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The Next Generation of Benefits Plans

Originally published on Benefits Canada - Kanupriya Vashisht | October 21, 2014

Going forward, smart employers will customize their benefits to stay relevant to employees of all ages

A little over a decade ago, group benefits were standard fare: traditional health, dental and vision, geared toward the undemanding average employee. But changing demographics have triggered a culture shift, prompting canny employers to fine-tune their total rewards packages to stay ahead of the hiring curve.

While early and late baby boomers and gen Xers continue to dominate the workplace, it’s the new kid on the block—gen Y—that is dictating much of the change. Statistics Canada reports that millennials currently make up about a quarter of the workforce—but that will swell to about 40% by 2020, when the majority of boomers will have retired, according to U.S. research. Employers that can cater to the needs and wants of this budding generation will have a competitive edge.

To understand gen Y aspirations, it’s important to realize that this cohort has grown up during a time when health has evolved from being solely about curing ailments to being more about preventive care and overall wellness.

Recent Sun Life Financial research shows that gen Y values group benefits less than older generations did at a similar life stage. While the importance of core medical and dental benefits remains, the gen Y focus is more on paramedical and lifestyle. Gen Yers also have a greater attitude of entitlement toward their benefits than older generations, with many gen Y employees making a concerted effort to max out their discretionary paramedical coverage.

With four generations co-existing in today’s workplace for the first time ever, one size no longer fits all. According toVic Medland, CEO of the Ontario Teachers Insurance Plan, “This industry has, so far, lacked real creativity and been internally focused for over 100 years, leaving room for disruptive change by an unexpected competitor as has happened in the music (Apple), TV and movies (Netflix), and home and auto insurance (Progressive) industries.” Group benefits today are at a crossroads and ripe for similar innovation.

Here are four big changes that have already affected group benefits in a big way—and will have an even greater impact in the future.

1) Personalized Perks 
Due to such divergent values and needs, each generation now relishes greater flexibility in what benefits can do for them. At one end of the continuum boomers still value prescription drug coverage, disability and long-term care. At the other end, their children are young and not so focused on ailments. Perks that assist a healthy and active lifestyle—alternative therapies, gym memberships, wellness programs or paramedicals, for example—excite them more. Marilee Mark, vice-president of market development, group benefits, with Sun Life Financial Canada, says choice is key for gen Yers. They want more voluntary benefits beyond the traditional benefits to choose from. Seventy percent of gen Y plan members surveyed in the Sun Life research support this thesis: they prefer a flexible benefits plan to a traditional one.

“They like to choose what they’re spending on. So they’re likely to be more interested in health savings accounts (HSAs) and personal savings accounts, where employees are allotted funds to spend on health-related expenses at their own discretion,” Mark adds.

Gen X—the sandwich generation that has to take care of aging parents and growing children—needs support, too. For this reason, the SSQ Financial Group (SSQ) recently included compassion insurance—which provides compensation for lost wages to employees who need to temporarily take time off to care for a gravely ill loved one—in its benefits offering. The product came about because the department that handles disability found that some claims had to be denied because the employees submitting them were not disabled: they were simply applying because they wanted to be with a child, spouse or parent with a severe or fatal illness.

“At such delicate times, we found it harsh to tell our employees they were not eligible,” says Carl Laflamme, senior vice-president of group insurance with SSQ. “That’s when we decided to link our short-term disability program to the federal government’s compassionate coverage program.”

2) Plain speak 
When it comes to their benefits, are employees getting the whole picture? Sarah Beech, president of Accompass (formerly Pal Benefits), says there’s been a lacklustre approach in the HR industry to articulating the value of a benefits program. “But your plan is only as valuable as people understand it to be,” she says.

“Clearly illustrating the monetary rewards of benefits really resonates with younger employees. So more and more companies are embracing infographics and have started including total rewards statements with employment offers. It makes the offer more dynamic.”

Medland underscores the need for clearly articulated benefits and easy-to- read contracts. He calls it “a minimum of process and maximum of product and service impact.”

3) Paper is Passé
In addition, technology has completely changed how we communicate. “Our current customers are consummate users of mobile technology. Whenever and wherever are recurring themes,” Mark says. “And we need to be where our customers are.”

To that end, the insurance industry has developed mobile apps that allow iPhone, Android, BlackBerry and other smartphone users to submit medical and dental claims online; check what they’re covered for; see their HSA balances; and access additional information about their drug plans, including lower-cost alternatives. E-payment services developed by the insurance industry allow plan members to receive benefits claims payment by direct deposit and view claims statements online.

Beech says another big trend isallowing people to choose how and where to buy their prescription drugs. Mail order or home delivery, she says, is gaining currency and appeal with younger people who shop online for everything. The convenience and cost-effectiveness of home delivery are proving a huge draw for boomers as well, Beech adds.

4) Prevention Over Cure 
Today’s workplace has undergone a cultural overhaul, with both employer and employee focus shifting from cure to prevention. According to Mark, “Progressive employers are now thinking of benefits beyond something they offer to fulfill standard expectations. They’re looking at them more as a means to develop a more engaged, healthy and productive workforce.”

Beech agrees that good plans are now beginning to tie healthy choices to more company money. For example, you could get an additional $50 in your flex plan if you take a health risk assessment; $50 if you commit to exercising for 20 minutes, three times a week; and another $50 if you are a non-smoker. “It’s a reward versus stick approach,” she says. “And employees are responding positively. This is when choice actually empowers them.”

Work/life balance has a huge appeal for gen Y, and companies do offer some interesting solutions to cater to that. For example, says Beech, some companies give employees the flexibility to buy or sell vacations: those who don’t take time off can monetize their leave; those who want extra time can buy additional vacation days. Barring obvious exceptions, she explains, gen Y likes buying; boomers like selling.

Despite the divergent choices of different generations, one thing is clear: in trying to cater to the mean, existing traditional plans don’t really satisfy the needs and wants of any generation. Employers and plan providers need to ensure that benefits remain relevant to both today’s and tomorrow’s employees—or, in the coming war for talent, there’s a risk they’ll be left behind.

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