As healthcare costs continue to rise, so does the need for employers to innovate their benefits packages, and employers’ innovations and perspectives have wide-reaching impact on other healthcare industry stakeholders. To better understand the employer perspective, Advisory Board conducted a focus group with Chief Human Resources Officers (CHROs) of large, self-insured organizations. We asked participants about their current healthcare benefits strategies – what's working and what’s not. We also explored their benefits priorities moving forward, their feelings about value-based care, and their interactions with the rest of the healthcare industry. Here are our three biggest takeaways.

1. No two employers are exactly the same – and their benefits strategies shouldn’t be, either.

Employers nationwide vary across several characteristics – geographic region, size, mission, and employee demographics, to name a few. These characteristics impact what tradeoffs employers are willing to make regarding their benefits strategies. For example, companies with a younger workforce may place less emphasis on healthcare benefits, allowing them to more aggressively chase healthcare cost savings. Others rely on comprehensive benefits as a core recruitment and retention lever. Thus, what’s considered “high-value” will look different based on each employer’s status quo approach and value proposition. 

In our focus group, we heard:

“I don't think that benefits in my industry really drive recruitment or retention...I want to push as aggressively as I can so that I can get the greatest amount of cost savings for the company.”

– CHRO of a large airline

“Our industry is almost the polar opposite of that. We have an incredibly competitive talent acquisition market. We don't have the luxury—unfortunately—to be as aggressive as we might want to be [on cost].”

– CHRO of a large energy company

2. Even advanced employers rely heavily on brokers.

Although the employers in our focus group have relatively sophisticated benefits strategies, we found they still rely heavily on brokers to drive benefits decision-making. Benefits managers aren’t typically healthcare experts, and they don’t want to be. Therefore, they turn to their brokers to act as their healthcare benefits liaisons and provide them with the highest quality benefits options available. Since many employers want other industry players (i.e., plans, providers, vendors) to go through broker channels to pitch their products and share insights, the broker-employer relationship can severely limit how employers receive their information.

Employers recognize the immense amount of trust they put in their brokers and potentially misaligned incentives have the potential to negatively impact the quality of their brokers’ recommendations. However, employers trust their broker is one of the good ones. Benefits managers often choose brokers through word-of-mouth or existing relationships, and these personal relationships can create an inflated level of trust between employer and broker. While this allows employers to confidently make benefits decisions without investing significant time and resources, potential broker conflicts of interest can prevent employers and employees from seeing the best possible outcomes.

We heard:

“Having a good broker is like having a good mechanic. Take a car in, and you know that your trusted mechanic is going to fix it. It's not going to be exorbitantly expensive. You put a lot of faith in their knowledge and recommendations.”

– CHRO of a large energy company

3. For many employers, employee palatability is just as important as cost savings.

Employers have long claimed healthcare costs are too high and cost increases are unsustainable. Yet, for some employers – especially larger ones – high costs aren’t as panic-inducing as one might think. Especially given the tight labor market, CHROs view keeping employees happy and productive as a key priority alongside healthcare cost containment. Some employers even gain and lose employees solely on their benefits package. One CHRO told us:

"We have an incredibly competitive talent acquisition market. We poach employees from competitors consistently because of our total rewards program. One of the things that is consistently in the top five categories on our employee climate surveys based on why they stay with the company is our benefits package…and in order to keep comprehensive benefits, we’re going to have to bear the cross [of healthcare costs].”

 – CHRO of a large energy company

Even employers less focused on using benefits to drive retention and recruitment are resigned to industry cost increases. Benefits directors see their job as keeping healthcare cost increases in line with the general market trend – not creating an innovative solution that sets them apart as a successful outlier.

Parting thoughts

What drives employers’ decision-making when it comes to healthcare benefits? That’s something employers themselves are still trying to navigate. While employers’ strategies vary based on company priorities, they’re balancing the same two factors: cost effectiveness and employee palatability. An imbalance in either direction puts the company at financial risk.

For industry stakeholders looking to partner with employers, understanding their priorities can help improve product design. And understanding how employers make decisions can improve communication and efficiency moving forward.