Traditional vs. modern: What’s the best way to design a benefits plan?

May 23

When it comes to attracting and retaining employees, group health insurance has become a “must have” offering. Yet, with so much generational diversity in today’s workplace, a one-size-fits-all approach to designing a benefits plan may not necessarily be the best tactic.

A successful benefits plan should produce actual results for your employees and for the company and the unique needs of employees fresh out of school differ from those approaching retirement age. So how do you creatively design a plan that appeals to all employees without sacrificing the “protection” that group insurance should offer as a whole?

First, let’s consider the three main types of employees and what they each commonly look for.

The Millennial. Most of these employees have not yet experienced health-related costs other than those associated with minor injuries and short-term illnesses. Their interests lie more with their current lifestyle and they tend to look at group insurance as a form of compensation. Flexible healthcare spending accounts are appealing here.

The GenXer. These employees are in the middle of their career life and are typically balancing work and family needs. Many are sandwiched between raising a family and caring for aging parents and some are reaching the age when the onset of chronic disease is more likely. They recognize the need for, and the value of, health benefits but they also appreciate flexibility and wellness tools that help them manage their energy and stress.

The almost-retiree. These employees realize how expensive medications can be and truly appreciate the value of the group health plan. They have experienced first hand or through a family member how health costs can add up. They truly understand the value of insurance.

The traditional or old way of designing a benefits package is to simply offer a standard and fixed plan design that applies to all employees equally. In other words, all employees are signed up for all options regardless of their unique needs. Whatever the employer chooses to offer in the bucket (e.g. health, dental, orthodontic, vision, physiotherapy) everyone has to accept regardless of whether they need it.

The advantage of this method is it is easier to communicate to employees, it’s what employees are used to, and it allows the greatest economies of scale by spreading the risk. The disadvantage is that this method doesn’t always meet the unique needs of a multigenerational workforce.

The modern or new way of designing a benefits package is just the opposite. These plans are typically modular with some choice for insurance options, combined with flexible claim reimbursement accounts (Spending Accounts). However, this method risks sacrificing many of the protections and safeguards that make benefits plans attractive in the first place. They can put too much choice in the hands of the employee — where often they make poor decisions.

Just because there’s a new way to look at a challenge, doesn’t make the old way wrong. The best-designed benefits plans are the one that combine aspects of both the old and new way of doing things.

The key to designing a successful, and financially viable, plan is to have a good long talk with a benefits advisor who can educate you on your options, help you weigh the differences and look deep below the surface of your company to understand your needs. Only then will you figure out what benefits will benefit both your employees and your business.

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