© Copyright 2000 Rogers Media. The following article first appeared in the May 2000 edition of BENEFITS CANADA magazine.

Passing the buck

Flexible benefits reduce costs for employers and, increasingly, benefits for employees. What's the real price employers are paying?

By Kathryn Dorrell

Flexibility is a popular buzzword these days. Employers talk about needing flexible employees, and workers ask the same of their bosses. So it stands to reason that a concept which allows employees to tailor their own benefits, and is packaged under the moniker flexible benefits, would be a sure hit. Well, it's not--at least for employees watching their benefits dwindle on an annual basis, and wondering what happened to their good old plan.

What happened is double-digit increases to healthcare costs, notably drugs, that employers are unwilling, or in many cases simply unable, to take on. The result has been a wave of cost-shifting--a concept that employees regard as passing the buck.

Sandy Hamilton, principal at Halifax-based MacLean Hamilton Benefit Consulting, has observed a dissatisfaction with flex benefits since they came into vogue. "It's ongoing. While the employers seem to be pleased with it, employees are not--they think it's a bad program."

James Norton, a senior vice-president with Aon Consulting Inc. in Toronto, sums up the jaded attitude: "The difference now is that employees are discontent when they hear they are getting flex, before they even find out what they've lost."

Cost-containment--as opposed to offering a customized plan based on employees' needs--appears to be the driving force behind the move to flex. "Everyone realizes that flex benefits is about cutting costs," says Sharon Blaney, director of corporate health at B.C.-based Telus. "The company implemented it [for salaried staff] as a cost-saving measure but they will never say [that's why] they did."

Blaney's remark hits the heart of the matter. It seems many employers have gilded the lily. They market a cost-reducing measure as an exercise in employee empowerment that allows individuals to pick their own benefits, failing to mention that workers' healthcare credits won't keep pace with soaring drug prices.

There's also a tendency for employees to cling to the old plan because they were always told it was good, explains Jean-Guy Gauthier, a partner at Morneau Sobeco in Montreal. Problems arise when employees decide they want to use their healthcare credits to buy back the core program they had, and discover they can't, at least not without paying more. "The fact is, over time, employees don't usually get what they had in the pre-flex era," says Barry Noble, national director of managed care at Toronto's Manulife Financial.

"The pressure to go flex is coming from healthcare and there are other ways to control these costs than shift them on to employees," says Norton, noting that prior authorization and therapeutic substitution are alternative solutions. "We've had three years in a row of double-digit healthcare increases. There's a limit to what you can pass on or you're asking for trouble."

Employers that do decide to pass on the mounting cost of healthcare to their employees can avoid trouble by explaining why they are implementing a flex package, and just what it entails. "Any time you are upfront and more honest, the more acceptance you'll get," says Blaney. Gauthier adds it's also important to evaluate the climate of the workplace before making the switch to flex. "How [the plan] is perceived is often determined by the culture in the company; what else is taking place that might make employees suspicious," he says.

Ultimately, in a work world where companies are scrambling for skills and employees hold the trump cards, employers have to weigh increased healthcare expenses against potentially disgruntled employees, and ask what price they'll pay for this cost-savings measure, and if it's worth it.

Kathryn Dorrell is associate editor with BENEFITS CANADA.

*** ***

CONFERENCES

Pulse 2000
The Business of Canada's Healthcare Future
May 24-26, 2000
Toronto Hilton, Toronto

This International Institute of Research event, co-sponsored by Canadian Healthcare Manager, will examine the political and economic implications of sustaining healthcare. Call (800) 941-9403.

Flexible benefits reduce costs for employers, and frequently benefits for employees. Is it surprising workers are becoming disenchanted with the concept?

The Romanow Commission has released its final report on the future of healthcare in Canada.

For Commissioner Romanow's recommendations, click here.

Click here for Senator Michael Kirby's report, "The Health of Canadians – The Federal Role: Recommendations for Reform."