Second Biggest Issue in Benefits Plans is Simple

May 17, 2018

A friend of mine sometimes remarks that this or that is the 2nd biggest/smallest, this or that he’s ever seen. And each time I can’t help but wonder what #1 is. But I’ll do as my friend does and leave you in suspense.

Let’s get to #2. Think about a recent big-ticket purchase. Perhaps it was a vacation or maybe a bike, which can easily run into the thousands.

If it was the latter, you may be a weekend warrior. If so, you’re vulnerable to injuries sending you off to consume a very different kind of product: health care, which can quickly rival the price of the bike. But most of us don’t know that…the price of the health care I mean, or even any of the other public services we use, such as education or infrastructure. Yet almost certainly, we know the price versus value proposition of the bike. 

Stepping back a bit gives us a broader view of the wide spectrum of public services in Canada from education to pensions to health care. We’re fortunate to have this system and it’s become a way of life we expect. Still, we take these services for granted and that’s unfortunate, yet true. End users, in this case employees, tend to have a low awareness and appreciation for the scope of what their employer provides, both in terms of value to the employee and of the employer’s costs. In fact, on a scale of one to ten it’s probably about five or six. It’s a surprisingly low number that represents opportunity…both for plan sponsors to highlight their full worth and for employees to capture it.

Moving that figure up builds value in a whole raft of ways, starting with attracting and retaining top staff for employers. Employees who are supported with a robust range of health, pension and other benefits are physically healthier, manage stress better, and are less absent. These factors significantly boost employee productivity, which ultimately lowers costs for employers. It’s a win win.

Specifics on those employer costs, according to one report, average about $8,330 annually to furnish a typical full-time employee with group insurance benefits. Another pegs the yearly cost of providing a pension at $4,500 for an employee earning $75,000 a year. What’s more is these figures don’t include costs for mandatory government healthcare benefits, which include hospital spending and physician services. Taken together, this spend amounts to somewhere between a ten and 30 per cent top up on an employee’s salary. It’s a not inconsiderable amount.

This may be especially so considering the #1 issue which, if you’re still wondering, is the rising cost of providing benefits overall. Reasons behind this climb range from inflation and increasing usage to rising stop-loss charges and reduced competition through mergers and acquisitions. The effects are significant. In only the past five to ten years, senior executives point to a doubling, even a tripling of costs for extended health benefits, along with rising disability costs, particularly long-term, and to a lesser extent, dental care.

So, that new bike. If you blew your knee on it, the average price for a new knee in Canada is $7,597. That’s just for the hospital costs. The final price tag is considerably more. But if you’re an employee you probably have group insurance benefits, so your total costs should be minimal. Isn’t that great? And now you know that.

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