ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT

Transcription

1 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT

2 IMPORTANT NOTICE: This document does not constitute or form part of any offer or solicitation or invitation to sell by either Marsh or Mercer to provide any regulated services or products in any country in which either Marsh or Mercer has not been authorized or licensed to provide such regulated services or products. You accept this brochure on the understanding that it does not form the basis of any contract. The availability, nature, and provider of any services or products, as described herein, and applicable terms and conditions may therefore vary in certain countries as a result of applicable legal and regulatory restrictions and requirements. Please consult your Marsh or Mercer consultants regarding any restrictions that may be applicable to the ability of Marsh or Mercer to provide regulated services or products to you in your country Mercer LLC. All rights reserved. No part of this work covered by copyright may be reproduced or copied in any form or by any means (graphic, electronic, or mechanical, including photocopying, recording, taping, or information retrieval systems) without the written permission of Mercer. Note: Rounding adjustments have been made to bring totals to 100%

3 CONTENTS CONTENTS Executive Summary 1 Living Longer Good for Us, but Who Picks up the Tab? 3 Survey Findings 5 Health and Wellness Management 5 Employee Choice 7 A Road Map to Develop a Sustainable Employee Choice Benefits Program 11 Conclusion 17 About the Survey 20 Deep Dive Analysis 23 Economic Outlook 23 Health Benefits Spending as a Percentage of Payroll 24 Employee Turnover Rate 25 The Impact of the War for Talent 27 Workforce Health and Health Management 27 Concerns for Employee Health 29 Reasons for Implementing Health Programs 29 Health Management Programs in Asia 31 How Employers are Using their Data 32 Challenges to Implementing Health and Wellness Strategies 34 Integration of Health Data, Strategy, and Provision 35 Employee Choice in Benefits 35 Key Reason for Offering Choice 39 Benefits Offered for Employee Choice 41 Measuring the Success of Employee Choice Programs 41 The Impact of Employee Choice Programs 42 Desired Changes in Employee Choice Programs 45 Appendices 47

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5 EXECUTIVE SUMMARY 1 EXECUTIVE SUMMARY The past two years has seen the global economy struggle its way through the recovery from the greatest financial crisis since the Great Depression. As a result, all of us in Asia have had to deal with this slowdown after decades of economic boom. Mercer Marsh Benefits' 2013 Asia Total Health and Choice Survey highlights the continued uncertainty and caution demonstrated by the 1,035 HR professionals that participated. In fact, 77% of those HR professionals expect static to slower growth over the next two years, which represents an increase of 20% from the 2011 survey. Furthermore, this uncertainty and caution indicates that expense management continues to be prudent in the wake of the economic downturn. For HR professionals, this means that business leaders (CEOs, CFOs, and CHROs) are becoming much more focused on finding a direct link between expenses related to the HR function and overall business performance. This concurs with Mercer Marsh Benefits' experience with our clients across Asia, and is not only evident in multinational corporations but even more so in local or regional enterprises. The financial sustainability of benefits programs over the short and longer term will challenge HR professionals to become much more sophisticated in managing these programs. Specifically, remarketing the vendors of the benefits program every year is not going to generate the results that business leaders are looking for. Benefits programs that are already in place are not optimized to drive the real business results that business leaders care about specifically, the value of a productive employee versus the cost of unhealthy employee. The data collected for these programs are a missed opportunity for HR professionals to truly understand the value and cost drivers of their programs, thus maximizing positive outcomes while managing away uncertainty and risk. In this report, we share the results from the survey, our perspectives on the implications, and a road map on how to evaluate and maximize the effectiveness of your benefits programs. Mercer Marsh Benefits' views on the results of the Asia Total Health and Choice Survey include: HR professionals are unable to identify sufficient evidence of positive return on investment in benefits programs, which makes it difficult to justify additional investments. This in turn reduces the effectiveness of such programs in achieving a positive impact on key HR issues like attraction and retention.

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7 LIVING LONGER GOOD FOR US BUT WHO PICKS UP THE TAB? 3 LIVING LONGER GOOD FOR US BUT WHO PICKS UP THE TAB? We are all familiar with the statistics that show we are living longer. According to the World Health Organization, life expectancy in Asia has improved dramatically since It now ranges from 65 (in India) to 83 (in Japan). 1 However, poor lifestyle habits have resulted in deteriorating general health and an increase in the incidence of chronic illnesses. Although medical advances have allowed us to cope with chronic illnesses, the net effect is that people are living longer but with poorer health, resulting in greater demand for medical care. In addition, the cost of medical care is increasing every year, and medical inflation is outstripping general inflation significantly. While governments around the world are grappling with this, in Asia the health care provisions are simply not enough. Medical Inflation Table Country *General inflation 2013 Medical inflation 2013 Expected change in medical premiums China 2.7% 5% 7% 10% 12% Hong Kong 3.5% 4% 5% 10% India 10.9% 18% 16% 22% Indonesia 7.3% 12% 13% 10% 12% Japan 0.1% 3% 4% **0.3% Malaysia 2% 15% 10% 15% Philippines 2.8% 8% 10% 10% 15% Singapore 2.3% 3% 4% 4% 8% South Korea 1.4% 2% 7% Taiwan 1.20% 2% 3% 4% 6% Thailand 2.2% 18% 22% 15% 20% Vietnam 8.8% 20% 25% 15% 20% * General inflation for 2013 is extracted from IMF as of Oct **Refers to the increase in statutory HIA premiums. Note: The figures stated above are subject to change during the year as these are estimates and based on current market conditions 1 World Health Organization. "Chronic diseases and health promotion," available at: accessed 7 February 2014.

8 4 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT WHO BEARS THE BURDEN OF THIS COST? Ultimately, the cost of providing medical care to the community is a personal cost that we as individuals bear. But the cost is also being passed on to employers through employer-sponsored health insurance programs. For business leaders, this results in three underlying people risks that need urgent attention: 1. Utilization risk: the risk associated with increasing use of care by individual employees and their dependents leading to ever increasing health care costs. 2. Health care risk: the risk of poor health and illness as a result of unhealthy lifestyles. 3. Productivity risk: the loss of productivity of individuals due to poor health and illness. The first and second risk items have a direct impact on the overall cost of the benefits program, while the third risk item is indirect. At the current rate of increase of 10% to 20%, as reported by most of Mercer Marsh Benefits clients, health care costs will double within four to seven years. This survey shows that the majority of HR professionals are exploring options available to them. But whether these explorations are resulting in meaningful and relevant outcomes to business leaders remains to be seen. Key Findings Employer-sponsored programs are bearing a larger proportion of health care costs for individuals and their dependents, especially those with poorer health. In a climate of slower economic growth, business leaders will find it a challenge to shoulder this increasing cost and the associated erosion of profit. On top of medical inflation, the cost of maintaining employer-sponsored programs is accelerated by greater usage, especially by those with poorer health and chronic illnesses. HR professionals will need to be more financially vigilant, since remarketing of benefits programs will not curb the expected cost increases. Any strategy that seeks to provide health care after employees get sick does not address the underlying issues. Targeted intervention and prevention should be a priority for HR professionals so that companies are able to control the ongoing cost of benefits programs and avoid future costs that may not yet have manifested. Doing anything less simply perpetuates the vicious cost-increment cycle. HR professionals should not focus on the cost of keeping employees healthy and productive, but what the incremental future costs will be if no action is taken. Alternative solutions require investment, but are HR professionals equipped with the necessary data, tools, and knowledge to justify this investment to business leaders?

9 SURVEY FINDINGS 5 SURVEY FINDINGS The survey addresses two core areas of benefits management: health and wellness management and employee choice. HEALTH AND WELLNESS MANAGEMENT We noted earlier that any strategies that seek to provide health care after an employee falls ill are not effective. The survey garnered encouraging results that suggest HR professionals are beginning to explore new preventative approaches to managing health care costs. However, many of these approaches are passive in nature for example, communication, education, and superficial health support, such as gym memberships and healthy food offerings at work, which do not necessarily generate a direct and immediate impact on the financial outcomes of the benefits program. Although such programs promote healthy lifestyles and prevent illness from manifesting in the future, they do not provide the direct and short-term financial impact sought by HR professionals and their business leaders. Such an impact will require more relevant behavioral-change wellness programs and direct health-management intervention, which need to be seen as an investment to cap costs and not as an incremental increase in health care spend. The Importance of Health and Wellness Programs an HR Professional s Perspective When HR professionals were asked why they think health and wellness is important to their organizations, the most popular responses were to improve individual productivity and performance and to attract and retain talent: Figure 1. Motivators Behind Investment in Health and Wellness (Weighted Score) Improve productivity/performance at the individual level Attract and retain talent Enhance employee engagement Promote employee health and well-being 54% Reduce health risks Reduce medical claims cost Encourage positive health behaviors 49% Reduce absence Support employer brand Reduce employment cost (e.g. pension, sick pay, etc.) 18% 37% 45% 53% 52% 67% 72% 80% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Note: For the 2013 survey, we scored results on a weighted basis to allow for greater ease of comparison. HR professionals are clearly recognizing the value of health and wellness management. Over 80% of surveyed HR professionals reported that they have implemented some form of health and wellness program; however, only 5% believe their programs are fully integrated (an increase of 25% from 4% two years ago).

10 6 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT Effectiveness of Existing Health and Wellness Programs In general, employers are offering a mix of education, prevention, and targeted intervention programs. Figure 2. Programs Currently Offered in 2013 Annual employee health checkups (comprehensive medical screening usually performed off-site) 83% Biometric screening (e.g. basic tests for blood pressure, cholesterol, body mass index, etc., usually performed on-site) 58% Health talks/ health fairs Exercise programs (e.g. on-site gym, off-site gym membership, running club, boot camp) 43% Web-based information resources Participation in routine cancer screenings (e.g. breast, skin, colon cancer) 31% On-site clinic/ medical services Employee assistance programs (EAP) 28% On-site food service improvements 23% Stress management (e.g. drugs and alcohol, psychological counseling, sleep management) 20% Absence management program 17% Health risk assessment (HRA) questionnaire (e.g. paper or electronic questionnaire on lifestyle risks) 16% Weight control and nutrition counseling program 15% Smoking cessation program 11% 29% 34% 49% Chronic disease management programs (e.g. for diabetes, asthma, cancer or hypertension/heart disease) 10% 0% 20% 40% 60% 80% 100% Annual health checkup and biometric screening top the list with 83% and 58%, respectively. These programs can offer valuable insights into the health of an organization s workforce and into potential diseases that have yet to manifest information that may not be available through medical claims. The results, coupled with medical claims data, allow employers to manage short-term costs and conduct predictive modeling that focuses on future cost avoidance. Perhaps due to the lack of mature health care service providers in Asia, less than a third of HR professionals noted that their organization offers any sort of behavioral-change programs. Furthermore, only 10% of the HR professionals surveyed said that they have implemented chronic disease management programs across the region. Targeted behavioral-change programs based on results drive sustainability to improve the health of an organization s workforce, and relevant disease management programs honed by analyzing medical claims data can be more effective in managing and reducing immediate costs within the acute and chronically ill population. The Value of the Data You Collect When asked what kind of data are collected, many HR professionals revealed that they struggle with this and are not tracking or using the valuable available data to drive meaningful results. Figure 3. Benefits Data That Employers in Asia Collect Type of data Percentage Employee absence data 76% Medical/health plan claims history reports 76% Employee physical checkup reports 67% Employee feedback 63% Employee assistance program (EAP) 37% On-site service utilization 32% Employee disability/salary continuance 32% Employee health risk surveys 31% It is surprising that HR professionals are not making a concerted effort to track and collect these readily available data since these form the basis for calculating the return on investment (ROI) that business leaders seek from their health care spend.

11 SURVEY FINDINGS 7 Key Findings HR professionals are not taking advantage of the wealth of health and behavioral data available, whether they are aware of its availability or not. As such, decisions made are based on gut feelings and compromises rather than tangible evidence. For business leaders, these underlying issues are the reason why opportunities to have a direct and immediate impact with health programs are missed. Some HR professionals have put in place the right type of health and wellness programs but their effectiveness is diminished when these programs are fragmented and not integrated in a way that delivers on specific business objectives. For business leaders, a real opportunity cost is incurred by running ineffective programs that do not generate the expected ROI. This exposes the business to a greater risk than simply doing nothing to address health issues, and has a larger and longer-term impact in the form of unsustainable cost increases. Figure 4. Key Drivers of Offering Choice Better meet needs of employees Attract and retain talent Create greater value from existing benefits 64% Benefit enhancement 62% Market differentiation 48% Better communicate value of benefits to employees 39% Cost management 31% Connection to total rewards 30% Market alignment 21% 84% 89% EMPLOYEE CHOICE Since the 2011 survey, Mercer Marsh Benefits has seen a marked increase in HR professionals implementing or evaluating programs that enable employees to choose their benefits. The overarching theory is sound: employees, when given choice should select benefits that are more important to them. On this basis, HR professionals have been increasing the types of benefits offered in order to cater to the diverse needs of their workforces. However, is this really delivering true value to individual employees and to the business? Benefit harmonization 10% Reduce HR workload through outsourcing 7% Global/regional initiative 6% Other 0% 0% 20% 40% 60% 80% 100% When asked about the key drivers of offering choice, HR professionals cited meeting the needs of employees, attracting and retaining talent, and creating greater value from the existing benefits in the top three:

12 8 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT Although employers recognize the value of choice, the vast majority still do not currently offer options as a part of their benefits package to all employees, perhaps due to the perceived complexity of offering choice. Figure 6. Does Your Organization Give Eligible Employees Some Choice in the Benefits They Receive? % 13% Figure 5. Barriers to Employers Supporting Choice in Benefits 37% 3% 2013 Complexity of administration The cost of such programs is too high 48% Employee communication challenges 33% Our employees have not asked for choice 20% Inconsistent with our guiding principles 20% Management does not support employee choice 19% HR does not agree with the idea of allowing employee choice 9% There is no advantage in letting employees do so 9% Tax laws make it unattractive 8% Legislation does not permit it 1% 73% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Note: For the 2013 survey, we scored results on a weighted basis to allow for greater ease of comparison. Yes, but only certain employees have a choice Yes, all employees have some choice Yes, all employees have a great deal of choice 43% No, all employees receive the same benefits package No, but packages vary by employee grade To validate the hypothesis that the perceived complexity of offering choice is holding employers back, this year s survey proposed three options to those that do not currently offer choice. These options would reduce the time and effort required to introduce choice into benefits packages, as illustrated in Figure 7 below. The results supported our hypothesis that if the process and administration effort required can be streamlined, more than half of the employers that do not currently offer choice will consider offering their employees choice in the future. Figure 7. Would Any of the Following Employee Choice Alternatives/Solutions Change Your View on Offering Choice? Standardized plan: typically an off-the-shelf flexible benefits plan that is simple, cost efficient, and easy to launch and administer 53% 23% 24% Spending account only: a simple flexible benefits plan that provides a flex budget that can be used for claims on health, wellness, and lifestyle benefits, with no enrollment/selection of insurance benefits options 55% 20% 25% Voluntary benefits: coverage and services that employees can purchase with their own money at discounted prices, generally via a portal 58% 21% 21% 0% 20% 40% 60% 80% 100% Yes Yes No No Not sure Not sure

13 SURVEY FINDINGS 9 Another significant finding from this year s survey is that a small percentage of employers are taking a more strategic approach to offering employee choice to support their business goals. These employers are holistically influencing and promoting a healthier workforce by incorporating health and wellness programs into their benefits choice package. Figure 8. Health Care, Insured, and Wellness Benefits Medical Dependents coverage Health screening Life Critical illness 63% 62% 67% 72% 81% Employers across Asia are becoming increasingly sophisticated in understanding and managing their employee benefits. However, in most cases, employers are struggling to track data and they are not making informed decisions or measuring the success of current programs based on available data. When the survey asked about how employers measure the success of their employee choice programs, the results showed that most appear to rely on program participation and engagement surveys. Figure 9. Measures of Success for Employee Choice Programs Employee participation/take-up rates Employee climate/engagement survey results Improved employee understanding/appreciation of benefits Change in employee utilization behavior 30% 44% 52% 56% Accident Maternity Dental Long-term disability income 34% 46% 52% 60% Employee retention/turnover statistics 26% Employee focus groups feedback 24% Cost savings derived 18% Don t know/do not measure 0% 0% 10% 20% 30% 40% 50% 60% Vision Health programs (e.g. smoking cessation, weight management, stress management, wellness) 30% Parents medical 33% 29% Traditional Chinese medicine and consultations 28% Childcare (e.g. vouchers, on-site nursery) 19% 0% 20% 40% 60% 80% 100% Employers have a great opportunity to develop an evidence-based strategy and implement targeted programs that are relevant to their workforce by leveraging the untapped potential of health data to maximize the return on their investment. Key Findings Existing choice programs struggle to achieve success because they offer too many choices with too little differentiation, which compounds administration complexity. Mercer Marsh Benefits' experience is that HR professionals are not leveraging the insights available to them through their data to make informed decisions and to measure results.

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15 A ROAD MAP TO DEVELOP A SUSTAINABLE EMPLOYEE CHOICE BENEFITS PROGRAM 11 A ROAD MAP TO DEVELOP A SUSTAINABLE EMPLOYEE CHOICE BENEFITS PROGRAM Our survey results suggest that HR professionals around the region are beginning to explore new approaches that could potentially alter the current benefits landscape. However, there is much work to be done before sustainable, positive changes can be realized. There is a growing recognition among employers that employee choice may provide the best opportunity to lay the groundwork for a different future. However, HR professionals must take clear, measurable actions today that will position their organizations to achieve significant positive results and maximize their ROI. In this section, we aim to give key decision makers a road map to develop an evidenced-based health and wellness employee benefits choice program and bring about the changes necessary to achieve business objectives. The changes must flow throughout the culture of the organization, all the way to employees and their families. This road map provides some direction for making these changes, but each organization must respond in a fashion that reflects its own culture. At Mercer Marsh Benefits, we believe that an effective employee benefits program must address the following business priorities: Offer a compelling and differentiated proposition that is personalized for the specific talent that the organization seeks to attract and/or retain. In a highly competitive environment, not all talent is good talent! Create, enhance, and support a healthy and productive workforce and reward those productive individuals appropriately to maximize behavioral change that has a meaningful impact on the business. Control short- and long-term cost by clearly defining objective milestones to which HR, finance, and the business leadership agree. On a year-to-year basis, there should be no surprises to the business leadership regarding the overall cost of the program and the ROI. Employee benefits choice can be an effective tool that allows employers to redistribute existing spend and control future investment to meet these challenges. When introducing choices into the employee benefits program, HR professionals should think holistically and incorporate benefits into a broader total rewards framework.

16 12 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT To increase the perceived value of rewards, a benefits strategy must anticipate the needs of current and future employee demographics. It is no longer meaningful to simply provide a vast range of options as all that would achieve is to drive greater administrative burden and unnecessary complexity for the employee in selecting the most appropriate options. By appropriately analyzing your workforce profile, existing usage, and each employee s life stage, it is possible to provide choices that are relevant rather than being just choice for choice s sake. All of these data are already available to you, so why not take advantage of the information and be two steps ahead of the employees? Think Holistically PAY CAREERS BENEFITS WORK/LIFE Reward elements are interdependent Increasing the value of rewards does not necessarily address the other business priorities to create, enhance, and support a healthy and productive workforce or control short- and long-term costs. To tackle these issues, employers should consider integrating health and wellness programs into the employee choice benefits package. HR professionals should look beyond market studies and industry benchmarking. An effective health and wellness program must be targeted and relevant to an organization s workforce. Depending on where an employee sits across the population segments, employers can add significant value by: Managing prevalent chronic conditions primary cost drivers for health care spending. Addressing problematic lifestyles main factors leading to future chronic disease. Such a strategy can generate short-term savings and long-term cost avoidance. To realize these positive results and maximize ROI, employers need to identify prevalent health risks and chronic conditions within its population. This can be achieved through a diagnostic analysis using available data. The results allow organizations to make informed decisions and smart and targeted investment. As our survey results revealed that a small percentage of HR professionals have already incorporated some of what we have discussed into their benefits strategy. In fact, the vast majority of employers that offered choice believe their employee choice programs have met their objectives.

17 A ROAD MAP TO DEVELOP A SUSTAINABLE EMPLOYEE CHOICE BENEFITS PROGRAM 13 Figure 10. How Has the Employee Choice Program Impacted the Following? Meeting diverse employees needs 1% 8% 40% 10% 41% Employee understanding and appreciation of value and cost of benefits 2% 13% 49% 4% 32% Total rewards strategy 2% 16% 48% 6% 28% Employer competitiveness 1% 20% 48% 4% 27% Employer branding 3% 17% 49% 5% 26% Improvement in benefits utilization behavior 4% 18% 51% 2% 25% Success of benefits harmonization/alignment strategy 5% 17% 48% 7% 23% Talent attraction and retention strategy 2% 20% 53% 4% 21% Employee engagement 6% 13% 56% 4% 21% Cost containment 5% 17% 53% 5% 20% Employee productivity 8% 24% 52% 2% 14% 0% 20% 40% 60% 80% 100% No impact Significant impact Little impact Strong impact Some impact "HR professionals should seek data to help determine whether to eliminate or refocus existing programs..." However, this does not correlate with the responses shown in Figure 9 regarding how HR professionals actually measure the success of their employee choice programs. Although the metrics shown in Figure 9 provide some high-level data around participation, usage, and engagement, these types of measurement tools do not deliver concrete evidence of how the programs are performing. A sustainable program will require ongoing maintenance and investment in order to adapt to the changing needs of the organization and its workforce. HR professionals must be aware of whether their program is having an impact on the war for talent, is reducing costs, and is improving the health status and behaviors of the workforce population in order to make informed decisions and manage the program effectively on an ongoing basis. These key issues matter the most to business leaders as they assess the viability of the organization s benefit programs. HR professionals should seek data to help determine whether to eliminate or refocus existing programs, add new programs, or focus on specific groups or prevalent conditions within their covered population. As we noted above, it is increasingly necessary to differentiate between talent and critical talent. HR professionals need information to manage the programs; business leaders seek evidence of ROI and similar information to support or eliminate future investments, and understand the overall business impact of employee health. It is therefore critically important that evidencedbased measurement is a part of an organization s benefits strategy. The measurement results can support not only informed decision-making but also provide concrete evidence of how the program is performing and its ROI, and deliver the information necessary to make changes. The more robust and detailed the data, the more credible the measurement results will be, leading to better-informed decisions.

18 14 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT In fact, if the relevant data are available on an individual level, HR professionals can develop measurement metrics to address three broad objectives: Establish baseline measures of the performance of all health programs collectively or individually, and allow ongoing measurement on the same cohort of population to determine true ROI by eliminating uncontrolled influential factors, such as demographic/health profile changes as a result of staff turnover. Stratify results to help employers target specific groups, conditions, and behaviors appropriately based on actual employee data. Provide a platform for reporting to two distinct audiences: program managers and senior executive sponsors. HR professionals can then analyze how a specific population s health changes over time, in terms of both disease prevalence and behavioral risks. Hot zones of high costs, high disease prevalence, and poor health behaviors can be identified which in aggregate can drive program design. In addition, such robust data can be customized to link individual data to productivity and disability information. The result is that senior executives can view the impact of population health on the business as a whole. The following framework offers a high-level process and some key questions employers should ask when considering implementing a sustainable employee choice benefits strategy.

19 A ROAD MAP TO DEVELOP A SUSTAINABLE EMPLOYEE CHOICE BENEFITS PROGRAM 15 STRATEGY Are benefits objectives aligned with business priorities? What will success look like? What are our measurement metrics? What kind of data are available? What is the budget limitation? MEASURE AND MODIFY DESIGN DELIVERY Do the benefits choices meet the diverse needs of employees? Will employees be confused by too many choices? Are our health and wellness programs integrated? Do the health and wellness programs address prevalent risks and conditions across all segments of our population? Are there overlaps or redundancies? What is the most effective and efficient way to deliver benefits? Who should be the partner that manages benefits for our employees? What is the most efficient way to administer benefits? How do we effectively communicate with employees? MEASUREMENT Are employees satisfied with the choices? Are the choices meeting their needs? Are programs effective given key objectives? If not, what is the problem (design or vendor partner)? What is the ROI? Is there any short-term cost reduction? Any health risk improvement? How does that translate into long-term cost avoidance? This is both a challenging and exciting time for employee benefits. Maintaining the status quo is not sustainable the pressure to reduce costs and improve workforce productivity has pushed organizations to think more critically and strategically about the best approach to addressing their challenges. Employee benefits has surfaced as a top business priority for best-in-class companies, where the focus is on aligning shortterm cost control with a long-term strategy to effectively manage the workforce. "Maintaining the status quo is not sustainable..."

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21 CONCLUSION 17 CONCLUSION The number one phenomenon that the survey demonstrated was that HR professionals are indeed seeking new approaches to manage the impact of their benefits programs. However, many HR professionals continue to support multiple programs that are not necessarily aligned with the right business outcomes. As a result, measuring and supporting the impact of the benefits program is difficult, especially when it comes to justifying the programs to business leaders who are seeking more tangible ROI. For 2014 and beyond, Mercer Marsh Benefits believes that greater financial rigor and discipline are necessary for HR professionals. This can be supported by: 1 LEVERAGING DATA FOR BETTER DECISION-MAKING Leveraging the wealth of data you already have to substantiate the business impact of your benefits programs. This will allow for better decision-making and provide you with insights into your employee profile and give you the opportunity to make your benefits program relevant to your employees.

22 18 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT 2 MAXIMIZING SPEND FOR ONGOING HEALTH CARE PROGRAMS Deliver initiatives that focus on hot zones to maximize impact. MEASURE Start with baseline metric to determine ROI. Stratify results to target specific groups. DRIVE ANALYZE Identify hot zones for cost, disease prevalence, and behavior risk. Doing more with your existing benefits program by being targeted and specific with your outcomes; however, this is a dynamic event and sophisticated HR professionals recognize that addressing the broader issue of benefits program effectiveness is more about maximizing the spend rather than maxing out the spend.

23 CONCLUSION 19 3 CREATING A SUSTAINABLE HEALTH CARE PROGRAM Creating a sustainable health care program. This will be the key focus for years to come the existing approach of simply remarketing your program every year will no longer be an effective way of managing your health care cost. Sustainability requires longer-term behavioral change from your employees, so you will need to move away from passive activities, such as education and communication, to more proactive investments in health and wellness intervention programs.

24 20 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT ABOUT THE SURVEY Our survey attracted the participation of 1,035 employers across 12 countries in Asia. The countries with the highest participation rates were China, Hong Kong, India, the Philippines, Singapore, Taiwan, and Malaysia, which this year is included in country-level reporting. made up the majority of participants (56%), followed by companies with between 501 and 2,500 employees (25%) and those with more than 2,500 employees (18%). Figure 11. Survey Participation by Industry Country Number of Participants Percentage 11% 15% China % Hong Kong 84 8% India 63 6% Indonesia 33 3% Japan 19 2% Korea 29 3% Malaysia 50 5% Philippines % Singapore % Taiwan % Thailand 22 2% Vietnam 21 2% Total 1, % 10% 11% 11% 15% 15% 10% 10% 18% 10% 18% 18% 10% 10% 3% 8% 3% 3% 8% 8% 3% 3% 3% 7% 7% 6% 3% 3% 7% 6% 6% 6% 6% 6% Manufacturing Professional Professional and other and and other services other services services Hi-tech Hi-tech and technology and technology Health Health care and care life and sciences life life sciences BPO/call BPO/call center center Financial Financial services services Hospitality Hospitality and real and real estate real estate estate Energy Energy and chemical and and chemical chemical Pharmaceutical Retail Retail and FMCG and FMCG Pharmaceutical Retail and FMCG Automative Automative Others Others Automative Others Figure 12. Survey Participation by Headcount The survey continues to receive input from organizations across a wide variety of industries, with manufacturing and hi-tech/technology being most prominently represented. To refine the study and to recognize the individual nuances of each industry, we separated pharmaceutical and health care for We also added two additional categories: automotive, and hospitality and real estate. In terms of headcount, we saw a similar distribution of company sizes despite the exclusion of Australian companies from this year s survey. Small to medium enterprises (those with less than 500 employees) 56% 56% Above 2,500 Above 2, to 2, to 2,500 19% 19% 25% 25% Below 500 Below 500

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27 DEEP DIVE ANALYSIS 23 DEEP DIVE ANALYSIS ECONOMIC OUTLOOK The past several years have seen the global economy struggle its way through a recovery from the greatest financial crisis since the Great Depression. Of the 1,035 employers surveyed, only 23% expect rapid growth for their organizations, compared to 41% in the previous study in The majority of organizations demonstrating this shift in sentiment appears to be moving from rapid growth to slow growth with an increase from 46% to 59% since the prior study. Finally, we observed a marginal change in the status quo with 15% of employers assuming no growth, compared to 11% in In light of these employer perceptions, the slowdown in economic growth coupled with the escalating cost of benefit programs suggests that cost containment will remain a high priority in the near future. Figure 13. Anticipated Economic Outlook for Foreseeable Future Across the Region Economic growth 60% 40% 41% 46% 59% Figure 14. Anticipated Economic Outlook for Foreseeable Future (by Sector) Pharmaceutical Health care and life sciences 40% Automotive Retail and FMCG 27% Others 29% Manufacturing Hospitality and real estate 36% Hi-tech and technology 44% Professional and other services 58% 57% 13% 53% 4%3% 48% 6%2% 12% 4% 11% 62% 27% 24% 56% 17% 3% 13% 63% 21% 3% 17% 63% 52% 12% 17% 3% Financial 5% 17% services 53% 5% 20% 26% 53% 17% 4% 23% 20% 0% Rapid growth Slow growth 15% 11% Static 2% 3% Downsizing Energy and chemical 25% BPO/call center/captive BPO/ind BPO/KPO 17% 58% 70% 12% 5% 0% 20% 40% 60% 80% 100% Rapid growth Slow growth Static Downsizing 13% At the industry level, the automotive, hospitality, and real estate categories appear the most buoyant, with high expectations for growth. However, the largest shifts away from rapid growth expectations were observed in the retail, professional services, and manufacturing categories. The retail, financial services, and energy sectors seemed most resigned to downsizing over the short-term. As in the previous survey, we observed large variances in sentiment across the region. The Philippines* emerged as the most optimistic, with 36% of participants projecting rapid growth, fuelled in part by the continuing emergence of outsourcing solutions as businesses shift their delivery to centralized models. *For more information on country data, please contact your local Mercer Marsh Benefits Consultant.

28 24 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT Taiwan* and Hong Kong* show the lowest aggregate level of anticipated growth. Interestingly, both territories also demonstrated this pessimistic outlook in the previous survey. Malaysia* shows the greatest propensity for downsizing. Figure 15. Anticipated Economic Outlook for Foreseeable Future (by Country) Taiwan 11% Singapore 21% Philippines Malaysia India Hong Kong 36% 32% 53% 45% 30% 6% 69% 9%1% 52% 13% 9% 3% 10% 35% 62% 3% 11% 53% 31% 5% HEALTH BENEFITS SPENDING AS A PERCENTAGE OF PAYROLL A new innovation in the 2013 report is the separate analysis of employer expenditures across statutory and supplementary provision, allowing us to paint a more accurate picture of mandated versus discretionary spending. The troubling trend of employers not knowing the exact cost of their benefit programs continues. In the new regional analysis, the results show that 12% of employers do not know how much they spend on statutory benefits. For supplementary benefits, 13% of employers do not know how much they spend. This was an increase on the aggregate figure of 8% reported in For those employers reporting expenditures in excess of 15% of payroll, the bulk of this spend is driven by statutory provision (21% compared to supplementary provision at 11%). Generally, supplementary benefits expenditures constitute a lower percentage of payroll on a weighted basis. China 25% 60% 13% 2% Figure 16. Spend on Health Benefits as a Percentage of Payroll Across the Region 0% 20% 40% 60% 80% 100% 0% <2% Rapid growth Slow growth Static Downsizing 15% The region has experienced a series of conflicting events since the last survey. Continuing medical inflation and a slowing economic environment will very likely lead to a greater focus on the affordability aspects of health care delivery in the region. 2% <6% 6% <15% 4% 19% 48% 6% 21% 28% 27% 33% >15% 21% 11% Don t know 12% 13% 0% 5% 10% 15% 20% 25% 30% 35% Spend on statutory Spend on supplementary *For more information on country data, please contact your local Mercer Marsh Benefits Consultant. China* reports the highest expenditures for statutory provision of benefits, with 35% of employers spending in excess of 15% of payroll, and the lowest level of expenditure on supplementary benefits, with 39% of employers reporting expenditures of less than 2% of payroll.

29 DEEP DIVE ANALYSIS 25 Hong Kong* reports the lowest level of statutory provision of benefits, with 59% of employers spending less than 6% of payroll. The Philippines* reports the highest level of supplementary benefits provision expenditure, with 54% of employers spending in excess of 6% of payroll. However, this may be partially due to the statutory influence on supplementary benefits as a result of local nondiminution laws. Figure 17. Spend on Health Benefits as a Percentage of Payroll (by Country) Statutory Taiwan 6% Singapore 21% Philippines 15% Malaysia 19% India Hong Kong China 22% 11% 20% 31% 23% 34% 21% 47% 12% 13% 14% 18% 15% 29% 23% 31% 7% 10% 31% 28% 21% 3% 8% 11% 40% 35% 6% 0% 20% 40% 60% 80% 100% 0% <2% 2% <6% 6% <15% >15% Supplementary Taiwan 38% 29% 21% 22% 15% 17% Don t know 13% 6% 14% EMPLOYEE TURNOVER RATE Fourteen percent of employers reported hyperturnover in excess of 20% of the workforce annually. This result is in line with earlier observations of general economic softening; turnover rates otherwise have generally slowed down when compared to previous survey. The proportion of employers reporting turnover between 10% and 20% has reduced from 37% of respondents to 33% of respondents. This 4% reduction has drifted evenly to the lower turnover categories with 20% and 33% of employers reporting turnover of less than 5% and less than 10%, respectively. Figure 18. Employee Turnover Across the Region <5% 5% <10% 10% <20% 20% <40% >40% 3% 3% 0% 5% 10% 15% 20% 25% 30% 35% 40% % 11% 18% 20% 48% 6% 31% 33% 33% 37% Singapore 18% Philippines 11% 23% 26% 27% 32% 10% 22% 22% 9% Interestingly, smaller organizations are reporting lower turnover levels. The majority of the hyperturnover is in the employer group size of more than 2,500 employees. Malaysia 18% 23% 25% 22% 12% India 38% 19% 23% 7% 13% Hong Kong 17% 40% 23% 2% 18% China 39% 27% 16% 0% 20% 40% 60% 80% 100% 9% 0% <2% 2% <6% 6% <15% >15% Don t know 9% *For more information on country data, please contact your local Mercer Marsh Benefits Consultant.

30 26 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT Figure 19. Employee Turnover (by Sector) Figure 20. Employee Turnover (by Key Markets) Pharmaceutical 11% 34% 37% 18% Taiwan 28% 25% 27% 18% 2% Health care and life sciences 9% 27% 43% 21% Singapore 24% 36% 32% 7% 1% Automotive 8% 39% 37% 11% 5% Philippines 26% 28% 35% 10%1% Retail and FMCG 17% 20% 40% 19% 4% Malaysia 30% 32% 32% 6% Professional and other services 30% 27% 25% 16% 2% India 6% 30% 49% 12% 3% Others 21% 40% 28% 11% Manufacturing 24% 33% 30% 7% 6% Hospitality and real estate 22% 30% Hi-tech and technology 18% Energy and chemical 33% 18% 42% 4% 3% Financial 5% 17% services 53% 5% 20% 27% 27% 30% 13% 3% 29% 49% 30% 21%1% BPO/call center/captive BPO/ind BPO/KPO 10% 23% 33% 27% 7% Hong Kong China 28% 29% 31% 12% 11% 34% 37% 13% 5% 0% 20% 40% 60% 80% 100% <5% 5% <10% 10% <20% 20% <40% >40% Interestingly, Taiwan* has the highest country level of turnover, with 20% of employers reporting annual turnover in excess of 20%. This compares to a result of 11% in the prior survey. Of the surveyed countries, Malaysia* reports the lowest levels of annual turnover, with 62% of employers reporting rates of less than 10% annually. 0% 20% 40% 60% 80% 100% <5% 5% <10% 10% <20% 20% <40% >40% The hospitality and BPO sectors continue to report the highest levels of turnover in excess of 20% annually with results of 30% and 34%, respectively. For the BPO sector, this is consistent with Unsurprisingly, the professional services, financial services, and energy sector report the lowest rates of annual turnover. This is consistent with the general economic conditions being reported for those sectors. *For more information on country data, please contact your local Mercer Marsh Benefits Consultant.

31 DEEP DIVE ANALYSIS 27 THE IMPACT OF THE WAR FOR TALENT The war for talent continues to be an issue for employers, but the problem seems to be easing somewhat. The improvement of this issue is not surprising in an environment of economic slowdown and is consistent with the lower turnover rates reported by the majority of employers. However, although the talent war may be easing at the extremes, the issue of talent still remains a major concern for employers across the region and will do so for the near future. From an industry perspective, the war for talent is less of an issue within the professional and financial services sectors. It does continue to be a major issue in the BPO sector, however, with 27% of employers responding that talent is an issue in all areas, compared with 28% in the prior survey. The pharmaceutical industry also seems to be facing major challenges in the talent space. Figure 21. Impact of War for Talent Across the Region Major issues in all areas 5% 2% Issues in all areas 14% 10% Issues in some areas Not an issue 5% 9% 4% 79% 76% WORKFORCE HEALTH AND HEALTH MANAGEMENT The results of 2013 survey show no significant change in regards to workforce health and health management compared with the previous survey. Figure 22. Provision for Health and Wellness Programs Across the Region Fully integrated health and wellness strategy 4% 5% Multiple discrete health and wellness programs (e.g. health exams, fitness programs) 46% 47% Supplemental health and wellness education/information 34% Statutory requirements only No provision 3% 2% 13% 15% 31% 0% 10% 20% 30% 40% 50% % 10% 20% 30% 40% 50% 60% 70% 80%

32 28 ASIA TOTAL HEALTH AND CHOICE IN BENEFITS SURVEY REPORT Figure 23. Provision for Health and Wellness Programs (Key Markets) Figure 24. Plans to Offer More Health and Wellness Programs Across the Region Taiwan 3% Singapore 2% Philippines 15% Malaysia India Hong Kong China 29% 40% 58% 49% 45% 36% 25% 13% 1% 21% 3% 29% 7% 17% 0% 20% 40% 60% 80% 100% 7% 12% 26% 36% 26% 4% 31% 43% 15% 4% 59% 23% 13% 1% Fully integrated health and wellness strategy Multiple discrete health and wellness programs (e.g. health exams, fitness programs) Supplemental health and wellness education/information Statutory requirements only No provision Singapore* has the lowest level of fully integrated health and wellness delivery models, which may be because the government plays an active role in promoting public health and wellness programs. Taiwan*, Hong Kong*, and China* are not far behind. 7% At 15% of employers, the Philippines* has a very high rate of fully integrated health and wellness delivery models. This result is partly due to the mandatory nature of on-site clinic provision for many employers. More programs cost share 23% 17% More programs employer sponsored 32% About the same Fewer programs 1% 2% Don t know 4% 3% 28% 40% 50% 0% 10% 20% 30% 40% 50% Overall, the survey results demonstrate a slowdown in the number of programs being offered in health management. This observation applies to paid corporate programs and also to those programs with a voluntary element. *For more information on country data, please contact your local Mercer Marsh Benefits Consultant.

33 DEEP DIVE ANALYSIS 29 CONCERNS FOR EMPLOYEE HEALTH Concerns about employee health remained consistent between the two surveys, although we were surprised to see a slight decline in the number of employers that were concerned about the future health of their employees. Figure 25. Concerns for Employee Health Across the Region Yes current and future health Yes future health 22% 19% Yes current health 3% 5% Not sure 19% 21% 56% 55% We don t think employee health is an organizational responsibility 0% 0% 2% 0% 10% 20% 30% 40% 50% 60% REASONS FOR IMPLEMENTING HEALTH PROGRAMS For the 2013 study, the results were weighted to allow for greater ease of comparison. Continued improvement in productivity and performance is a key motivator for addressing health and wellness among survey respondents. The results suggest that employers see the connection between health and performance it is therefore strange to see that the same employers are shying away from expanding their interest and investment in implementing more programs. The second and third largest motivators, (attract and retain employees, and enhance employee engagement, respectively), are along similar lines and also show that employers are linking the health of their employees to the overall performance of the business, if somewhat indirectly. The data suggest that employers have the right intentions in driving productivity and performance but are failing to actually measure the business impact of increased productivity and performance. At the country level, the profile of concern in the 2011 and 2013 surveys is very similar, with little variance between the majority of countries.