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FINDINGS AND INSIGHTS FROM THE 2017BENEFITS STRATEGY & BENCHMARKING SURVEY

BEST-IN-CLASSBENCHMARKING ANALYSIS

FOR MIDSIZE EMPLOYERS2017

Reaching PeakOrganizationalPerformance

DATA DRIVESDECISIONSTM

Gallagher AJG.COM �3

MIDSIZE EMPLOYERS

Table of Contents

Executive Summary ...........................................................................................................................4Overview ........................................................................................................................................................................................... 4Methodology ................................................................................................................................................................................... 5

Best-in-Class Profi le Group�—�Healthcare Cost Control ....................................................... 6Best-in-Class Attributes�—�Healthcare Cost Control .........................................................................................................7

Best-in-Class Profi le Group�—�Human Resource Management ........................................14Best-in-Class Attributes�—�Human Resource Management ......................................................................................... 15

Best of the Best�—�Top Performers in Both Profi le Groups .............................................. 20Best-of-the-Best Attributes .....................................................................................................................................................21

About Gallagher ................................................................................................................................26

�4 BEST-IN-CLASS BENCHMARKING ANALYSIS 2017 Benefits Strategy & Benchmarking Survey

MIDSIZE EMPLOYERS

Executive SummaryOverviewMuch like climbers aspiring to scale new heights, employers often look to the experience of their peers for guidance as they pursue destination-employer status. The right path to improved healthcare cost control and better employee attraction and retention outcomes isn’t the same for all. However, common strategies, programs and tactics emerge among those that more eff ectively control spending and address human resource management needs. Insights from their experiences can help other employers identify and evaluate changes — whether minor or major — that provide solid ground for increasing the value of their total compensation off ering.

The results highlighted in this analysis show how employers with best-in-class attributes are more proactively and strategically managing healthcare costs. By working to stabilize these costs they gain the advantage of more time, energy and fi nancial resources. And more funds can be invested in key competitive opportunities such as training and other benefi ts, salaries, wages and bonuses, or increased headcount to support growth.

This Best-in-Class Benchmarking Analysis interprets selected data from midsize employers with 100 to 999 full-time employees (FTEs) that responded to Gallagher’s 2017 Benefi ts Strategy & Benchmarking Survey.* Based on fi ndings, the analysis describes key attributes of best-in-class organizations in two profi le groups, defi ned by areas of excellence:

• Healthcare cost control

• Human resource management

Each group represents a best-in-class competency that’s critical for outperforming other midsize employers. The report also describes the strategies, tactics and programs that distinguish the best-of-the-best employers — those organizations that lead their peers in both healthcare cost control and human resource management. *A version of this report based on the responses of larger employers with 1,000 or more FTEs is also available.


MIDSIZE EMPLOYERS

MethodologyGallagher followed a six-step process to identify and characterize best-in-class midsize employers:

Best-in-Class Analysis Process

12

34

56

Identify Profi le Groups and establish evaluation criteria• Profi le Group 1:

Healthcare cost control• Profi le Group 2:

Human resource management

Select Survey Questions and Score Responses for each profi le group

Identify the Best of the Best• Top-performing

employers in both groups

Determine the Best-in-Class and Best-of-the-Best Attributes based on statistical signifi cance

Analyze Datafrom Gallagher’s Benefi ts Strategy & Benchmarking Survey

SuronResponses

rofi le group pro

urvnsponses

e grou

Best-in-Class Analysis Process

1. Analyze data from Gallagher’s 2017 Benefi ts Strategy & Benchmarking Survey.

2. Identify profi le groups and establish evaluation criteria.

• Profi le group 1: Healthcare cost control

• Profi le group 2: Human resource management

3. Select questions from the survey that are relevant to the two profi le groups. Score all responses to the questions

for each group and then total the scores.

• A total of 1,192 midsize employers responded to the entire set of profi le group questions.

4. Divide the total scores for each group into quarters — or quartiles —

according to their values, and assign each employer to a quartile. The

top quartile for each group includes the highest-scoring or best-in-

class employers for healthcare cost control (27%) and human resource

management (24%).

5. Identify the best-of-the-best employers among the best-in-class pool.

These exceptional performers scored in the top quartile of both profi le

groups. Just 83 midsize employers (7%) qualifi ed as the best of the best.

6. Determine the attributes that separate the best-in-class and best-

of-the-best employers from all other midsize survey participants, by

analyzing response data for questions on strategy, tactics and programs.

Run Quartile Analysisto identify each group’s best-in-class employers • Total score = upper

24%–27% (1st quartile)

1,192Midsize employers responded

to the entire set of profi le group questions


MIDSIZE EMPLOYERS | Healthcare Cost Control

Best-in-Class Profi le Group�—� Healthcare Cost ControlCriteria for midsize employers that are best in class at controlling healthcare costs include their success in containing healthcare premium increases over the past three years, and their perspective on the eff ectiveness of their healthcare cost-management strategy.

Measures of best-in-class healthcare cost control

• Health plan premium increase�at the most recent

renewal

• Health plan premium increase one year prior

• Health plan premium increase two years prior

• Self-assessed healthcare cost management strategy

eff ectiveness

An analysis of the best-in-class group found that these employers achieved at least one of the following metrics for premium cost increases in the past three years: 3.9% or less for the last three years; 0.9% or less for two of those years; or 3.9% or less for one year plus 4.9% or less for another year.

Data for each year’s health plan premium increase was analyzed separately, and employers were placed in quartiles based on their relative performance. Employers with consistently low premium increases accumulated the most points, and were most likely to be included in the best-in-class group for healthcare cost control.

Points were also assigned to employers based on the level of confi dence they expressed in the eff ectiveness of their strategy to manage healthcare costs. Employers expressing more confi dence received more points.

The highest possible total score was 20 points — including rankings for both premium increases and strategy eff ectiveness. Scoring at least 12 points, 317 employers (27%) qualifi ed for the top quartile as best in class for healthcare cost control.

Midsize employers: Healthcare cost control

27%

28%21%

24%

Top quartile: Best in class

Quartile 2

Quartile 3

Bottom quartile

Best-in-class health premium trendEmployers achieved at least one of these premium increase metrics over the past three years:

3.9% or less (all 3 years)

0.9% or less (2 of 3 years)

3.9% or less (1 of 3 years) + 4.9% or less (1 of 3 years)


Healthcare Cost Control | MIDSIZE EMPLOYERS

Best-in-Class Attributes�—�Healthcare Cost ControlWhen survey responses from best-in-class employers were compared to the rest of their midsize peers, distinguishing attributes emerged. An analysis of these attributes identifi ed four key themes:

• Prioritizing culture, wellbeing, engagement and productivity

• Getting costs under control and putting benefi ts in balance

• Reining in costs without shifting the burden to employees

• Providing a robust wellness program aimed at reducing healthcare costs

Prioritizing Culture, Wellbeing, Engagement and Productivity Interestingly, the best-in-class employers for healthcare cost control rank controlling benefi t costs as a top human resource priority less often than their peers. This tendency could be due to strategies implemented in the past several years that are giving them greater control and more confi dence. With costs stabilized at a more acceptable level, these employers may be pivoting their focus to workplace culture, wellbeing, engagement and productivity. Best-in-class employers were more likely to cite these areas as top priorities.

Increasing workforce engagement and productivity

40%

33%

Controlling benefi t costs47%

54%

Creating or maintaining a strong workplace culture

37%

30%

25%

18%Improving employee health and wellbeing

��Best in Class ��Other Midsize Employers

Marks a best-in-class response that is lower compared to other midsize employers.

Top human resource priorities

Getting Costs Under Control and Putting Benefi ts in BalanceResults for best-in-class employers suggest their greater control over healthcare costs has allowed them to balance their mix of benefi ts and compensation more eff ectively than their peers. They report greater harmony in spending on benefi ts compared to wages and bonuses (85% vs. 74%) as well as the right level of spending on training and development (54% vs. 44%). Also, they’re more likely to see their benefi ts as competitive, including aff ordable for employees and a fi t for their needs. For example, the best in class more often report health plan premium costs are reasonable for individual (89% vs. 83%) and family (64% vs. 54%) coverage.

Report greater harmony in spending

Benefi ts compared to wages and bonuses

85% 74% vs.Appropriate spending on training and development

54% 44% vs.



Aff ordable health plan premiums for family coverage

64%

54%

Increased employee cost sharing through plan design changes in 2017

41%

55%

Increased employee contributions to 2017 health plan premiums

43%

57%

Considering a move to defi ned contribution7%

14%



Correct balance of spending on wages and bonuses vs. benefi ts

85%

74%

Aff ordable health plan premiums for individual coverage

89%

83%

Industry-competitive health benefi ts83%

76%

54%

44%

71%

61%Employee satisfaction with health benefi ts

Appropriate spending on training and development

Employers’ view on the strength of their total compensation

Approach to cost sharing and defi ned contribution

Reining in Costs Without Shifting the Burden to EmployeesMidsize employers that are best in class for healthcare cost control are taking concrete actions to manage their costs. What’s more, many are applying tactics that contain spending without adding costs for eligible employees. In 2017, best-in-class employers were less likely to increase employee contributions to health plan premiums (43% vs. 57%), or add to employee expenses through benefi t plan design changes such as higher deductibles, copays or coinsurance (41% vs. 55%). And fewer were considering defi ned contribution as a cost-control method (7% vs. 14%).

836%


HEALTH PLAN PREMIUM AFFORDABILITY

SPENDING BALANCE AND COMPETITIVE STRENGTH



22%

14%Provide nonsmokers a discount on premiums

Best-in-class employers for healthcare cost control are more likely than their peers to off er just one or two medical plan options (71% vs. 62%). Yet they’re less likely to use a narrow provider network aimed at lowering premium costs. The fi rst tactic is a departure from providing employees with greater choice as a way to minimize expenses, and in fact, does not distinguish the best in class for human resource management and the best of the best among both profi le groups.

Midsize employers that control healthcare costs exceptionally well use a variety of methods. They reduce spending not only by selectively limiting choice, but also by applying benefi t eligibility measures and incentivizing value-focused tactics that directly support their employees’ fi nancial interests. For example, they have a stronger tendency to disallow domestic partner coverage (40% vs. 51%) and to discount premiums for nonsmokers as a motivation for healthier behaviors (22% vs. 14%). They’re also more likely to lower the cost of prescription drugs that treat expensive chronic conditions (8% vs 4%) or to reduce the cost of certain medical procedures performed at designated centers of excellence (7% vs. 4%).

Options like self-insured medical plans are more common among best-in-class employers (62% vs. 41%). In return for claims that pose a higher fi nancial risk under this funding arrangement, they gain lower health plan fees, greater control over healthcare costs and — if costs are managed well — possible savings. Once again, because the best in class tend to pivot more often toward changes in plan design over increases in employee cost sharing, they’re also more apt to contract directly with a pharmacy benefi t manager (PBM) to administer pharmacy benefi ts (20% vs. 13%). In addition, they’re more likely to use a specialty PBM to address rising prescription drug spending than their peers (29% vs. 21%).

Choose a self-insured funding arrangement for the medical plan

62%

41%

Off er only 1–2 medical plans 71%

62%

Off er domestic partner coverage 40%

51%

Use narrow provider networks 13%

19%

Reduce employee costs for using centers of excellence for certain medical procedures

7%

Carve out pharmacy benefi ts 20%

13%

4%

29%

8%

21%

4%

Use a specialty PBM

Reduce employee costs for prescription drugs to treat high-cost chronic conditions



Use of traditional and innovative cost-saving tactics



It’s notable that best-in-class employers more frequently use health programs and services to control costs than their peers do — including wellness (63% vs. 54%) and disease management (45% vs. 31%). Findings also show they’re more likely to extensively integrate their health and disability management programs (26% vs. 18%) — strategically linking outcomes for improved success. This more sophisticated, proactive approach focuses on maintaining employee health and wellbeing. The goal is to give management the tools they need to keep employees actively at work, in spite of injuries or illnesses. Although worksite populations infl uence the availability of onsite health clinics, more of the best in class off er the convenience of medical services at these facilities (13% vs. 8%).

Providing a Robust Wellness Program Aimed at Reducing Healthcare CostsEmployers that are best in class at healthcare cost control have a greater tendency not only to off er wellness programs, but also to cite the potential for reduced healthcare costs as a top reason for their investment (41% vs. 30%). They also provide more robust program options and incentives for employees — that produce better metrics — and more often extend eligibility to all employees, spouses and retirees.

Typically, employers use internal resources to administer their wellness programs (68% vs. 70%). When there’s an exception, the best in class rely more often on outside vendors (14% vs. 12%) and brokers or consultants (5% vs. 2%) instead of their health plan vendor (11% vs. 18%).

The use of incentives to drive wellness program accountability is more typical of best-in-class employers compared to their peers. Several provide cash or gift incentives (36% vs. 28%) and premium diff erentials contingent on participation levels (19% vs. 12%). Also, the best in class tend to evaluate both the qualitative and quantitative success of their wellness program components to a greater extent. Metrics they apply more frequently include program participation (35% vs. 28%), results of satisfaction surveys (23% vs. 17%), health risk assessments (20% vs. 15%) and chronic condition management (6% vs. 3%), as well as lost work-time data (6% vs. 2%).

Off er disease management programs45%

31%

Implement wellness programs63%

54%

Integrate health and disability management programs

26%

18%

13%

8%Off er an onsite health clinic with medical services


Improving spend while promoting employee health

INTEGRATED HEALTH AND DISABILITY MANAGEMENT

This integrated, proactive approach focuses on maintaining employee health and wellbeing. The goal is to give management the tools they need to keep employees actively at work, in spite of injuries or illnesses.




Rank reducing healthcare costs as a top reason for wellness program investment

41%

30%

Off er a wellness program62%

53%

PROGRAM STRATEGY

Premium diff erentials19%

12%

Cash or gift incentives36%

28%

PARTICIPATION INCENTIVES

Spouses19%

13%

All employees50%

40%

Retirees5%

2%

ELIGIBILITY

Health plan vendor11%

18%

Outsourced wellness vendor 14%

12%

Broker or consultant5%

2%

ADMINISTRATION

Employee engagement (satisfaction survey results)

23%

17%

Program participation35%

28%

Health risk assessment results20%

15%

Lost work-time data6%

2%

6%

3%Chronic condition management

EVALUATION


Wellness program profi le

Internal resources68%

70%



As part of a robust wellness off ering, best-in-class employers tend to provide employees with a wider variety of options compared to their midsize peers. The most common include fl u shots, biometric screenings, tobacco cessation programs and classes that promote individual health and wellbeing. They also focus more often on wellness communications, wellness committee coordination and program integration, which promote total wellbeing and support a culture of health within the organization. Health challenge activities, health fairs, walking paths, and onsite wellness coordinators and healthcare professionals — all more commonly available from best-in-class employers — boost the worksite eff ectiveness of their wellness initiative.



Classes to promote good health and wellbeing 33%

25%

Tobacco cessation 33%

21%

Weight management 26%

19%

Financial wellbeing opportunities (part of the wellness program)

24%

17%

Physical activity program 25%

20%

Disease management 22%

13%

19%

14%Community engagement opportunities

Wellness communications 51%

41%


Biometric screenings 39%

32%

Wellness committee or wellness champions 35%

25%

Flu shots 49%

38%

Policies (smoke-free worksite, etc.) 30%

22%

Program integration (employee assistance, safety and other programs)

31%

23%

Health challenge activities (minutes of physical activity, healthy eating, etc.)

30%

23%

Health fair 28%

23%

Web-based portal 28%

21%

Healthy vending and/or healthy eating 20%

15%

Onsite wellness coordinator or health professional

17%

10%

18%

13%Onsite walking paths

Wellness program elements


MIDSIZE EMPLOYERS | Human Resource Management

Best-in-Class Profi le Group�—� Human Resource ManagementCriteria for establishing midsize employers that are best in class for human resource management included turnover percentages and completion of a workforce engagement survey. Self-perceived success with employee communications and internal assessment of workforce satisfaction, motivation and commitment also counted toward their scores.

Measures of best-in-class human resource management

• Turnover percentage

• Success of employee communication eff orts

• Assessment of workforce satisfaction, motivation

and commitment

• Completion of a workforce engagement survey

within the last two years

Turnover was analyzed by industry and points were assigned by quartile. To account for the importance of this outcome-based factor, this measure was weighted twice as heavily as the others.

The highest possible total score was 21 points — including rankings for turnover metrics, self-reported success of employee communication, and established processes to assess employee engagement. Scoring 13 to 21 points, 286 employers (24%) qualifi ed for the top quartile as best in class for human resource management.

Midsize employers: Human resource management

Top quartile: Best in class

Quartile 2

Quartile 3

Bottom quartile

24%

25%27%

24%

Associations, Financial Services, Law, Religious

5% or less

Healthcare, Public Entity, Social Services, Technology, Transportation, Wholesale

9% or less

Best-in-class turnover by industry

Manufacturing, Retail14%

or less


Human Resource Management | MIDSIZE EMPLOYERS

Best-in-Class Attributes�—�Human Resource ManagementWhen survey responses from best-in-class employers were compared to the rest of their midsize peers, distinguishing attributes emerged. An analysis of these attributes identifi ed three key themes:

• Philosophically approaching benefi ts as engagement tools and recruiting assets

• Strategically addressing employee engagement and supporting communications

• Strongly promoting wellbeing through wellness programs and absence management

Philosophically Approaching Benefi ts as Engagement Tools and Recruiting AssetsBest-in-class employers tend to adopt diff erent employee compensation and benefi t philosophies than their peers. The overarching distinction is their treatment of benefi ts as engagement and recruiting assets. They’re less likely to say compensation and benefi ts are simply costs of doing business (13% vs. 19%) and more inclined to consider them investments in maximizing workforce performance to achieve business outcomes (36% vs. 29%). Also, employers ranked as best in class for managing human resources identify medical and pharmacy as cornerstone benefi ts for attracting and retaining talent (70% vs. 63%). Increasing their organization’s innovation is a higher priority because this attribute supports competitive benefi ts that secure the right talent (21% vs. 16%).

The best in class employers for human resource management have a greater fi nancial stake in their benefi ts, with 56% reporting a higher average cost of employer-paid benefi ts per eligible employee — $10,000 or more — compared to 46% for their peers. Related to this fi nding, their annual health plan deductibles tend to be lower. For their medical plans with the highest enrollment, they’re less likely to off er in-network deductibles above $2,000 for individual coverage (16% vs. 27%) or above $4,500 for family coverage (18% vs. 28%). Even so, they report a better balance of wages and bonuses compared to benefi ts spending (83% vs. 75%). A possible contributor may be their higher rates of multi-year labor cost modeling used for compensation planning (24% vs. 19%).

In addition, best-in-class employers more often report that employees are satisfi ed with their benefi ts, and that family premiums (63% vs. 54%) as well as deductibles, copays and coinsurance (69% vs. 62%) are more aff ordable. They also have a greater tendency to say they spend enough money on training and development (58% vs. 43%). And, they’re more likely to make sure their benefi ts match employee needs by subsidizing stand-alone vision plans (40% vs. 32%) and business travel accident insurance (34% vs. 27%).

Total compensation investments are simply the cost of doing business

13%

19%

Total compensation investments maximize workforce performance to achieve business outcomes

36%

29%

Medical and pharmacy are cornerstone benefi ts for attracting and retaining talent

70%

63%

21%

16%Increasing innovation is an organizational priority



Outlook on the value of compensation and benefi ts



Employer-subsidized business travel accident insurance

34%

27%

Deductibles above $2,000 for the in-network individual medical plan with the highest enrollment

16%

27%

Employee satisfaction with health benefi ts


Aff ordable added costs for employee healthcare benefi ts (deductibles, copays and coinsurance)

71%

61%

83%

75%

69%

62%

Appropriate spending on training and development

58%

43%

63%

54%Aff ordable health plan premiums for family coverage

24%

19%Multi-year labor cost modeling for compensation planning

18%

28%

Deductibles above $4,500 for the in-network family medical plan with the highest enrollment

27%

23%Average cost of employer-paid benefi ts per eligible employee $10,000 to $14,999

40%

32%Employer-subsidized stand-alone vision plans



Average cost of employer-paid benefi ts per eligible employee of $15,000 or more

29%

23%

Strategically Addressing Employee Engagement and Supporting CommunicationsA strategic and comprehensive approach to employee engagement and communications tends to occur more often with best-in-class employers. Specifi c to improving engagement, 57% report having a strategy in place compared to 44% of their peers. When managing and engaging employees, they’re more likely to set clear performance goals (45% vs. 33%) in addition to identifying development needs and creating action plans (43% vs. 30%). And it’s more typical of the best in class to support employees’ interests in defi ning and pursing a career path (39% vs. 26%), and to provide interesting and challenging work (31% vs. 19%).

As for employee communications, best-in-class employers are much stronger in taking a comprehensive approach (21% vs. 9%) and somewhat less likely to have no strategy at all (7% vs. 11%). This fi nding aligns with their interest in fostering trust and confi dence through communications (41% vs. 28%), and providing clear and transparent messaging on how to earn bonuses or pay increases (23% vs. 15%). In addition, the best in class are considerably more likely than their peers to give timely and constructive feedback (47% vs. 33%).

Benefi t investments and perceived outcomes

BENEFIT INVESTMENTS

PERCEIVED OUTCOMES




Strongly Promoting Wellbeing through Wellness Programs and Absence ManagementTwo key traits that distinguish the best in class are making a greater eff ort to address employee wellbeing through wellness programs, and taking a unique approach to absence management. These areas of focus strongly suggest they recognize the importance of both preventive and restorative measures in employee engagement and wellbeing.

Best-in-class employers for human resource management are more likely not only to off er wellness programs (65% vs. 54%), but also to include a broader spectrum of program elements. For example, wellness communications and a web-based portal may help drive participation and engagement. And a healthy lifestyle is promoted more frequently through gym subsidies, physical activity and weight management programs, wearable fi tness trackers, onsite walking paths and nutritious vending options. More common medical elements include fl u shots and disease management. Best-in-class employers focus more expansively on wellbeing to give employees the opportunity to connect with a broader sense of purpose and community. They’re stronger proponents of off ering volunteering (20% vs. 15%) and community involvement activities (19% vs. 14%) that foster the experience of social and emotional wellbeing.

In addition, the best in class are more regular users of employee engagement and satisfaction surveys to measure wellness program eff ectiveness (26% vs. 16%). By applying metrics, they help ensure that available opportunities meet the needs of both their organization and their employees.

Commitment to employee engagement and communication

STRATEGY

ENGAGEMENT TACTICS

Lack an employee communication strategy7%

Have a comprehensive employee communication strategy

21%

9%

Have a strategy to improve employee engagement

57%

44%


Communicate in a way that fosters trust and confi dence

41%

28%

Support employees in defi ning and pursuing a career path

39%

26%

Give timely and constructive feedback 47%

33%

23%

15%Communicate clearly and transparently on how to earn bonuses or pay increases

31%

19%Provide interesting and challenging work

45%

33%Defi ne clear performance goals

43%

30%Identify development needs and create action plans

11%




Evaluate program eff ectiveness using employee engagement (satisfaction survey results)

26%

16%

Flu shots 47%

40%

Off er a wellness program65%

54%


42%

PROGRAM TACTICS

PROGRAM ELEMENTS


20%


21%


19%

Disease management20%

14%

Community engagement opportunities19%

14%

Gym subsidies 21%

16%

Volunteer opportunities 20%

15%

Onsite walking paths19%

12%

Social wellbeing initiatives15%

9%

Charitable contribution matching at 100%10%

3%

18%

13%Use of wearable fi tness trackers

Wellness program management and scope



How employers approach absence management directly aff ects how well they use resources to support their employees — helping them stay at work or return from disability faster. It’s notable that best-in-class employers for human resource management prioritize properly administering and managing lost time, including the Family and Medical Leave Act (FMLA), incidental absences, short-term disability, workers’ compensation, and related implications of the Americans with Disabilities Act (ADA) and the ADA Amendments Act (78% vs. 65%). When it comes to paid time off , they’re more likely to designate days for incidental sick leave (77% vs. 70%) and to provide separate days for vacation, illness, holidays and similar absences instead of off ering a combined bank of days (73% vs. 65%).

Designate time off for incidental sick leave77%

70%

Prioritize properly administering and managing lost time

78%

65%

Provide separate days for vacation, illness, holidays and similar absences

73%

65%


Approach to managing employee absence

Best in class Other midsize employers

78% 65%



MIDSIZE EMPLOYERS | Best of the Best

Best of the Best�—� Top Performers in Both Profi le GroupsThe best-of-the-best employers achieved the highest combined scores and ranked in the top quartile for both healthcare cost control and human resource management. At 7%, just 83 qualifi ed among all midsize employers surveyed.

BEST IN CLASS for human resource

management

BEST IN CLASS for healthcare cost

control

BEST OF THE BESTtop quartile in

both profi le groups


Best of the Best | MIDSIZE EMPLOYERS

Best-of-the-Best AttributesNot surprisingly, many of the diff erentiating characteristics of the best in class in each profi le group also distinguish the best of the best. Three key themes emerged from analysis of the best-of-the-best attributes:

• Adopting long-term planning and enhanced strategic integration

• Measuring progress toward health and wellness goals

• Actively controlling healthcare benefi t costs while focusing on employee satisfaction and aff ordability

Adopting Long-Term Planning and Enhanced Strategic IntegrationBest-of-the-best employers are more likely to agree that medical and pharmacy benefi ts are the cornerstone of their benefi ts off ering and key for recruitment and retention (77% vs. 64%). This philosophy places foundational importance on benefi ts to achieve organizational objectives and drive business growth. The best of the best are also nearly twice as likely to execute multi-year benefi t strategies (22% vs. 12%). This ability to proactively plan instead of reactively respond helps them apply a more strategic and integrated approach to benefi ts management and cost control.

Continuing this pattern of integration and foresight, the best of the best more often have a strategy for improving employee engagement (64% vs. 46%) that’s used to address motivation, satisfaction and commitment. Also, similar to the best in class for human resource management, they more regularly apply certain engagement tactics like giving timely and constructive feedback (61% vs. 34%) or defi ning clear performance goals (55% vs. 35%).

Best-of-the-best employers are ahead of their midsize peers by 16 percentage points in using a comprehensive employee communication strategy (27% vs. 11%). They also have a greater tendency to commit to an integrated approach that focuses holistically on safety, wellness, benefi ts enrollment and other programs instead of relying on separate strategies for only some programs. By itself, this fi nding shows they place a high priority on making sure employees are well informed about their organization and its benefi ts, policies and programs.

By opting more often to self-fund their medical plan, best-of-the-best employers accept a higher fi nancial risk for claims (63% vs. 46%). The upside of this choice is lower health plan fees, greater control over healthcare costs and possible savings from managing these costs well.

Properly administering and managing lost time is a priority for more the best of the best employers (80% vs. 67%) and serves as yet another indicator of their focus on strategy and integration. Focal areas include the administration of intertwined and complicated leave laws surrounding FMLA, incidental absences, short-term disability, workers’ compensation, and the ADA and ADA Amendments Act.

Have a strategy to improve employee engagement

64%

46%

��Best of the Best ��Other Midsize Employers

Choose a self-insured funding arrangement for the medical plan

63%

46%

Have a multi-year benefi ts strategy22%

12%


80%

67%

Have a comprehensive employee communication strategy

27%

11%

Integrated approach to healthcare cost control and benefi ts management




Defi ne clear performance goals 55%

35%

Give timely and constructive feedback61%

34%

Communicate in a way that fosters trust and confi dence

49%

30%

Identify development needs and create action plans

54%

31%

Support employees in developing and pursuing a career path

46%

28%

Communicate clearly and transparently on how to earn bonuses or pay increases

29%

16%

Provide interesting and challenging work 39%

21%

Measuring Progress Toward Health and Wellness GoalsImproving employee health and wellbeing is more likely to be a top human resource priority (29% vs. 19%) among best-of-the-best employers. This emphasis manifests as a robust wellness off ering that’s more often motivated by a desire to become or remain a destination employer (10% vs. 4%). Diff erentiating program options include tobacco cessation (37% vs. 23%), disease management (27% vs. 15%) and onsite health clinics (7% vs. 3%) — supported by wellness communications that connect employees to opportunities like these (54% vs. 43%). Other elements that reinforce physical health are a wellness committee or wellness champions (37% vs. 27%), group or individual health-challenge activities (36% vs. 24%), classes to promote good health and wellbeing (36% vs. 26%) and nutritious vending choices (30% vs. 15%).

Compared to their midsize peers, more best-of-the-best employers off er opportunities for volunteering (31% vs. 15%) and community engagement (28% vs. 14%), and a higher percentage launch social wellbeing initiatives (21% vs. 10%). Related to this tendency, they’re also twice as likely to match their employees’ charitable contributions (24% vs. 12%). These choices help serve the purpose of hiring and keeping the right employees as well as engaging them in their organization’s work.

There’s certainly a correlation between these tactics, the pressure of changing workforce demographics, and the need for benefi ts that appeal to all generations from millennials to baby boomers. It’s generally accepted that many younger workers want career advancement, fl exibility, and a sense that their work contributes value to their organization — priorities that are likely shared by others. However, younger workers often express a stronger interest in extending the value of their eff orts to society. So the best of the best are thinking more intensively about how to build a workplace culture that allows employees to connect with social causes. These engagement opportunities need to allow employees to deepen the meaning of their work and their relationships — with others and the organization itself.

Engagement tactics




22%


Invest in wellness programs to become or remain a destination employer

10%

4%

Tobacco cessation 37%

23%

Rank improving employee health and wellbeing as a top human resource priority

29%

19%


43%

PROGRAM ELEMENTS

Health challenge activities (minutes of physical activity, healthy eating, etc.)

36%

24%

Wellness committee or wellness champions 37%

27%

Classes to promote good health and wellbeing

36%

26%

Disease management27%

15%

Social wellbeing initiatives21%

10%


20%

Gym subsidies 25%

16%

Community engagement opportunities28%

14%


21%

Onsite health clinic7%

3%

Charitable match (partial or 100%)24%

12%

Onsite walking paths 29%

13%

Volunteer opportunities31%

15%

30%

15%Healthy vending and/or healthy eating

Approach to wellness

MOTIVATION



Best-of-the-best employers evaluate the eff ectiveness of their overall wellness program design and the options off ered. They recognize that without metrics it’s impossible to quantify the impact of programs and the value employees derive from their experiences. Top areas they assess include program participation (41% vs. 29%) and employee engagement (34% vs. 17%). The best of the best are also more likely to use sophisticated metrics that take stock of preventive care impacts (13% vs. 6%), and look more closely at data on lost work time (8% vs. 3%) and lost productivity (4% vs. 1%).


Employee engagement satisfaction survey34%

17%

Program participation41%

29%

Lost work time8%

%

Preventive care13%

6%

Lost productivity 4%

1%

Actively Controlling Healthcare Benefi t Costs While Focusing on Employee Satisfaction and Aff ordabilityThe best of the best are doing a better job of taking steps to actively control spending on healthcare benefi ts, while making them aff ordable and otherwise satisfactory for employees. Compared to their peers, a notably higher portion of best-of-the-best employers think they’ve found the appropriate total-compensation balance between wages and benefi ts (92% vs. 76%). They’re also more apt to say they invest appropriately in employee training and development (68% vs. 45%). Evidence for that claim may be found in the 65% that off er tuition assistance in contrast to 52% of their peers.

More often than other midsize employers, the best of the best rely on disease management as well as pharmacy and value-focused tactics to help control healthcare costs. What makes these methods especially eff ective is they don’t shift costs to employees. Instead, they take advantage of basic tools such as spousal exclusions for healthcare coverage (28% vs. 17%), or enlist the expertise of a specialty PBM to address core benefi t design challenges (35% vs. 22%).

While the large-scale use of value-focused tactics is still taking hold, best-of-the-best employers are leading the charge with more eff orts aimed at engaging employees more fully in their health and healthcare decision-making. Key examples include disease management programs (46% vs. 34%) and reduced employee costs for prescription drugs that treat expensive chronic conditions (11% vs. 5%) and qualifying elective procedures (7% vs. 3%), such as a knee replacement. Cost reduction for a procedure typically requires the employee to participate in a decision-support consultation upfront.

When considering these fi ndings, it’s important to keep in mind the infl uence of employer size bands. Midsize employers with fewer employees (e.g., 150 vs. 950) may be more limited in the approaches and tactics they can use to manage their plans.

Wellness program metrics




92%

76%

Use a specialty PBM35%

22%

Off er disease management programs46%

34%

Implement a surcharge or exclusion for spouses with access to other coverage

28%

17%

Reduce costs for certain elective procedures if the employee participates in a decision-support consultation about the procedure

11%

5%

7%

3%

Reduce employee costs for prescription drugs to treat high-cost chronic conditions


Employee-focused healthcare cost management appears to be working to the advantage of plan participants covered by best-of-the-best organizations. Compared to their midsize peers, more of these employers say they provide aff ordable healthcare coverage for employees and their families — including premiums for family plans (72% vs. 55%) and added costs such as deductibles and copays (81% vs. 62%). Best-of-the-best employers were also more likely to report industry-competitive health benefi ts in 2017 (93% vs. 77%). So it seems their eff orts to maintain an eff ective balance of benefi ts and compensation while avoiding many cost-sharing tactics are succeeding. It’s no surprise, then, that they’re more likely to report employee satisfaction with health benefi ts (84% vs. 62%).

Satisfaction with health benefi ts on the part of employees

84%

62%

Industry-competitive health benefi ts93%

77%

Aff ordable added costs for employee healthcare benefi ts (deductibles, copays and coinsurance)

81%

62%

72%

55%Aff ordable health plan premiums for family coverage

68%

45%Appropriate spending on training and development

65%

52%Off er tuition assistance


Use of value-focused tactics

Perception of employee satisfaction and aff ordability

55%

68%

65%


MIDSIZE EMPLOYERS

About GallagherIf you could name one thing that drives your organization’s success, what would it be? Chances are, it’s your employees.

Attracting and retaining the right talent is both a top priority and a top challenge when managing rising costs in a highly competitive and complex business climate. To secure your place as a destination employer, you need the right data to make sustainable benefi t decisions that deliver on the needs of a diverse workforce.

All aspects of eff ective, best-in-class HR programs — benefi ts, wellbeing, communication and culture — work together to manage risks related to human capital. From surveying and analyzing competitor trends to evaluating the demographics of your own workforce, Gallagher helps you gather insights and apply best practices not only to manage risk, but also to increase opportunities to excel in the marketplace.

When you take this holistic approach to developing total compensation programs, you’ll create a culture of organizational health that promotes your employees’ total wellbeing. And you’ll be rewarded with a productively engaged team that’s more loyal and motivated to drive your organization’s success.

Arthur J. Gallagher & Co. (NYSE: AJG), an international insurance brokerage and risk management services fi rm, is headquartered in Rolling Meadows, Illinois, has operations in 34 countries and off ers client-service capabilities in more than 150 countries around the world through a network of correspondent brokers and consultants.


MIDSIZE EMPLOYERS

25075-BIC MSE

TERMS OF USEThe intent of this Survey is to provide you with general information regarding current practice within the employee benefi ts environment. The data does not constitute recommendations or other advice regarding employee benefi t programs, and the user is in no way obligated to accept or implement any information for use within their organization(s). The decision to utilize any information provided rests solely with the user, and application of the data contained does not guarantee compliance with applicable laws or regulations regarding employee benefi ts. Information provided by the Survey, even if generally applicable, cannot possibly take into account all of the various factors that may aff ect a specifi c individual or situation. Additionally, practices described within the Survey should not be construed as, nor are they intended to provide, legal advice.

The Web Site and the Content do not constitute accounting, consulting, investment, insurance, legal, tax or any other type of professional advice, and should be used only in conjunction with the services of a Gallagher consultant and any other appropriate professional advisors who have full knowledge of the user’s situation.

Gallagher does not represent or warrant that the Content will be correct, accurate, timely or otherwise reliable. Gallagher may make changes to the Content at any time. Gallagher assumes no responsibility of any kind, oral or written, express or implied, including but not limited to fi tness for a particular purpose, accuracy, omissions and completeness of information. Gallagher shall in no event whatsoever be liable to licensee or any other party for any indirect, special, consequential, incidental, or similar damages, including damages for lost data or economic loss, even if Gallagher has been notifi ed of the possibility of such loss. For the purposes of this section the term “Gallagher” shall be construed so as to include Gallagher Surveys as a marketing division and/or Gallagher Benefi t Services, Inc. and its affi liates.

© 2017 Gallagher Benefi t Services, Inc.

All rights reserved. No part of this book, including the text, data, graphics, interior design and cover design may be reproduced or transmitted in any form, without explicit consent from Arthur J. Gallagher & Co.

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