Health care costs have been an extraordinary challenge for employers over the past year. In the Society for Human Resource Management's (SHRM) newly released 2010 Employee Benefits Survey Report, 72 percent of the 534 HR professionals surveyed said that the benefits offerings at their organization have been affected in some way over the past year.

However, despite intensifying cost pressures, and in the wake of the landmark federal health care reform law, most companies remain committed to providing employee health care benefits.

According to the SHRM report, released last month, employee benefits remained relatively stable from 2009 to 2010. In a separate survey, conducted by Workforce Management and Business Insurance, 52.5 percent strongly disagreed that it would be better for their organizations to stop offering health care benefits and pay a fine under the new law; an additional 15.3 percent somewhat disagreed with the notion of dropping coverage and paying the fine.

The percentage of payroll paid on benefits has held steady in 2010 when compared with last year. On average this year, 19 percent of an employee's annual salary was spent on mandatory benefits, 18 percent on voluntary benefits, and 11 percent on pay for time-not-worked benefits. In 2009, HR professionals reported that 20 percent of payroll costs were spent on mandatory benefits, 19 percent for voluntary benefits and 11 percent for paid leave benefits.

Mandatory benefits generally include unemployment, worker's compensation and Social Security. Voluntary benefits include medical plans, dental plans, prescription coverage, flexible spending accounts, vision plans and survivor benefits.

Nearly all companies (98 percent) offer at least one of the following health care insurance packages: preferred provider organization (PPO) plans; health maintenance organization (HMO) plans; health care reimbursement accounts (HRAs); point of service (POS) plans; consumer-directed health care plans (CDHP); indemnity plans; or exclusive provider organization (EPO) plans.

Highlights from these health insurance programs:

• A PPO plan, which offers a network of health care providers that patients must use or otherwise pay more for services from providers outside of the network, is the most frequently offered type of health insurance, offered by 85 percent of respondents' companies.
• One-third (33 percent) of organizations offer HMO plans, which require participants to choose a primary care physician from their network to coordinate all of the patient's care.
• A POS plan, offered by 21 percent of organizations, is a unique managed-care health insurance system that combines attributes from both HMOs and PPOs.
• Sixteen percent of companies reported offering a CDHP, which involves a high-deductible insurance plan combined with a health care spending account from which unreimbursed health care costs are paid. This plan can be attractive in that the premiums are typically lower for both the employer and the employee.
• Nine percent of organizations offer an EPO plan, which is often considered more restrictive because employees must use providers from a specific network of hospitals and physicians.
• Only 8 percent of organizations report offering indemnity (or fee-for-service) plans, which charge employees for each individual service and allow them complete freedom in which providers they see under this type of plan.
• Six percent of organizations offer health reimbursement accounts — health care spending accounts set up by the employer for the employee. The employer makes contributions for an employee's health care services. It is similar to a flexible spending account, except that the funds roll over from year to year, allowing the employee to accumulate funds over time.

Thirty-seven percent of organizations offer health care coverage to part-time employees.

The majority of companies (94 percent) offer dental insurance to employees, and 77 percent offer vision insurance. These programs may be part of or in addition to other health insurance plans. Other forms of insurance offered by respondents' organizations include:

• Accidental death and dismemberment insurance (82 percent);
• Chiropractic coverage (85 percent);
• Mental health coverage (82 percent);
• Supplemental accident insurance (44 percent);
• Cancer insurance (31 percent);
• Long-term care insurance (31 percent);
• Critical illness insurance (21 percent);
• Hospital indemnity insurance (19 percent); and
• Intensive care insurance (19 percent).

Overall, health care benefits are a mixed bag of offerings in the 2010 report. While the "rehabilitation assistance" benefit increased from 37 percent in 2009 to 45 percent in 2010, the "long-term health care insurance" benefit dropped from 39 percent to 31 percent during the same period. Meanwhile, "mental health coverage" benefits continue to increase, from 80 percent in 2009 (and 73 percent in 2006) to 82 percent in 2010.

Employees consistently rate benefits, especially health care benefits, among the key factors influencing job satisfaction. In turn, U.S. employers continue to offer competitive health benefits as a crucial part of their compensation package to attract and retain top talent.

According to Michael Thompson, a principal of Human Resource Services at PricewaterhouseCoopers, "The value of these benefits is becoming an even more visible part of overall compensation as medical costs grow... ."

Recent

Employee Benefits Top of Mind in 2010

Companies Cutting Back on Health Benefits

Resources

2010 Employee Benefits Survey Report
Society for Human Resource Management, June 28, 2010

Employee Benefits: Which Ones Are Surviving the Weak Economy?
Society for Human Resource Management, June 28, 2010

Survey Finds Employers Are Unlikely to Drop Health Care Benefits
by Regis Coccia
Workforce Management, April 2010

Most Employers Won't Drop Health Care Benefits: Poll
by Regis Coccia
Business Insurance, April 12, 2010

Behind the Numbers: Medical Cost Trends for 2010
PriceWaterhouseCoopers LLP's Health Research Institute, June 14, 2010