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Iowa Number$ – Size DOES Matter

Data from Iowa Employer Benefits StudyIt appears that employer size really DOES matter – especially for employees with family health coverage who work at the largest organizations here in Iowa. A great example can be found in the two graphs below.

In 2012, Iowa employers with fewer than 250 employees (over 99 percent of employers in Iowa fall into this category) asked their workers with single health coverage to contribute $1,108 annually for their health insurance. This amount has increased by 53 percent since 2005. Employees who are employed in organizations with 250 or more employees contributed $135 less annually for health coverage (a 48 percent increase during this same period).

 David P. Lind Benchmark

To compound matters, employees at larger organizations receive dramatically lower deductibles (and lower out-of-pocket maximums). At large firms, the average employee with single health coverage receives an average deductible of $895, versus a $1,654 single deductible at organizations smaller than 250 employees.  In addition, the out-of-pocket maximum at smaller employers is $3,320 while the large organizations average $2,439. These are BIG discrepancies!

The differential for employees with family coverage is even more pronounced. Employees in the larger organizations contribute $3,831 annually for their health coverage. Likewise, employees in smaller organizations contribute $1,318 MORE annually, or $5,149.

 David P. Lind Benchmark

As you may have guessed, employees in larger organizations have, on average, a lower family deductible than employees who work for smaller employers. The average family deductible for large employers is $1,880 while the average deductible for smaller organizations is $3,559 (a variance of $1,679!). The family out-of-pocket maximums for the larger and smaller organizations are $4,699 and $6,948, respectively.

In the late 19th Century, British Prime Minister Benjamin Disraeli said, “There are three kinds of lies:  lies, damn lies, and statistics!”

Why is there such a great variance between large and small employers? Frankly, it has more to do with economics than with employer generosity. For example, to help mitigate health costs, larger organizations are more likely to self-insure their health plan(s), which allows for greater flexibility with plan design and risk management. About 97 percent of employers in Iowa employ less than 50 employees, and many such employers do not have the luxuries afforded to the very large organizations.

Therein lies the rub – that fine line between ‘lies’ and ‘statistics!’

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Number$ in Iowa

Lindex StatisticsPeriodically, I like to share some interesting results from previous Iowa Employer Benefits Studies© that may possibly reflect trends on what Iowa employers are doing regarding various benefit offerings.

The first chart relates to the prevalence of vision coverage offered by employer size. As is the case with most benefits monitored, the larger organizations are more likely to offer benefits – and, vision coverage is certainly no exception. Urban organizations are more likely to offer vision coverage in 2012 (49 percent) when compared to their rural counterparts (28 percent).

David P. Lind Benchmark

Most of the large employers tend to offer pre-tax premium plans for their employees, with about 70 percent of all Iowa employers offering such a ‘benefit.’ Considerably fewer employers offer medical spending and dependent care spending accounts (53 percent overall). This particular chart reflects results from the 2012 Study.

David P. Lind Benchmark

This last chart shows the percentage of organizations offering dental plans during 2009, 2010 and 2012. Interestingly, the largest of employers (1000+) reported a decrease in dental coverage offerings. Our 2013 Study (to be released this Fall) will either confirm this as a trend or an anomaly. One great thing about performing studies, is having the ability to detect (or not) emerging trends over time. However, prematurely announcing new trends can be dangerous, unless new data can conclusively confirm emerging changes that ultimately become trends.

David P. Lind Benchmark

“The common facts of today are the products of yesterday’s research.” – Duncan MacDonald.

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Benefits Valued by Iowa Employees

Happy Employees in IowaOur 2007 Iowa Employment Values Study sheds light on many questions that employers continue to wrestle with today…namely, what workplace values are most important to their employees? In last week’s blog, I discussed the 11 key workplace values that are ranked by employees and their executives.

Of the 11 workplace values rated, Benefits ranked number seven, which was seven points less than the top-ranked value, Respect. Within this Study, differences of four or more points are statistically significant. The three values that were at least 4 points greater than Benefits were Respect, Achievement and Balance (having the opportunity to balance work time with family time). The other three ahead of Benefits, but fewer than four points were: Job Security, Money and Employer Leadership. Time will tell whether employees continue to rank these values in a similar fashion from six years ago.

We asked employees and their bosses in this Study to rank the importance of nine benefits (Table below). The bosses (executives) rated how important they believed each benefit was to their employees. NOTE: The questions were presented to respondents using Likert scales. Scored on a 1 to 100 scale, the highest number represents the most positive response.

Values Study - Benefits

As you might expect, Health Insurance and Vacations are rated highly by both groups. In most other benefit categories, however, executives underrated the importance to their employees.

Executives severely underrated the importance of Long-Term Disability Insurance, Life Insurance and Dental Insurance to their employees. Retirement is also substantially more important to employees than executives realized. Employees ranked Retirement first, while executives ranked it fifth. One must wonder how the Great Recession has impacted such rankings today…

Some other key findings for employers to consider from this 2007 Study include:

  • Benefits by Gender: Females reported almost all benefits as more important than their male counterparts. Female employees responded that Sick Pay and Holidays were much more important than their male counterparts and female executives recognized this importance. Also, Health Insurance, Long-Term Disability Insurance, Life Insurance and Dental Insurance were much more important to female employees than male employees. Male executives were the least cognizant of the importance of all of the benefits listed to their female employees.
  • Benefits by Age: Categories of those younger and those older than 50 years of age were also studied. With the exception of Health Insurance, executives under 50 grossly underestimated the importance of benefits to their employees, especially Retirement, Long-Term Disability Insurance, Life Insurance and Flex Spending. Employees of both age categories rated the importance of these benefits similarly, with the exception of Flex Spending which was much more important to the younger group of employees.
  • Benefits by Tenure: Employees with five years or less at their current job consider Health Insurance to be the most important benefit. However, those employees with greater tenure consider Retirement plans most important. Executives underestimated the importance of five major benefits (Retirement, Dental Insurance, Long-Term Disability Insurance, Life Insurance and Flex Spending). This Study also found that executives with less tenure are slightly more accurate in their perceptions than those with greater tenure.

Much can be learned from this Study which can be applied in today’s world. One important takeaway is that executives must be more cognizant of what is most important to their employees and continue to find ways to bridge this gap. This Study suggests that employees have needs and desires that are far different from what many executives perceive. By the way, the new Lindex tool recently developed by David P. Lind Benchmark, uses key findings from this Study when determining the weights assigned for each benefit ‘score.’ 

Executive responses from smaller organizations disclose that they are less in tune with what is important to their employees than executives from larger organizations. Since turnover can be even more crippling to a small organization, these executive misperceptions are extremely important to recognize. The results from this Study reveal that executives from smaller organizations need to better understand the importance of employee benefits to their staff.

To attract and retain employees, it is critical for organizations to understand what drives commitment – particularly among top performing employees – and act on it. Iowa employees responded negatively to their organization’s ability to recognize and reward the best workers and to the availability of advancement opportunities within the organization.

The clear disconnect between employers and their employees in this six-year-old Study should encourage Iowa organizations to review their workplace environment and consider enhancements to their total rewards program.

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