Posted by: Professionals In Human Resources Association (PIHRA) | July 6, 2011

2011 Benefit Plan Trends

Los Angeles, CA — The past decade has seen an unprecedented increase in the cost of health care rates and services. Medical costs continue to outpace inflation, while the 2010 healthcare reform act mandates added a new layer of costly coverage requirements and uncertainty for employer-sponsored plans. Utilization of benefits also remains high, as employees, fearful of losing their health coverage in the slow economy, make use of their benefits while they have them. Taken together, this means large rate increases for most companies who provide benefits.

On average, the 2011 health benefit renewal rates were approximately 15% higher than in 2010. Even large companies such as Microsoft and The Gap Inc., well-known for their generous employee benefits, are announcing that employees will have to start contributing some percentage to their cost of coverage. It’s a sign of the times, as even the most stable, progressive companies can no longer afford to absorb health care cost increases on their own.

While Microsoft’s decision has received much attention, the expenditure reality for many other companies is even more pronounced. “Many of our clients began requiring employees to contribute to their medical premiums several years ago. This year, we’re seeing more employers looking to their medical plan’s design in order to cut costs,” observes David Brown, head of a leading benefits consulting practice at Gallagher Benefit Services in San Francisco, CA. “Raising co-pays, deductibles, or co-insurance levels are increasingly common strategies to keep medical plan renewals within budget, but plan design can really make a difference to a small business.”

In addition, some employers, rather than asking all employees to contribute the same to benefits costs, are establishing varying contribution schedules based on salary (with high earners contributing a greater portion than lower-paid hourly workers), attempting to be more equitable in sharing cost increases.  When benefit changes such as these are necessary, Brown stresses the importance of clear and frequent communication with employees both before and after renewal season. “Begin communicating right away to educate employees about the need for cuts and prepare them for upcoming changes. If possible, constructively involve your staff in decision-making through surveys or focus groups.  This will help ease the transition for the entire organization.”

Companies may discover employee input to be even more essential if healthcare reform mandates continue to move forward. With healthcare costs continuing to rise at unprecedented levels, companies may find it worthwhile to investigate and develop benefit plans tailored to the needs of their distinct employee populations.  This allows employers to customize, adding or cutting benefits (based on costs) to allow for a value-based benefits design.  Whatever the strategy, a thoughtful creative approach will alleviate concerns, protect core health obligations, and better serve both employers and employees in the years to come.

For further information contact:

Bill Urick
Area President, Los Angeles
Gallagher Benefit Services, Inc.                                     818.539.1335                                                      

Michael Patrick
Managing Director
Gallagher Benefit Services, Inc.

About Gallagher Benefit Services, Inc. Gallagher Benefit Services, Inc., a subsidiary of Arthur J. Gallagher & Co. (NYSE: AJG), is one of the leading employee benefits brokers and consultants in the U.S.  It delivers a full range of employee benefits services, including benefits strategy, plan design and management, financial planning, actuarial, data analysis and benchmarking, retirement brokerage and consulting, and human resource services. To learn more, visit


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