<i>Dear Workforce</i> How Do We Defuse a Breakdown in Morale If We Hike Employee Health-Care Costs

July 29, 2005
Dear Bracing:

For many employers, health-care costs already account for more than 15 percent of wages. Should current trends continue, by 2008 they are expected to consume 20 percent of all dollars that companies spend on wages. Nevertheless, employees prize their employer-sponsored health coverage. A recent Segal Co. survey found that, after wages, employees rank health coverage as the single most important benefit.
As a result, many employees are willing to contribute something to the cost of their health-plan coverage. However, your effort to hike contributions is doomed to fail unless you communicate, clearly and early on, why increases are needed. Morale and productivity will suffer, and you'll be perceived as being insensitive to employee needs.
On the other hand, moderate increases in employee contributions are unlikely to prompt employees to drop coverage or mutiny. Clearly, the degree of contribution required is the overriding issue. Are employees asked to contribute 5 percent or 35 percent? Are they contributing to cover themselves as well as their families? What are the provisions of the plan? Are there also copays and deductibles? Get answers to these questions to determine how much employees are willing or able to contribute to the cost of coverage.
Introducing a modest contribution increase should not have an unfavorable effect on morale, assuming that you carefully articulate the justification for it.
SOURCE: John Asencio, corporate health practice leader, The Segal Company, New York, New York, September 14, 2004.
LEARN MORE: See:The Battle over Benefits; Thanking Employees for Controlling Costs;Four Case Studies;More Care, Less Cost.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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