. From the experience of early adopters, a consensus seems to be emerging that “benefit
buy-down” (moving employees from traditionally richer health insurance plans to HDHPs or silver/bronze
plans) and “network optimization” offer quick hits for real savings.
Some of the early predictions about private exchanges do not appear to be on target as of 2015. Employers
are currently not “dumping” group coverage in favor of individual insurance arrangements; among other
factors, the tax advantages for group coverage appear to be too strong. Large employers are not running
immediately toward fully insured solutions; most (nearly 80%) expect to remain self-insured in 2016.
In summary, this study’s findings of modest private exchange penetration suggest that most employers are taking
an incremental approach to their benefits strategies in general, with a reluctance to throw away the longstanding
employer-customized commitments they have in place for wellness, disease management and other health
initiatives. States Garlitz from bswift: “A commitment to a more employee-centric and technology-enabled
program is clearly part of most employers’ employee benefits strategies.”
The Cadillac Tax as a Factor in PlanningMany pundits and consultants have pointed to the ACA’s “Cadillac tax” looming in 2018 as a reason for employers to
move to private exchanges, or at least to revisit the trajectory of their current employee benefits program. Given the
substantial tax that will be imposed on high-cost health plans beginning in 2018, 49% of large employers indicate
the tax as a factor in their 2016 benefits planning, but only 21% cite it as a major factor. The tax has clearly prompted
a subset of large employers to consider a private exchange; of those large employers considering a private exchange,
64% cite the “Cadillac tax” as a factor in their 2016 planning, with 32% describing it as a major factor (Figure 12).
As anticipated, the Cadillac tax is influencing more employers in their 2016 planning, compared to 2015. Employer
concern is likely to grow given that the tax is triggered by total plan cost and these costs continue to increase over
time. Although employers can pass along the tax burden to their employees, providing lower cost plan options
provides a way to minimize the impact on employees. To avoid the perception of a “benefit takeaway” associated
with eliminating high-cost plans, many employers will bring in lower cost options (including HDHPs and narrow
network plans) alongside the more expensive Cadillac plans, positioning consumer choice in a private exchange or
defined contribution arrangement as the solution.
The number of overall employers considering Cadillac tax for 2016: 49% as factor, 21% as major factor
The number of overall employers considering Cadillac tax for 2015: 41% as factor, 12% as major factor
The number considering Cadillac tax for 2015, only looking at employers that are considering PIX: 46% as factor, 14% as major factor
The number considering Cadillac tax for 2015, only looking at employers that are considering PIX: 64% as factor, 32% as major factor
Figure 12—The Cadillac Tax as a Factor in Employee Benefits Planning
Major factor Minor factor
Base = >500 employees Source: SourceMedia Research, 2015
All employers
Employers considering private exchanges
All employers
Employers considering private exchanges
2016
2015
21% 28%
32% 32%
12% 29%
19% 31%
49%
64%
41%
50%
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Figure 13—Employee Benefits Enrollment Methods, Large EmployersHow do your employees enroll in benefits (e.g., health, life, etc.) for each of the enrollment types?
Annual Open Enrollment
Life Event
New Hire
Online enrollmentfor all benefits without administrator involvement
Online enrollment for all benefits—but enrollments are verified/processed by a benefits administrator
Online enrollment for some benefits—other benefits are processed via manual or paper process
No online enrollment
Base = >500 employees Source: SourceMedia Research, 2015
32% 37% 14% 17%
16% 33% 14% 36%
26% 36% 13% 25%
The ACA and IRS Form 1095 CompliancePart of the value proposition of a private exchange is that technology can help employers meet burgeoning
compliance requirements, especially those associated with new ACA regulations. Whether or not they offer
health plans, employers with 50 or more full-time equivalents are required to prepare and distribute IRS Form
1095-C to all full-time employees and covered part-time employees, and self-insured large employers must
include more detailed coverage information than fully insured employers.
Not only must employers be prepared to demonstrate that coverage was affordable (based on the employee-
only cost for the lowest cost plan), but self-insured employers must also prove month-by-month coverage for
each individual, including dependents. The calculation of the lowest cost plan may be affected by employee
location/geography, employment classification and available wellness credits or surcharges, where only non-
tobacco credits are allowed in the formula (i.e., other wellness credits may not be used in the calculation of
the employee cost for the lowest cost plan).
Large employers indicate that the primary source of data necessary to complete these forms will come from
benefits administration systems (25%), carriers or TPAs (18%), payroll systems (18%), HRIS systems (16%) and
others—most frequently a broker or consultant or unknown/not sure (11%). Most payroll systems and many HRIS
platforms do not track the eligibility or dependent-coverage data required to complete the IRS forms. Therefore,
some employers that rely on payroll and HRIS systems to produce Form 1095 may be surprised to discover they
must pay to obtain necessary data from another source to complete the forms. Brokers and consultants may be
effective in helping support this work if they leverage a benefits administration system behind the scenes.
Employee Self-Service and AutomationEmployers continue their gradual move away from a reliance on paper-based processes as the way for
employees to enroll in benefits. The percentage of large firms without any online enrollment has declined in
the past year from 29% to 25% for New Hire Enrollment, from 41% to 36% for Life Event Enrollment and
from 20% to 17% for Annual Open Enrollment (Figure 13).
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On the other hand, the contingent of employers relying 100% on employee self-service for enrollment has
not increased due to two factors. First, a pronounced—and growing—number of organizations are adding
a “verification” layer to their processes (especially for dependent verification). The percentage of firms using
online enrollment supplemented by a verification or administrative process increased from 34% to 37%
for Annual Open Enrollment and from 33% to 36% for New Hire Enrollment. Second, more employers are
seeking the involvement of administrators to help process certain benefits on a manual basis (speaking to the
increased complexity and selection of benefit offerings in 2015), with that percentage increasing from 9% to
13% for New Hire Enrollment and from 9% to 14% for Annual Open Enrollment.
Similarly, employers’ use of automated alerts to notify employees and/or administrators continues to grow—
from 21% in 2013 to 25% in 2015. However, a sizable percentage of large employers (18%) still do not
provide any automatic alerts to inform new hires or administrators of an important enrollment deadline
(Figure 14).
Despite widespread immersion in technology (approximately 90% of U.S. consumers own mobile phones
and/or have access to the Internet) and escalating expectations of employees, it is striking that, as of March
2015, 25% of large employers still do not offer online enrollment for new hires. Employee self-service for
benefits enrollment continues to increase, but there remains a surprisingly high volume of employers who are
not fully embracing or leveraging readily available technologies.
Benefits Technology: Increasing Complexity of Benefits Drives Market Shift to “Best-of-Breed” VendorsThe world of benefits—and, by association, benefits administration—is becoming more complex. Employers
must be agile enough to manage a changing environment composed of many moving parts, including ACA
compliance, HDHPs, wellness credits, spousal surcharges, defined contribution, mobile compatibility and
optimization, more benefit plan options, voluntary benefits and higher expectations from employees on the
benefits shopping experience, including decision support tools. In essence, the bar for industry-leading “ben
admin” has reached a new high.
Base = >500 employees Source: SourceMedia Research, 2013, 2014, 2015
Figure 14—New Hire Communication, Large Employers How are new hires alerted if their enrollment window is closing soon and their enrollment remains incomplete?
2015
2014
2013
25%
22%
21% 52%
56% 23%
57% 18%
26%
Auto alert Administrators monitor and notify No alerts or notifications
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These new initiatives are positive developments for the market and for employees but are challenging to
execute well. They require fl exible and nimble benefi ts technology to enable a streamlined and seamless user
experience for both the employee and also the HR/benefi ts team.
What used to be considered “good enough” may not pass muster anymore; customers have higher
expectations. For years, HRIS/payroll vendors offering a “one-stop shop” approach with “integrated”
solutions encompassing everything from payroll to talent management to benefi ts have been making the
case that although their benefi ts solutions may not be “state-of-the-art,” they get the job done. As of 2015,
however, this argument appears to be losing ground, as the numbers in the study reveal.
Increasingly, the HRIS/payroll “one-stop shop” vendors are losing market share within the benefi ts technology
marketplace. From 2013 to 2015, HRIS/payroll’s market share of the overall benefi ts administration marketplace
for large employers declined from 60% to 45% and has been replaced by benefi ts technology specialists,
benefi ts outsourcing fi rms, benefi ts brokerage/consulting fi rms and private exchanges (Figure 15).
Even more striking is the difference in customer satisfaction between the HRIS/payroll “one-stop shops” and
at least some of the leading benefi ts technology companies. In this survey, respondents were asked to identify
their primary technology for managing enrollment and eligibility data for employee benefi ts and to rate,
on a scale of 0 to 10, the likelihood that they would recommend that vendor to a colleague, using the Net
Promoter Score (NPS) methodology.
In 2015, similar to 2014, the overall NPS for the HRIS/payroll vendors is worse than -50, and none of the
major players registered a positive NPS, which shows both that benefi ts are very complicated as well as the
deep dissatisfaction on the part of benefi ts leaders and managers with the benefi ts solutions that their HRIS/
payroll vendors offer. In contrast, there are some benefi ts solution vendors with an NPS greater than +20.
Considering that many view NPS as a leading indicator of growth, the future looks bright for leaders in the
benefi ts technology space.
Of note is that this NPS data is based solely on benefi ts technology and does not address HRIS/payroll vendors’
ability to deliver on the rest of their value proposition. When considering only their core HR and payroll
functions, some of these vendors may fare better in terms of their NPS scores.
Figure 15—HRIS/Payroll Market Share of Benefits Administration Market, Large Employers
2013 2014 2015
58%
57% 18%
Auto alert Administrators monitor and notify No alerts or notifications
45%
60%
Base = >1,000 employees Source: SourceMedia Research, 2013, 2014, 2015
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Companies with 50 to 500 Employees: WellnessThis year’s study shows fewer small employers (defined for purposes of this study as those with 50 to 500
employees) investing in workplace wellness, with 63% offering wellness programs in 2015, down from
about 70% in 2014. The 63% of small employers is also significantly lower than the 85% of large employers
investing in wellness in 2015. This is likely due to three size-related reasons: smaller organizations have
limited resources for bearing the administrative burden of wellness, there is a predominance of fully insured
health solutions among small employers (64% are fully insured) and lower overall health/benefits budgets for
these employers mean there is less potential impact on their financial results.
Key findings include:
Employee engagement/participation is more important than cost savings in assessing wellness program
success. 33% of small employers reported employee engagement/participation as the top Key Performance
Indicator (KPI) of success for their wellness program, ahead of cost savings, which was the second ranked
KPI (at 26%). This reversal of order among the top two KPIs vis-à-vis the large employer segment may be
explained by the fact that more of these small employers are fully insured, thus putting more of the pressure
to reduce costs on the insurer rather than the employer, at least in the short term.
Incentives are primarily based on completion of HRAs and biometric tests, which is similar to the findings for
large employers. For those employers offering wellness incentives to employees, completion of health risk
assessments (HRAs) leads the pack at 67% (a jump up from 56% in 2014), followed closely by completion of
biometric tests at 63% (vs. 58% for the year before). Participation in wellness education or coaching comes in
third at 46%, down from its top spot at 73% for 2014 (Figure 16).
Figure 16—State of Incentivized Wellness Programs, Small vs. Large EmployersFor which of the following wellness programs, if any, does your organization offer incentives (i.e.,”carrots”) or disincentives (”sticks”)?
Completion of Health RiskAssessments (HRA)
Completion ofbiometric tests
Participation in/completionof wellness education
or coaching
Tobacco use/tobacco non-use
Meeting or exceedingbiometric thresholds(i.e., for cholesterol,
blood pressure)
50-500 employees >500 employees
67%
63%
72%
67%
26%
16%
45%
46%
34%
53%
Base = Employers offering incentives for wellness programs Source: SourceMedia Research, 2015
>500 employees 50-500 employees
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Outcomes-based wellness programs are likely to grow in 2016. While only 16% of small employers use outcomes-
based wellness today (compared to 26% of large organizations), 30% are considering offering incentives/
disincentives for meeting or exceeding biometric thresholds for 2016 (compared to 18% of larger employers).
The amount invested in wellness incentives is similar between small and large employers. 38% of small
employers offer annual wellness incentives of greater than $500, which is comparable to that of large
employers (Figure 17).
Companies with 50 to 500 Employees: Defined Contribution and Private ExchangesSmall employers are embracing private exchanges and defined contribution more rapidly than large
employers, but the faster adoption rate has not been driven by concerns with the Cadillac tax.
Key findings include:
Defined contribution and private exchanges are gaining traction more rapidly for small employers than for
large employers. Currently, 20% of organizations with 50 to 500 employees use a defined contribution
approach to benefits (twice the rate of large employers), and 25% are considering offering it for 2016.
Approximately 12% of small employers view their 2015 benefits program as a private exchange (more than
twice the rate of large employers), and 10% are considering one for 2016.
Most small employers are likely to remain fully insured in 2016. For 2015, 64% of small employers are fully insured,
and 36% are self-insured. The survey responses suggest these numbers are likely to remain similar for 2016.
50-500 employees >500 employees
Figure 17—Investment in Wellness Incentives per Employee, Small vs. Large EmployersWhat is the annual dollar amount per employee for wellness incentives?
Less than $50
$50 to $249
$250 to $499
$500 to $1,000
More than $1,000
10%
14%
26%
26% 26%
24%
22%
33%
29%
7%
9%
Base = Employers offering incentives for wellness programs Source: SourceMedia Research, 2015
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The Cadillac tax is less concerning to small employers. Only about 21% cite the ACA-related excise tax on
employer-provided health benefits as a factor in their benefits planning for 2016. At about half the rate
cited by larger organizations, this finding is intriguing given that small employers—at least those with more
than 50 employees or full-time equivalents—are equally exposed to the tax consequences. This lower level
of concern among small employers may reflect either a lack of awareness of the tax consequences or the
historical reality that, compared with larger employers and unions, these firms have been less likely to sponsor
very rich plan designs.
Companies with 50 to 500 Employees: Self-Service and AutomationWhen it comes to implementing employee self-service and automation for benefits enrollment and
administration, small employers have significant opportunities ahead of them.
Key findings include:
The majority of small companies do not have online enrollment for new hires. 63% of small employers—a
slight uptick from last year’s 61%—are without an online system for enrolling new hires in benefits. For
life events and annual open enrollment, the percentages without an online solution are 62% and 53%,
respectively. Additionally, very few small employers leverage new hire auto alerts (9%).
In regards to ACA compliance, small employers plan to use varied sources to calculate lowest cost health
plans. The primary source of information that small employers plan to use to verify the lowest cost health
plan for each employee is their payroll system (30%), followed by their carrier/TPA (20%) and then their
benefits administration system (18%). This statistic reflects the absence of benefits administration solutions
in this employer segment. Small employers with fully insured health plans, simple benefit programs and
basic eligibility data available on their payroll system or HRIS may be able to report on affordability without a
comprehensive benefits administration platform, but others may be challenged to determine and defend the
affordability of health plans for certain groups of employees.
Figure 18—State of Automation, Small vs. Large Employers
New hire employeeself-service without
administratorinvolvement
New hire auto alerts
Life event employeeself-service without
administratorinvolvement
Open enrollmentfor all benefits
withoutadministratorinvolvement
50-500 employees >500 employees
26%
7%
24%
9%
16%
5%
31%
7%
Base = All respondents Source: SourceMedia Research, 2015
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ConclusionThe 2015 bswift Benefits Study findings provide evidence that we are in the midst of an evolution, rather than
a revolution, in employee benefits. Yes, the employee benefits world is trending toward “retail” and shifting
from a “paternalistic” approach to more of a “consumerist” approach, but the changes are incremental and
most employers are taking discrete steps at their own pace and on their own terms. Many employers are
essentially leveraging their existing programs while adding more choice and technology to their offerings.
The key “consumerism” trends highlighted in this study include steady, incremental increases in: a) employee
self-service and online enrollment; b) the use and amount of wellness incentives as well as the use of “social”
challenges and c) more plan choices for employees—such as health plan options like HDHPs and narrow
networks.
Despite the hyped predictions, the employer world is not moving en masse to radical new private exchange
models overnight. In fact, some might argue that the term “private exchange” is just a new name for a
modern employee shopping experience with a greater choice of plan offerings and with technology enabling
greater employee engagement with their health care all year round.
ACA has helped accelerate the ongoing evolution of employee benefits programs and given employers
both a reason and “cover” to introduce less rich health plan options and to further shift costs to employees.
ACA has also helped fuel the nation’s ongoing education on health care. Finally, ACA has added substantial
complexity to employers’ regulatory requirements; employers with large hourly and part-time populations
were impacted in 2014, but in 2015, all employers will need to learn more about their obligations in regards
to 6055/6056 reporting and 1095 forms.
“We expect that the next three years will bring continued movement toward consumerism,” notes Rich
Gallun, CEO, bswift. “If the tax code is eventually changed to remove the advantages of group health
coverage, things may change more quickly and radically. But in the meantime, there is steady progress in
leveraging technology to empower and educate consumers, to offer more choice and to create a more
consumerist world.”
MethodologyThe study was based on the results of an online survey fielded during January and February of 2015. In
total, SourceMedia surveyed 500 benefit decision makers at organizations that offer health benefits. The
sample was randomly drawn from subscribers of Employee Benefit News. The margin of error for the
total sample is +/-5.0% at the 95% confidence level.
About bswift
bswift, an Aetna subsidiary, offers software and services that streamline benefits, HR and payroll
administration for employers and exchanges nationwide. bswift’s state-of-the art, cloud-based technology,
outsourcing solutions and Springboard Marketplace exchange platform significantly reduce administrative
costs and time-consuming paperwork, making life easier for administrators and millions of consumers who
enroll in benefits with bswift. To learn more, please contact us at:
10 S. Riverside Plaza, Chicago, IL 60606 877.9.BSWIFT | info@bswift.com | www.bswift.com
About SourceMedia
SourceMedia Research (a unit of SourceMedia, publisher of Employee Benefit News) provides complete
custom B2B research solutions for strategists, marketers, agencies and others seeking in-depth insight
into select segments of the financial services industry. SourceMedia Research combines a strong technical
competency in market research with deep market knowledge and focus. www.sourcemedia.com
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