Seventh AnnUAL StUDY OF employee BeneFItS:

Transcription

1 Seventh AnnUAL StUDY OF employee BeneFItS: today & BeYOnD Insight into the Next Generation of Employee Benefits The Prudential Insurance Company of America (Prudential) 751 Broad Street, Newark, NJ

2 Welcome to Prudential s Seventh Annual Study of Employee Benefits: Today & Beyond. Fielded in July 2012, our survey captured the thoughts of the benefits marketplace in the weeks after the Supreme Court s decision on the Patient Protection and Affordable Care Act of While the fate of health care reform loomed large this year, brokers, employers, and employees were also grappling with a slowly recovering economy three years after the Great Recession officially ended. This report examines five topics, identifying key trends within each area: the economy; health care reform; wellness programs; voluntary benefits; and technology. You ll hear directly from brokers, employers, and employees about who is doing what, what has been successful, and where opportunities lie. We re pleased to once again bring you this valuable tool to help you meet your benefits challenges.

3 Sharpening the Focus on Benefits Strategy page 3 Economic conditions continue to put pressure on benefits programs. Health Care Reform: The Waiting Is Over page 9 In the wake of the Supreme Court s decision, the industry begins to act. Wellness Programs Gain Attention page 17 Employers want to keep employees and their benefits plans healthy. The State of Voluntary Benefits page 23 Voluntary coverages remain popular, but there is room for growth. Tapping the Potential of Technology page 31 Integration is key to enhancing capabilities and driving results. Methodology page 37 Bring Your Challenges page 40 Seventh Annual Study of Employee Benefits: Today & Beyond I 2

4 Sharpening the Focus on Benefits Strategy Economic conditions continue to put pressure on benefits programs. 3

5 Fewer employers and employees are reporting severe negative economic effects. Employer benefits strategy has been impacted a great deal by the economy. Employers have earned their employees trust when it comes to benefits. Employees are beginning to own the benefits selection process. Employee confidence in selections reflects the growing effectiveness of benefits communications. Group meetings are viewed as the most successful form of communication and education by employers. Employees prefer benefits communications that they can review on their own time. Sharpening the Focus on Benefits Strategy I 4

6 Fewer employers and employees are reporting severe negative economic effects. In 2010, two years after the economic crisis began, 27% of employers and 22% of employees reported severe negative effects. Despite fewer employers and employees reporting severe negative economic effects in 2012 (14% for both groups), there is a declining optimism for how each group believes they will be doing financially a year from now. Reported severe negative economic effects Employers % 27 % Employees % 22 % Said their financial position will be better or improving in one year Employers Employees % 42 % 38 % 54 % 62 % 70 % 5 I Seventh Annual Study of Employee Benefits: Today & Beyond

7 Employer benefits strategy has been impacted a great deal by the economy. Nearly four years after the financial crisis began, the economy is still impacting employer benefits strategies significantly up 14 percentage points since As a result, benefits strategies have been evolving into a main focus for businesses (up 17 percentage points since 2010). Expanding wellness, preventative, and work/life balance initiatives is the top benefits strategy; indicating that employers are focused on shifting ownership of employee benefits to employees. Employers see their top benefits strategies in order of importance as: n Expanding wellness, preventative, and work/life balance initiatives. n Improving the effectiveness of benefits communications. n Cost-sharing with employees. n Giving more financial responsibility to employees. n Increasing employee benefits education and financial advice. up Impact of economy on benefits strategies up 14 percentage points 17 percentage points Benefits strategies are a main focus for businesses Employers have earned their employees trust when it comes to benefits. Seventy-nine percent of employees view their employers as a trustworthy source to help them grow and protect their money, second only to credit unions (81%). Because of this trust, employers are in a good place to make a difference and shift ownership of employee benefits to employees. Employees also believe they are being offered a wider array of benefits than employers see themselves as offering (51% for employees versus 40% for employers). Value of employee benefits has trended up over the past few years 43 % 49 % 59 % Employees believe they are being offered a wide array of benefits 38 % 45 % 51 % Sharpening the Focus on Benefits Strategy I 6

8 Employees are beginning to own the benefits selection process. Nearly a third (30%) of employees say they are doing more homework on employee benefits and 63% say they are confident in the benefits they selected in their most recent enrollment period (up 11 percentage points from 2010). But many are going at it alone when it comes to making a decision: only 15% of employees say they are asking for in-depth advice from their human resources department making the benefits communications they receive even more critical. up 11 percentage points The number of employers seeing a trend in the effectiveness of their benefits communications. Doing more homework 30 % 63 % 15 % Confident in most recent benefits selections Employee confidence in selections reflects the growing effectiveness of benefits communications. Asking for in-depth advice from their human resources department For the past three years, the effectiveness of benefits communications for employees has trended upward. Employers who say that their benefits communications are effective have also increased and they are seeing an increase in employee satisfaction with their benefits program as well. This could be a trend that will continue to increase if employers keep it at the top of their benefits strategies. Employees have seen a steady trend up in the effectiveness of their communications % 36 % % Employers citing that their benefits communications are effective % 35 % Employers reporting increased satisfaction with their benefits % 37 % 7 I Seventh Annual Study of Employee Benefits: Today & Beyond

9 Group meetings are viewed as the most successful form of communication and education by employers. According to employers, the most successful form of communication is a group meeting. Fewer employers are offering one-on-one meetings (69% compared to 81% for group meetings), but those who do report them to be very successful. A quarter (25%) of employers reported completing a targeted mailing for their employees, with large companies more likely to say they have used this method successfully. Employers are beginning to use social media and mobile technology as part of their communications strategy, with mixed degrees of success. For social media, the communications are more likely done on an internal platform for company access only. Larger companies are more likely to say they have utilized this approach versus smaller firms. However, smaller firms are more likely to say they have utilized a mobile benefits communication strategy and have had success. The most successful forms of benefits communications (outside of plan materials) Group meetings One-on-one meetings Toll-free help number Home mail Work mail Webinars Online presentation Video/CD-ROM/DVD presentation Outbound calls to employees Targeted mailings Internal social media Mobile devices External social media 21 % 19 % 18 % 17 % 14 % 12 % 10 % 9 % 42 % 37 % 35 % 58 % 57 % Employees prefer benefits communications that they can review on their own time. 69 % A significant number (82%) of employees report that they are reading their benefits enrollment materials, up seven points from The top resources that employees say are the most effective outside of plan materials whether they were available at their workplace or not were at the workplace (47%); mail at home (29%); and an online presentation that could be viewed at their own pace (24%). Only 21% of employees surveyed say that they prefer group meetings or individual one-on-one meetings (18%) during the workday. 82 % Employees say they are reading their benefits enrollment materials. { Rated most effective { { 47 % 29 % 24 % at the workplace Mail at home Online presentation that could be viewed anytime Sharpening the Focus on Benefits Strategy I 8

10 Health Care Reform: The Waiting Is Over In the wake of the Supreme Court s decision, the industry begins to act. 9

11 Brokers are no longer in watch-and-wait mode. Brokers are looking to carriers for help in reacting to the implications of health care reform. Brokers and employers are getting ready to meet the benefits challenges posed by health care reform. Company size impacts employer views on health care reform. A majority of employers feel they are on par with their peers when it comes to adopting changes. Health care reform is prompting employers to take action regarding their benefits plans. Employees speak out about the anticipated impact of health care reform. Health Care Reform: The Waiting Is Over I 10

12 Brokers are no longer in watch-and-wait mode. This survey which was launched after the Supreme Court s 5 4 decision largely upholding the Patient Protection and Affordable Care Act of 2010 was uniquely positioned to capture broker, employer, and employee reactions to health care reform. For brokers, issues around health care and health care reform are the top factors affecting their business. Helping clients manage health care reform is brokers number one most critical priority (42%). The second most critical priority is helping clients lower their benefits costs (38%). n Brokers with six or more years of experience are more likely to say the uncertainty regarding health care reform is greatly impacting their business (62% versus 47% for those brokers with under six years of experience). n Brokers who work with smaller companies are more likely to highlight uncertainty over those who work with large companies. Top factors brokers say will greatly impact their business The rising cost Uncertainty regarding of health care health care reform Changing federal/ state regulations 68 % 61 % 59 % Critical priorities 1 Helping clients manage health care reform 2 Helping clients lower their benefits costs 42 % 38 % 46 % 54 % n Critical priority n Priority n Not a priority 11 I Seventh Annual Study of Employee Benefits: Today & Beyond

13 Brokers are looking to carriers for help in reacting to the implications of health care reform. Brokers are looking to carriers to provide educational and communication help. The most critical need of brokers is expertise and thought leadership on health care reform (28%), with another 44% saying this information would be very helpful. Seventy-two percent of brokers also say that marketing and education to help employers maintain strong benefits offerings, even if they cease offering health insurance coverage is critical or very helpful. Enhanced enrollment capabilities is the next item brokers say would be helpful or critical to receive from carriers (70%). Products and services rounded out the last two of the five areas in which carriers can help brokers as they address the implications from health care reform. Brokers are looking to carriers to provide educational and communication help Expertise and thought leadership on health care reform Marketing and education to help employers maintain strong benefits offerings, even if they cease offering health insurance coverage Enhanced enrollment capabilities 28 % 44 % 24 % 48 % 21 % 49 % 72 % of brokers say marketing and education to help employers maintain strong benefits offerings is critical or very helpful. Wellness products and services for employees 22 % 47 % Access to a wider array of voluntary products 19 % 45 % Critical Very helpful Somewhat helpful Not helpful Health Care Reform: The Waiting Is Over I 12

14 Brokers and employers are getting ready to meet the benefits challenges posed by health care reform. Not surprisingly, both brokers and employers are anticipating consequences from health care reform, with brokers expecting a larger impact. While both groups agree that employee benefits funding will be impacted the most (82% of brokers; 60% of employers saying moderately or tremendously impacted), they differ on the next two items. Brokers see the next two items impacted to be number of employee benefits offered (80%) and employee benefits communications (78%). Employers say employee benefits service and support (56%), followed closely by the number of employee benefits offered (55%). Items cited as moderately or tremendously impacted by health care reform Large companies (10,000+ employees) were less likely to say that the number of employee benefits offered will be impacted by health care reform. BROKERS EMPLOYERS Employee benefits 82 % 60 % funding 80 % Number of employee benefits offered 55 % Employee benefits funding Number of employee benefits offered 78 % Employee benefits communications 51 % Employee benefits communications 77 % Employee benefits service and support Employee benefits 56 % service and support Greater consumerism 75 % 49 % by employees Greater consumerism by employees Company size impacts employer views on health care reform. Mid-size employers (500 to 9,999 employees) are anticipating a greater impact on all aspects of employee benefits than smaller or larger companies. Sixty-eight percent say that health care reform will have a significant impact on employee benefits funding and 61% say it will have a significant impact on employee benefits communications. Large companies (10,000+ employees) were less likely to say that the number of employee benefits offered will be impacted. 13 I Seventh Annual Study of Employee Benefits: Today & Beyond

15 Anticipates significant impact on employee benefits funding Mid-size companies Smaller companies Larger companies 57 % 49 % % Anticipates significant impact on employee benefits communications Mid-size companies Smaller companies Larger companies 45 % 50 % 61 % Anticipates significant impact on number of employee benefits offered Mid-size companies 61 % Smaller companies Larger companies 53 % 47 % A majority of employers feel they are on par with their peers when it comes to adopting changes. Most employers are aware of what is going on within their company and other companies on this topic, whether it is a positive or negative for their company. More than half (58%) of employers say they are on par with their peers, with 12% saying they are leading their peers. Only 5% say they are not sure. n Those companies who said they are lagging their peers are more likely to be struggling financially or lacking direction. n They are more likely to have been negatively impacted by the economy in the past six months (20% saying very negative compared to 5% for leaders and 12% for on par companies). n More likely to say they have taken no action in regard to health care reform, but are considering taking action. n Since they have taken little or no action, these companies are also expecting that health care reform will have a greater impact. 25 % All employers 5 % 12 % 58 % Fewer than 500 employees 500 to 9,999 employees 10,000 or more employees 6 % 12 % 4 % 11 % 16 % 17 % 26 % 24 % 56 % 61 % 67 % Don t know Lagging On par Leading Health Care Reform: The Waiting Is Over I 14

16 Health care reform is prompting employers to take action regarding their benefits plans. 29 % of employers say that it is at least somewhat likely they will cease offering health care benefits. Twenty-nine percent of employers say they are at least somewhat likely to cease providing health care benefits to their employees; 7% saying extremely likely and another 7% saying very likely. Those companies who say they are leaders in health care reform adoption are most likely to say they are not considering scaling back on benefits offerings (46% versus 32% of those in the on par category and 13% of those in the lagging category). 67 % 15 % 7 % 7 % 4 % State of health care benefits n Companies in Construction (12%) and Retail (13%) are more likely to say it s extremely likely that they will cease offering health care benefits than those in Professional/Technical Services (4%), Health Care (4%), and Other Services (2%). Not likely Somewhat likely Very likely Extremely likely Don t know 5 % 5 % Scaling back benefits offerings 27% have already or are in the process of scaling back benefits offerings with another 39% considering it. 29 % 22 % n Companies with 1,000 to 4,999 employees are more likely to say they have already done this or are in the process. 39 % Switching carriers/tpas Almost half of employers (46%) are considering switching carriers or TPAs. 7 % 6 % 15 % n Companies in the Northeast and the Midwest are more likely than those in the South to say they are considering switching. 27 % n Companies with fewer than 100 employees are more likely to say they are not considering switching. 46 % n Companies with 5,000 to 9,999 employees are more likely to say they have already done this. Participating in health care exchanges 17% have already or are in the process of participating in health care exchanges and 39% are currently considering it. 13 % 4 % 13 % 31 % 39 % n Those with 5,000 to 9,999 employees are more likely than others to say they are considering it (56% compared to 38% and fewer). n Those with 25 to 99 employees are more likely to say not applicable (18% compared to those with 100 to 4,999 employees, 12% and fewer). Post implementation Adopting and implementing No actions, but considering No actions, not considering Don t know 15 I Seventh Annual Study of Employee Benefits: Today & Beyond

17 Employees speak out about the anticipated impact of health care reform. Many employees have concerns about how health care reform will affect their worksite benefits. Nearly half (46%) of employees believe that it is likely that the cost of health insurance will increase overall, with 44% believing that the cost will increase at the employer level. Employees who are ages 40 to 59 are more likely than those who are ages 22 to 39 to think the cost of health care will increase overall (51% and 36%, respectively). Thirty-one percent say it s likely that fewer employers will offer health insurance coverage, which is in line with the employers response. However, only 12% of employees say it s likely their own employer will stop providing health insurance. Employees thoughts on health care reform % It s likely the cost of health insurance will 46 increase for me 44 % Costs will increase at the employer level % The government will have to find new ways 40 to cover the health insurance costs 31 % Fewer employers will offer health insurance 27 % It will be up to me to find new ways to cover the costs of health insurance % My employer will stop providing 12 health insurance Health Care Reform: The Waiting Is Over I 16

18 Wellness Programs Gain Attention Employers want to keep employees and their benefits plans healthy. Brokers consider wellness a priority. Employers are focused on helping employees live healthier lives. Wellness programs are being used to manage costs. 17

19 Employees have room for growth in participation in wellness programs. Employees who have participated in wellness programs find more value in their benefits. Wellness Programs Gain Attention I 18

20 Brokers consider wellness a priority. Nearly a third (32%) of brokers say developing wellness-related offerings is a critical priority over the next few years, with 51% of brokers listing this as a priority. Group Benefits Consultants were more likely to say this is critical than General Agents, who were more likely to say that is not a priority (21%). Critical priority 32 % 51 % Priority Leading Companies with a larger focus on return-to-work programs are more likely to place a greater importance on wellness as well. Employers are focused on helping employees live healthier lives. Overall, the top benefits strategy listed by employers was expanding wellness, preventative, and work/life balance initiatives. Having healthier employees was the number two benefits objective behind controlling health care costs. Seventy percent of larger companies (10,000+ employees) are placing a greater focus on employee health. Larger companies place a greater focus on employee health More than 10,000 employees 500 to 9,999 employees Fewer than 500 employees 55 % 70 % 69 % Companies on par or leading in adopting health care reform rate the objective of healthier employees higher than those lagging Leading On par Lagging 47 % 61 % 64 % 19 I Seventh Annual Study of Employee Benefits: Today & Beyond

21 More than 1 in 3 Employers say expanding wellness, preventative, and work/life balance initiatives was very important and another 26% say this strategy was somewhat important. n In line with what we saw with the objectives, this strategy is more important in larger companies. n Those companies in the Health Care Industry (41%) and Accommodations/Food Services (40%) are more likely to say this is important. n Companies in the Construction Industry are less likely to rate this as important (25%). Wellness programs are being used to manage costs. In order to achieve their cost management goals, employers are implementing a number of health- and wellness-related activities. Almost half of employers (44%) are already increasing the use of wellness programs to improve the health of employees. Among these companies that have already implemented this approach, 33% have been very successful in achieving their desired cost savings. Companies with fewer than 500 employees are more likely to say they are not considering wellness programs as a way to manage costs (26%). Employers are implementing a number of health- and wellness-related activities 42 % Employers are expanding the range of education programs on health and wellness + 37 % Employers are considering it 37 % Employers are providing health and benefit options based on health behavior + 37 % Employers are considering it 35 % Employers are increasing incentives and penalties to motivate healthy behaviors + 36 % Employers are considering it 28 % Employers are connecting their wellness programs to their disability programs + 34 % Employers are considering it n Consistent with other findings around this topic companies leading or on par with adopting health care reform are more likely to be implementing all of these items. Wellness Programs Gain Attention I 20

22 Employees have room for growth in participation in wellness programs. Fitness programs and health screenings are the most common at-work programs participated in by employees. That said, only 32% say they have participated in a fitness program through their employer in the past five years. n There is an opportunity for employers to stress the importance of their health and wellness programs to their employees. n Employees may not know what programs their employer offers or that these programs can have an effect on their health care costs. Participated in fitness programs Yes 32 % No 68 % n Employees under the age of 30 were less likely to say they participated (79%) than those over 40. n Those who work for larger companies (more than 500 employees) and those in the Manufacturing Industry were more likely to say they have participated in or are currently participating. Participated in health screening Yes 40 % No 60 % n Those over age 30 are more likely to say they are currently participating. n Those working in Retail (62%) and Professional/Scientific/ Technical (58%) are more likely to say they have not participated in the past five years than those in Manufacturing (43%). Participated in other programs Yes 25 % No 75 % Yes 25 % No 75 % Yes 20 % No 80 % Yes 8 % No 92 % Weight loss Healthy food selection Stress management Tobacco cessation 21 I Seventh Annual Study of Employee Benefits: Today & Beyond

23 Employees who have participated in wellness programs find more value in their benefits. Half of the employees surveyed participated in at least one wellness program in the past five years. These employees are more likely to say that benefits are more important to them given recent economic conditions, with 58% saying more important compared to 48% for those who have not participated. This group also finds more value in their benefits: 66% of those employees who say their benefits are very valuable participated in at least one wellness program versus 51% of the employees who are not participating. 1/2 of employees have participated in at least one wellness program in the past five years: n These employees place a greater importance on their medical and dental benefits. n They are more concerned with costs of health care insurance increasing for themselves and their employer as a result of health care reform. Those who have participated in the past five years are more likely to say they are satisfied with their current employer (% saying very satisfied) 64 % Those who have participated in the past five years are more likely to say their benefits are valuable (% saying very valuable) 66 % 72 % Those who have participated say the workplace has increased in importance over the past five years when it comes to personal savings and insurance products. 51 % Participants Nonparticipants Wellness Programs Gain Attention I 22

24 The State of Voluntary Benefits Voluntary coverages remain popular, but there is room for growth. Brokers are very optimistic about the future of voluntary benefits. Employees see the value of voluntary benefits and are more interested in having access to them. Participation in voluntary products has grown, but gaps remain. Cost, convenience, and competitiveness are the top three advantages for employers. Employees cite cost and guaranteed issue as major advantages. 23

25 Age, gender, and education level impact employee opinions of voluntary benefits. Carrier brand name is growing in importance. The State of Voluntary Benefits I 24

26 Brokers are very optimistic about the future of voluntary benefits. Brokers say they are expecting the demand for voluntary benefits (i.e., 100% employee-paid coverages) to increase over the next five years more than they have in the past. Some employers say that the state of the economy will lead to an increase in participation (27%) in voluntary benefits, but not nearly as much as the brokers. Forty-four percent of brokers expect participation to grow, a 10 percentage point increase over last year. This could be due to the fact that brokers are seeing a bigger shift to voluntary coverages and the addition of new programs as a result of keeping health care costs down especially in the wake of health care reform. Brokers currently selling voluntary products say they are expecting demand to increase % 44 % 52 % All brokers see the adoption rate of various voluntary products to increase with their clients Critical illness insurance Long-term care insurance Accident insurance Long-term disability insurance Short-term disability insurance Dental insurance Life insurance Vision insurance AD&D insurance 41 % 32 % 31 % 30 % 28 % 27 % 25 % 21 % 17 % Increase Stay the same Decrease n The largest increases in adoption came with critical illness insurance (41% believe it will increase), long-term care insurance (32%), and then accident and long-term disability insurance (31% and 30%, respectively). 25 I Seventh Annual Study of Employee Benefits: Today & Beyond

27 Brokers currently selling voluntary products believe that the state of the economy will lead to an increase in participation % 34 % 44 % Employees see the value of voluntary benefits and are more interested in having access to them. Employees saying that their employer offers at least one voluntary benefit increased by three percent (85% in 2011; 88% in 2012). Twelve percent of employees say that their employer does not offer them any voluntary benefits, a decrease from last year (15% in 2011). Sixty-three percent of those employees who say that their employer offers at least one voluntary benefit agree that voluntary benefits increase the value of their company s benefits program. There was a 10 percentage point increase from last year in employees saying that they are interested in receiving more voluntary benefits through their employer. Voluntary benefits increase the value of a company s benefits program Agree Disagree 27 % 63 % Employees say they are interested in receiving more voluntary benefits through their employer % 34 % The State of Voluntary Benefits I 26

28 Participation in voluntary products has grown, but gaps remain. The top four voluntary benefits employees are offered through work and are currently enrolled in are: dental insurance; life insurance; vision coverage; and disability insurance. Critical illness and accident insurance were the products employees were most likely to say their employers do not offer (42% and 40%, respectively). Similarly, critical illness and accident are two of the top products that employers say they do not offer. Life insurance is more likely to be offered at no cost to the employee (38%), meaning that if no voluntary plan is in place, employees may be underinsured or worse, uninsured. Most popular voluntary benefits offered and participation employee perspective Dental insurance Life insurance Vision insurance Disability insurance AD&D insurance Long-term care insurance Accident insurance Critical illness insurance 22 % 20 % 12 % 38 % 65 % 61 % 53 % 50 % n Critical illness and accident insurance are products that employees cited as being not sure if they were part of their employee benefits package (27% critical illness and 21% accident). n Long-term care insurance also fell into this don t know category with 22%. This could be due to employees not receiving enough communication or education regarding their worksite benefits. 21 % of employers only offer long-term disability, long-term care, accident, and critical illness as voluntary products. Most popular voluntary benefits offered employer perspective Medical insurance 4 % Dental insurance 13 % Life insurance 14 % Short-term disability insurance 17 % Vision insurance 16 % Long-term disability insurance 21 % AD&D insurance 18 % Long-term care insurance 21 % Accident insurance 21 % Critical illness insurance 21 % 27 I Seventh Annual Study of Employee Benefits: Today & Beyond

29 Cost, convenience, and competitiveness are the top three advantages for employers. According to employers, lower cost of some benefits was cited as the top advantage; while convenience of payroll deductions and maintain competitiveness of benefits program with little/no cost round out the top three. Guaranteed issue came in a distant fourth. n Forty percent of employers strongly agree that offering voluntary benefits has had a positive impact on their employees satisfaction with their benefits program. n The South (6%) and West (5%) regions were much more likely than the Midwest (0%) to believe that there are no advantages to voluntary benefits. Advantages of offering voluntary benefits 67 % Lower cost of some benefits 59 % Convenient (pay via payroll deductions) % Maintain competitiveness of benefits 52 program with little or no cost 36 % Guaranteed issue 4 % No advantages 40 % of employers strongly agree that offering voluntary benefits has had a positive impact on their employees satisfaction with their benefits program. The State of Voluntary Benefits I 28

30 Employees cite cost and guaranteed issue as major advantages. Over half of employees surveyed say cost and guaranteed issue are major advantages, with convenience through payroll deduction coming in close behind at 48%. One in three employees say that losing their voluntary benefits would be disruptive and expensive. Two-fifths or more consider all items asked about to be major advantages of voluntary benefits. These benefits also boost their impressions of their employer; over one in four (26%) feel that these benefits demonstrate that my employer has my interests at heart and cares about my well-being. 1 in 3 n Employees say that losing their voluntary benefits would be disruptive and expensive. n Employees who say this were more likely to be over the age of 50. Top major advantages according to employers Lower cost of some benefits Can enroll without medical exam or evidence of insurability Convenient (pay through payroll deduction) Access to a wider range of benefits Employer endorsement 52 % 52 % 48 % 47 % 43 % Younger employees (under 30) are less likely to see the advantage of having access to a wider array of benefits. Better service because of employer influence 39 % Major advantage Minor advantage Not an advantage Don t know Age, gender, and education level impact employee opinions of voluntary benefits. Older employees (60+) are more likely to feel that voluntary benefits offer major advantages, especially when it comes to guaranteed issue. Fifty-six percent of post-graduates agree that voluntary benefits give you access to a wider range of useful benefits than might not otherwise be available to you, which was significantly higher than employees with some college (44%) and high school graduates (45%). Women were more likely than men to say that voluntary benefits are convenient because you pay for them through payroll deduction (53% versus 45%). Women again were significantly higher when asked: your employer has done the research and shopping for you, and endorses the options that you have available (women (48%) versus men (39%)). 29 I Seventh Annual Study of Employee Benefits: Today & Beyond

31 Employee opinions on voluntary benefits Voluntary benefits often cost less than if you purchase the same benefits outside the 52 % workplace n Significantly higher among post-graduates (65%) versus some college (52%), college graduates (50%), and high school graduates (45%). You can enroll in voluntary benefits without going through a medical exam or providing 52 % other evidence of insurability n Significantly higher among ages 60 and older (62%) versus ages 30 to 39 (47%). Voluntary benefits are convenient because you pay for them through 48 % payroll deduction n Significantly higher among women (53%) versus men (45%). 47 % otherwise be available to you Voluntary benefits give you access to a wider range of useful benefits than might not n Significantly higher among post-grad (56%) versus some college (44%) and high school graduates (45%). Your employer has done the research and shopping for you, and endorses the options that 43 % you have available n Significantly higher among women (48%) versus men (39%) and significantly higher among ages 40 to 59 (47%) versus ages 22 to 39 (35%). Service is better because of the relationship/influence your employer has with the 39 % benefits provider n Significantly higher among ages 40 to 59 (42%) versus ages 22 to 39 (31%). Carrier brand name is growing in importance. For brokers, employers, and employees, the benefits carrier name has grown in importance with brokers having the most significant increase year over year (up from 78% from 2011). Forty-two percent of employees who reported only receiving one voluntary benefit through their employer say they know the name of the insurance company up from 35% in Brokers Employers Up from 78% in 2011 Up from 59% in 2011 Employees 66 % Up from 51% in % 88 % The State of Voluntary Benefits I 30

32 Tapping the Potential of Technology Integration is key to enhancing capabilities and driving results. 31

33 Employee benefits brokers are embracing technology tools. Many employers are using technology for plan administration, but lag in integration. Over half of all employers have an enrollment platform, but who provides that platform varies. If they had a choice, employers would prefer to use an integrated platform provided by an employee benefits carrier. Tapping the Potential of Technology I 32

34 Employee benefits brokers are embracing technology tools. Nearly 30% of brokers are using tablets to access marketing materials and plan information today. Another 30% wish that technology were available to them. Mobile phone applications remain popular, but trail tablets in favorability. About 20% of brokers are using their mobile phones to access marketing materials and plan information; another 20% to 25% wish it were available to them. Brokers continue to expand their use of technology: 44% of brokers are either currently submitting, or wish they could submit, Requests for Proposals (RFPs) through a tablet or smart phone. Nearly a quarter (22%) of brokers report having used auction technology a great deal in the past year a 5% increase over Interest in accessing by tablet Marketing materials Product plan info 29 % 28 % Claims reports Client reports Compensation reports Leads 22 % 20 % 18 % 18 % Using today Wish it was available Wait until technology proven by peers No interest Interest in accessing by mobile phone Marketing materials Product plan info Claims reports Client reports Compensation reports Leads 20 % 18 % 14 % 13 % 12 % 16 % Using today Wish it was available Wait until technology proven by peers No interest 33 I Seventh Annual Study of Employee Benefits: Today & Beyond

35 Many employers are using technology for plan administration, but lag in integration. Three-fifths of employers primarily those with more than 500 employees report using an administrative platform to manage their employee benefits programs. Of those employers, 62% say that using the platforms to manage their benefits program is effective, with 37% rating it highly effective. A majority of these platforms are integrated to some extent: 53% of those using an administrative platform say it is integrated for all employer-paid and voluntary products; 21% have an integrated platform but only for employer-paid products. Of those companies that do not have an integrated platform for all benefits, about half (49%) say an integrated platform would be easier. Use administrative platform Platform effectiveness No 34 % 7 % Don t Know Yes 59 % 25 % Effective 37 % Highly Effective Integration of administrative platform 4 % Don t know An integrated platform would be easier 49 % 22 % Not integrated Yes 21 % 53 % Integrated for all employer-paid products but not voluntary benefits Integrated for all employer-paid products and voluntary benefits n 70% of companies with more than 10,000 employees say their administrative platform is integrated for all products. n Companies with 500 to 9,999 employees are more likely to say one integrated platform would be easier. Since those employers who use an administrative platform may not have all their benefits integrated into one, they may have multiple sources. n 42% say the carriers provide their platform. Smaller companies are likely to be using carrier platforms. 30% say they house their platform in-house. 30% say they utilize a TPA for their platform. Tapping the Potential of Technology I 34

36 Over half of all employers have an enrollment platform, but who provides that platform varies. Fifty-two percent of employers have an enrollment platform, with 59% saying that this platform is integrated for all employer-paid and voluntary products. Integration is highest among companies with more than 10,000 employees (73%). Of the employers who say they do not have an integrated enrollment platform, 52% say that having all benefits integrated on one platform would be easier. Because those employers who use an enrollment platform may not have all their benefits integrated into one, they may have multiple sources: 44% say the carriers provide their platform; 28% say they house their platform in-house; and 27% say they use a TPA. Providers of platform vary slightly more than two-fifths are the carriers themselves, about three in ten do it in-house, while another three in ten use a TPA. Use enrollment platform No 44 % 4 % Don t Know Yes 52 % Integration of enrollment platform Enrollment platform effectiveness 30 % Effective 39 % Very Effective 4 % Don t know 18 % Not integrated 19 % 59 % Integrated for all employer-paid products but not voluntary benefits Integrated for all employer-paid products and voluntary benefits An integrated platform would be easier 52 % Yes n Companies with 500 to 9,999 employees are more likely to say one integrated platform would be easier. n Smaller companies are likely to be using provider platforms. 35 I Seventh Annual Study of Employee Benefits: Today & Beyond

37 If they had a choice, employers would prefer to use an integrated platform provided by an employee benefits carrier. Over half (55%) of the employers surveyed would choose an integrated platform provided by a carrier than one from a TPA (24%). If available, 86% of employers say they would move at least some of their benefits to that platform, with 56% saying they would move all or most. 55 % 24 % Employers would choose to use an integrated platform provided by an employee benefits carrier over a TPA n Higher among Midwest (64%) and South (58%) than West (49%) and Northeast (47%). n Higher among employers with 5,000 to 9,999 employees (75%) than 25 to 49 (50%), 50 to 99 (55%), 25 to 99 (52%), and more than 10,000 (48%). Employers would choose to use an integrated platform provided by a TPA n Higher among Northeast (30%) than South (19%) and Midwest (20%). n Higher among employers with 500 to 999 employees (31%) versus 25 to 99 (20%) and 5,000 to 9,999 (13%). 86 % Employers say they would move at least some of their benefits to the platform 56 % Employers say they would move all or most of their benefits to the platform Tapping the Potential of Technology I 36

38 Methodology The Seventh Annual Study of Employee Benefits: Today & Beyond was fielded via the Internet during July 2012* and consists of three distinct surveys: one among employers, another among employees, and the third among group employee benefits brokers and consultants. This enabled us to compare and contrast opinions of these groups on key benefits issues. This year s study was conducted for Prudential by the Center for Strategy Research, an independent market research firm based in Boston. Overview of Employer Survey Employer results are based on a national survey of 1,000 employee benefits decision-makers. Respondents included business executives, business owners, human resources professionals, and financial management professionals. The survey sample covers all industries, including government, and is nationally representative of all U.S. businesses with at least 25 full-time, benefits-eligible employees. Data shown in this report is weighted to reflect the actual proportion of U.S. businesses by company size, industry, and region based on data from the U.S. Census Bureau. The margin of error is +/- 3.0% at the 95% confidence level. Below is a breakdown of survey respondents by survey participant region, job function, industry, company size, approximate 2011 sales, years in business, and business ownership Sales or Fee Income Under $10 million 25% $10 million to under 19% $25 million $25 million to under 10% $50 million $50 million to under 14% $200 million $200 million to under 7% $500 million $500 million to under 7% $1 billion Region West 25% Northeast 20% South 32% Midwest 23% Job function HR/Employee Benefits 22% Other 7% Accounting/ Finance/ Treasury 17% Exec./Owner 54% $1 billion or more 11% Don t know 7% Years in Business Fewer than 10 11% 10 to 19 22% 20 to 49 41% 50 or more 26% Business Ownership Private 84% Public 15% Don t know 1% Industry Manufacturing 5% Other 26% Services 31% Number of employees 1,000 4,999 16% Wholesale 5% % Health Care 10% Construction 13% Retail 10% 5,000+ 6% % % % * Exact field dates are as follows: Employer July 11 to July 27, 2012; Employee July 18 to July 30, 2012; and Broker July 17 to August 1, I Seventh Annual Study of Employee Benefits: Today & Beyond

39 Overview of Employee Survey Employee results are based on surveys conducted among 1,011 employees, ages 22 or older, who work full-time for a company with at least 25 employees. The survey of employees was conducted during the same time period as the plan sponsor and broker surveys. The survey sample is nationally representative of all U.S. workers at companies with at least 25 full-time employees. Data shown in this report is weighted to reflect the actual proportion of U.S. workers by gender, region, race and ethnicity, education level, household income, and age based on data from the Bureau of Labor Statistics and the U.S. Census Bureau. The margin of error is +/- 3.0% at the 95% confidence level. Below is a breakdown of survey respondents by region, age, household income, racial and ethnic background, gender, education level, as well as employer industry and size. Racial Background White 82% African American 10% Asian 5% Other 3% Ethnic Background Hispanic 15% Non-Hispanic 85% Gender Male 57% Female 43% Region Northeast 18% South 37% West 22% Midwest 23% Age % 60+ 7% % % % Employer Industry Manufacturing 13% Professional Services 12% Retail Trade 9% Education 8% Public Administration 7% Health Care 6% Financial 5% Information 5% Transportation/ 5% Warehousing Accommodation/Food 5% Services Other 25% Household income $100,000 $149,999 18% $150,000 or More 15% $75,000 $99,999 18% Less than $50,000 27% $50,000 $74,999 22% Education Level Some High School 8% High School Graduate 27% Some College or Technical 27% School College or Technical School 24% Graduate Post Graduate School 14% Employer Size (No. of employees) % % % % 1,000 2,499 9% 2,500 4,999 7% 5,000 9,999 6% 10,000 24,999 9% 25,000 or more 21% Methodology I 38

40 Overview of Broker Survey As in 2010 and 2011, we engaged leading employee benefits brokers and consultants to participate in this year s study to help provide a clearer picture of the current and future trends and issues facing the industry. The group insurance intermediaries surveyed have the following characteristics: n Focused on employee benefits More than half (54%) spend 75% or more of their time in these activities. n Experienced More than half (55%) report working in the field for more than 10 years. n Broad product perspective Roughly 75% or more sell or service group medical, life, disability, and dental. Half or more sell or service group vision and other voluntary products. n Work for large companies Three in five work in companies with 1,000 or more employees. n Work with employers of all sizes and in all major industries (on average, less than 25% of business from clients with fewer than 50 employees). Broker results are based on surveys conducted among 603 group employee brokers/consultants. The survey of group employee brokers/consultants was conducted during the same time period as the employer and employee surveys. The margin of error is +/- 4.0% at the 95% confidence level. Gender Male 56% Female 44% Below is a breakdown of survey respondents by size of firm, size of clients served, region, age, gender, years in employee benefits, and top employer industries. Size of broker/consultant firm % of business from group employee benefits Years in Employee Benefits 5 years or fewer 22% 6 to 10 years 23% More than 10 years 55% 5, % Fewer than % Fewer than 50% 27% Top Employer Industries* Finance/Insurance 34% Manufacturing 33% Professional/Scientific/ 33% Technical Services 1,000 4,999 28% % 75% or More 54% 50 75% 19% Health Care/Social Assistance 28% Educational Services 22% Public Administration/ 18% Government Region Age 65+ 3% Other Services (except 15% Public Administration) Construction 13% Administrative/Support/ 12% Waste Management/ Remediation Services Northeast 28% South 30% % Under 35 23% Information 11% Transportation/ 11% Warehousing Retail Trade 10% West 19% Midwest 23% % % 39 I Seventh Annual Study of Employee Benefits: Today & Beyond * Benefits brokers/consultants were asked to indicate the three industries in which they have the highest concentration of clients. Numbers will add up to more than 100%. Listed are those industries with 10% + mentions.

41 Bring Your Challenges Prudential has been underwriting group insurance plans since Today our Group Insurance business is the nation s second-largest group life carrier, with almost 13,000 group life, 5,800 long-term disability, and 4,200 short-term disability clients insuring more than 20 million employees and their families. 1 At Prudential Group Insurance, we understand the challenges employers face delivering cost-effective, competitive benefits. We offer a full range of company-paid and voluntary coverages, including group life, long-term and short-term group disability, corporate- and trust-owned life insurance, and retiree solutions. Contact your Prudential representative or visit for more information. Bring Your Challenges I 40

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44 1 LIMRA, 2011 Annual Surveys of US Group Life and Group Disability Insurance. Group Insurance coverage is issued by The Prudential Insurance Company of America, 751 Broad Street, Newark, NJ Prudential, the Prudential logo, the Rock symbol, and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide