Benefits have shrunk for rank-and-file workers as well as top executives, but in different ways.
With rising healthcare costs, average workers now are paying higher deductibles, higher copayments and paying for their dependents’ healthcare, said Brian McGuire, regional director for Irvine-based CoreSource Inc., which handles benefits for big companies that fund their own health plans and is part of Lake Forest, Ill.-based Trustmark Insurance Co.
More employers also are using wellness and disease management programs, which seek to keep health insurance claims down, McGuire said.
Programs to stop smoking or lose weight are relatively cheaper to run, he said.
“There’s a lot of optimism that these will have an impact,” he said.
For all the attention on healthcare, “wages are still the driver” for most workers, McGuire said.
Even so, healthcare and other benefits are expected in many sectors, including technology, he said.
Nationally, 45% of workers had company-sponsored medical care coverage as of early 2003, down from 63% in 1992, according to the Department of Labor.
For executives, healthcare costs are less of an issue. Companies are more interested in getting more bang for their buck in a compensation and benefits package. That means tying pay to executive performance, said Michael Valente, managing director of Long Beach-based Executive Unlimited Inc.’s Laguna Beach office.
The high cost of living in Orange County is a factor, Valente said. To try and offset that, some employers are looking to be more creative with benefits, he said.
“That’s not so easy to do,” Valente said.
Blanket bonuses aren’t as common for executives anymore, Valente said. If bonuses are offered, they’re based on performance, he said.
“The heat is getting turned up,” he said.
Blame it on Eliot Spitzer, Valente said. The New York attorney general has gone after corporate misdeeds, one of which has been exorbitant pay.
But “some companies continue to cave,” he said.
They ante up for the higher cost of living here and pay outright bonuses to hire a star executive, he said.
For average workers, the move in benefits is toward “consumer-driven healthcare,” said Ken Farrell, president of Conexis Benefits Administrators LP, a division of Orange-based Word & Brown Inc., which administers worker benefits for employers.
Consumer-driven healthcare plans typically have a high deductible combined with a pretax account that workers can tap to reimburse certain healthcare expenses.
For an employer, the plans can cut down on claims, Farrell said. With a low copayment, a worker with a cold is more likely to go to the doctor, he said. With a higher copayment, he or she may be more apt to go to the drugstore, he said.
The theory: “You can’t get healthcare under control unless you reduce demand,” Farrell said.
“We believe it’s a trend that’s not going to be reversed,” he said.
Employers also are offering health reimbursement and savings accounts, in which workers set aside money for healthcare.
The difference between the two is that with reimbursement accounts, workers can’t take the money to their next job because employers fund the account with pretax dollars. The reimbursement account often is offered along with a high-deductible healthcare plan.
Employees fund health savings accounts and hold on to them if they change jobs.
Flexible spending accounts, which set money aside for healthcare expenses, are a related offering. They give workers pretax savings for a number of healthcare-related costs such as deductibles and copayments, dental services, prescriptions and eye care. The accounts also can be used for childcare.
Employers and employees save money with flexible spending accounts, according to benefits consultants. Employers save about 10 cents on every dollar for workers who use the accounts. Workers save because the money they put into the account is before taxes.
About 15% of workers nationally use flexible spending accounts. Usage likely would increase if workers could get back money they don’t use. As it is now, workers have to budget their expected healthcare costs precisely if they don’t want to lose any money.
Most workers sign on for flexible spending plans after hearing about them from colleagues, Conexis’ Farrell said. His company hopes to up awareness of flexible spending plans by targeting workers.
A newly launched educational program gives workers Internet links so that they can find out how to use them and figure out what their annual savings might be.
