Employers in Europe and the U.S. remain fair to their employees and avoid shifting costs—despite a sharp increase in healthcare costs and health-related benefits, according to Mercer’s 2010 pan-European survey on employee health benefits.
The survey, conducted in 14 European countries with responses from 556 employers, revealed that the cost of providing healthcare and health-related benefits to employees in Europe rose by 3.3% in 2010. For the same period, average health benefits cost per employee in the U.K. and the U.S. rose 4.9% and 6.9% respectively. Germany and the Czech Republic reported the lowest cost increases of 1.7% and 1.8%, respectively.
Health benefits include private medical plans and a range of other health-related benefits, including income support, critical illness coverage, employee assistance programs, dental and optical benefits, health screening, gym membership, and wellness programs.
“Despite the increases,” said Steve Clements, partner at Mercer, “our survey found that most employers remain unwilling to restrict eligibility or the scope of coverage or to shift more costs to employees. To keep costs down they are generally focusing on measures that don’t directly affect the employee, such as insurer negotiations and improved plan management and monitoring.”
The reason behind reluctance to pass on this cost to employees is, most importantly, the attraction and retention of talent.
“The ability to differentiate your company in the marketplace by providing staff and their family with good benefits is crucial, especially at a time when flexibility on salaries is restricted,” said Clements. “Companies are also aware that a healthy workforce is a productive workforce, so cutting back on this benefit may be counter-productive in the long term. It’s in their interests to give their staff good medical coverage.”
Cost pressures
Governments are shifting the cost of healthcare to employers and individuals in the form of tighter tax deductions, reduced scope of public healthcare services, privatizations, higher cost sharing and eligibility restrictions or opting-out schemes. And, employers are under pressure from employees and trade unions to improve health benefits, he adds.
The survey showed that private medical plans, which include both mandated and voluntary supplemental plans, are offered by nearly all respondents (93%) from countries with government model health systems, including Ireland, the U.K., Portugal, Spain and Italy.
In contrast, private medical coverage is offered by only 74% of respondents in social insurance model countries, such as Austria, Czech Republic, France, Germany, Poland, Switzerland and the Netherlands.
Employers operating under government health systems reported slightly higher increases, averaging 3.7%, in the per-employee cost of all health-related benefits, compared to those operating under social insurance models, with an average of 2.9%.
What’s important to employers
Nearly two-thirds of respondents (63%) rated managing employee health risks as a “very important” or “important” objective in the provision health benefits. More than half (53%) cited improving productivity as an “important” or “very important” objective. Respondents from countries with stronger national health systems, such as Germany and the Netherlands, were more likely to place improved productivity above retention, because company-provided benefits are perceived as less vital in countries with better healthcare.
“In almost every country, employers see opportunities in investing in benefit plans,” said Clements. “This is especially evident in national systems that already exhibit such shortcomings as long queues, poor accessibility, lack of medical staff, higher fees and perceived quality issues. Investments in benefit plans are still tax-efficient for both the company and individuals and helps attract and retain talented employees. The challenge is to achieve a return on investment through improved productivity while still keeping benefit costs under control.”