BenefitsAll

The One Employee Benefits Trend Worth Fighting Over

December 15, 2015
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This is the time of year when human resource (HR) experts discuss the top trends in employee benefits. These annual observations typically focus on health plan design or delivery systems that are gaining momentum or at least not losing it. Think high deductible health plans and private exchanges. Or they concentrate on survey responses from employers about programs they are sticking with despite their lack of effectiveness. Think wellness, employee engagement and communication programs. But there is one on-going benefits trend that never makes an HR top trends list.

Maintaining the financial status quo of health insurers and benefit plan service providers.

There is a raging war going on in both the health care and retirement plan industries that service workplace benefit plans.

Health Care

  • Health insurers are in a fight with health care providers, hospitals and pharmaceutical companies over costs that are threatening their profits. Health insurers are showing that they are not afraid to take on other parts of the health care delivery system. They are looking to Congress to reign in pharmaceutical costs, as well as pitting big pharma against itself when negotiating discounts. Additionally, they are cutting providers from the networks who won’t offer better discounts.
  • Pharmaceutical companies are in a political and public relations battle over the ever-increasing prices of both specialty and generic drugs. They are also battling with health insurance companies that they blame for providing inadequate prescription drug coverage under their health plans. And, big pharma continues to play the research and development and innovation costs cards to justify its high prices (all while providing no cost information…).
  • Health care providers and hospitals are sparring with health insurers over proposed mergers, narrowing of provider networks and low claims reimbursements. There's not much new to see in this fight except to see if the health insurer mergers will lead to greater health care discounts from providers.
Retirement Savings

The war over workplace retirement plans is not as high profile as what’s going on in health care, but it is important to track nonetheless. In fact, the fight to hold onto the retirement plan service provider status quo is even more epic because it pits the industry against the government over several issues.

  • First, there is the financial services industry's battle over the DOL proposed fiduciary standard for retirement advisers. Apparently having a rule that requires retirement advisers to act in the best interest of their clients and not provide advice or services that benefit the provider at the expense of the client is burdensome and unnecessary. According to some advisers, the new rule may result in the elimination of services to low dollar accounts (because they just would not be worth it).

  • Second, is the fracas between state governments and the retirement services industry over state designed retirement accounts for workers who do not have access to workplace retirement plans. The industry claims there are more than enough products out there to meet everyone's retirement savings needs. They also don't like the states moving in on their multi-decade, no-risk-to-them, easy money scheme of providing retirement products and services for workers. Even though they were previously okay with not marketing to this segment of the population states are trying to help, they find a state sponsored plan threatening for several reasons:

    • Will the states stop here or will they look to alter status quo plans?

    • Will the industry get a piece of the state retirement plan pie by offering products and services for these new plans?

    • Will states be exempt from some federal regulations that apply to non-state plans?

  • Third, is the entry of robo-advisors in the employer 401(k) business. Low-fee robo-advisors like Betterment are poised to offer employer-sponsored 401(k) plans, recordkeeping services and advice traditionally offered by retirement firms such as Fidelity Investments. Traditional firms will likely purchase, partner with or mimic robo-advisors in an effort to maintain their dominance and their fees.

Casualties of Benefit Plan Wars

The worst part about HR departments and employers ignoring the benefits status quo trend is that employees become the unwitting victims of the health insurance, health care and retirement industry titans. What these groups can’t extract from each other, they will simply make up for by passing on more costs to individuals. All of these industries are experiencing record growth in profits and they are at war to make sure things don’t change.

It’s easy to conclude that employers don’t want to see the employee benefits status quo upended either. Despite all of their claims about the financial burdens of providing employee benefit plans, they are quietly sticking with what they know. And like the insurers and service providers whose products “they” purchase, they can and do just pass on more of the costs to workers.

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