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Value now part of main course in benefits


As more employers serve up benefits on a budget, another trend is emerging: The quest for value. How do companies keep employees healthy and engaged at an affordable cost?

Accountable care organizations, health care providers that band together to offer a broad array of high-quality services at lower costs because of the scale of operations, are one solution.

Benefits consultant Leavitt Partners L.L.C. reports that 402 of the 744 active ACOs offered commercial contracts for medical care as of Dec. 31, 2014, primarily through partnerships with health insurers.

And though their viability is still a question mark, “we are seeing a lot of brokers moving to position themselves to try and make those connections,” said David Smith, a partner at Leavitt Partners.

Another benefit staple, life insurance, is holding its own, with 60% of employers with 10 or more workers offering it and 65% of those paying for it, says insurance and financial research association LIMRA International Inc.

This is while life insurers are enhancing their group coverage with extra services such as will preparation, grief counseling, identity theft protection, travel assistance and estate resolution, often at no extra cost.

This makes it less of a “death benefit,” said Brian Lelio, vice president of group life products with MetLife Inc., and more of a “life benefit,” prompting “the employee to think not only about their future needs … but now today’s needs.”

Where private-sector employees generally save for retirement by making sometimes-employer-matched contributions to a 401(k), those in health care, education and other such nonprofit organizations rely on a 403((b).

Like its better known sibling, the 403(b) allows for tax-deferred retirement savings. But it is more inclusive, open to even part-time employees, and it is not subject to the federal means testing that keeps worker contributions in proportion regardless of their salaries. “That is a big deal,” said Tammy Hughes, a principal with Mercer L.L.C.

European companies, for their part, are changing the way they view benefits with Solvency II capital requirements looming and longevity risks increasing.

More companies are looking to create international programs to manage employee benefits much as they handle other risks — with multinational pooling arrangements.

Employee mental health remains at the forefront for U.S. companies, which continue to develop comprehensive wellness plans that include it. The driver? Cost. Absences and presenteeism, or working at less than full capacity, accounted for roughly half of the $210.5 billion economic toll of major depressive disorder in the United States in 2010, researchers reported in the February 2015 issue of the Journal of Clinical Psychiatry.

Cost is also behind companies’ increased focus on other chronic conditions, including diabetes and heart disease. “About $500 billion out of the $3 trillion spent on health care in the U.S. is directly related to chronic diseases caused by obesity, principally diabetes and cardiovascular disease,” said Sean Duffy, co-founder and CEO of Omada Health Inc.

This edition of Crain’s Benefits Outlook explores these trends and others in-depth.