Benchmarking Employee Benefits

The exponential information age is like a verbally incontinent person: he talks more and more as fewer and fewer people listen.

Nassim Nicholas Taleb: The Bed of Procrustes

As a young businessman consulting clients, I recall feeling a tension between two forms of advice from elder consultants. The first form was to always prepare for client meetings with an opinion and the “so what” of your advice; You should have the foundation for your advice available, including supporting data. The second form was, when in doubt, flood the client with data; In my experience, consultants following this approach leave clients with binders of paper and multi-hour meetings to review data in the spirit of “letting the data speak for itself.”

I have been thinking about these approaches to consulting lately, as I have seen some activity on Linked In related to employee benefits benchmarking. I have seen many of these reports from insurers, not-for-profits, private employers, as well as consultants, and more often than not I have felt the strategies adopted have been in the spirit of the second form.

I am interested in building the superior solution. As a foundation, I wonder how much value organizations draw from benefits benchmarking surveys could be accomplished through a review of the annual survey from KFF.

I am interested in the insights plan sponsors have drawn from other benchmarking studies to inform how I might adjust my model. If you found value from a specific survey or you desire information which has, to date, been unavailable, please reach out to me and let me know! I appreciate you reading my blogpost!

KFF Employee Benefits Survey

The Kaiser Family Foundation (KFF) was established in 1948 to “develop and run its own policy analysis, journalism and communications programs” as a “nonpartisan source of facts, analysis and journalism for policymakers, the media, the health policy community and the public.”

KFF released its 2021 Employer Health Benefits Survey (EHBS) as the twenty-third instance of its report. The survey included 1,686 interviews with non-federal public and private firms. Over the last twenty years, I have spent time each year reviewing the KFF results in areas of health insurance cost, employee contributions, worker cost sharing, financing, retirement offerings, and prescriptions. Over the years, the survey has had areas of consistency analyzing results by region, firm-size, and financing strategy.

Results from 2021 that I thought were notable:

• Average premium for employer-sponsored health insurance are $7,739 for single coverage and $22,221 for family coverage. These represent increases of 4% over the prior year while wages increased 5% and inflation increased 1.9%. (Based on this @WSJ article on the recent inflation print, I can’t wait to see next year’s numbers!)
• Small and large firms continue to have similar premiums for single coverage and family coverage. There are interesting details differentiating costs for firms with “a relatively large share of lower-wage workers” where at least 35% earn $28k or less: single coverage of $7,156 (vs $7,796) and family coverage of $20,315 (vs $22,407) for firms with more (or fewer) lower-wage workers, respectively.
• Average worker contributions for single coverage was 17% while contributions to family coverage was 28%. There was variation here by firm-size, relative share of low-wage workers, as well as relative share of younger workers.
• “42% of small firms report that they have a level-funded plan, a much higher percentage than the previous two years.” Wow. This statistic really “jumped out” at me. The innovation in health plan financing is interesting and its cool to see trends playing out nationally that we have seen in my markets over the past years.
• “Among employers with 500 or more employees offering prescription drug benefits in 2021, 18% have programs that exclude subsidies from prescription drug manufacturers, such as coupons, from counting towards an enrollee’s deductible or out-of-pocket limit. Among these same employers, 13% made a change to their prescription program in the last two years to delay the inclusion of new high-cost drug therapies until the therapy is proven effective.” I believe innovation in pharmacy benefit offerings will continue to be a focus area for clients. Since writing this blogpost on UHC and Optum, this blogpost on Cigna and ESI, and this blogpost on the prescription drug value chain, things do not appear to have improved for consumers…

There was also some reference to health care price transparency strategies in 2021. It doesn’t appear that employer contacts have much optimism about the prospects of these strategies in improving costs.

ThorCo Solutions (TCS) Benchmarking Engine

I wondered this weekend whether I could incorporate some data from KFF into an interactive web-application to offer the bulk of the insights desired by clients based upon a very quick analysis. I identified some datapoints and translated into a Python script and deployed in the Flask application I have been building as an additional module.

Here is the simple intake I built. The state chosen is translated to the associated region in the KFF study. At this point, I have created differentiation by plan-type, firm-size, as well as region.

Here are some of my preliminary output formats. I am considering extending to more datapoints (e.g. office visit cost sharing) and differentiating attributes (e.g. financing structure). I am interested in input from groups about where they have found value in the past (or would find value in the future!)

I am thinking about how to “tie out” other efforts I have made. In particular, I am interested in how to integrate this specifically to the community bank engine I have built.

Another area I wonder about is whether I can also offer insight into fee benchmarking with a little invested energy. I intend to build an engine to ingest and report on Form 5500-disclosed commissions. Whether this data can be added in a useful manner to my benchmarking engine or not, I find information in these filings to be helpful in efforts to understand prospective clients.

Request for insight

If you can’t explain it simply, you don’t understand it well enough.

Albert Einstein

To reiterate: I am interested in the insights plan sponsors have drawn from other benchmarking studies to inform how I might adjust my model. If you found value from a specific survey or you desire information which has, to date, been unavailable, please reach out to me and let me know! I appreciate you reading my blogpost!