In a world where just about everything is becoming customizable, it’s no surprise that many plan sponsors want to offer flexible benefits that can be to tailored to meet their employees’ unique personal needs. Flexible benefits can mean different things to different people, so for the purpose of this discussion, let’s define flexible benefits as a program which at a minimum includes the possibility to choose from two or more health and dental options.
In the benefits world, flex plans are sexy, while traditional (or fixed) plans are, well—boring. While sexy is what many of us want, there’s nothing wrong with boring, which is often all we need. A well-designed flex plan can help provide competitive advantages for plan sponsors and be highly valued by its employees. However, it may not be the best option for every organization, even if it’s large enough for flex to be a choice.
Time and again whenever plan sponsors have indicated a desire to move from a traditional plan to a flex plan, the conversation goes something like this:
- We want to offer our employees more flexibility and choice.
- We don’t want to commit any more money or resources than we already allocate to our current program.
- We want our employees to be able to maintain coverage similar to what they currently have at no additional cost to them (i.e., no losers).
Sound familiar? Even a genie in a magic lamp would be hard pressed to deliver all three of these wishes simultaneously. Any two of these can be achieved with relative ease but solving this equation to deliver on all three wishes can be challenging, if not impossible. Plan sponsors can move to flex and maintain benefit cost neutrality but generally not without offloading some additional costs to employees. And keeping employees “whole” can be minimized but generally not without increasing the organization’s costs.
Plan sponsors considering a move to from traditional to flex should set realistic expectations and understand that sometimes sexy comes with a lot of work. If your organization is contemplating a move from traditional to flex, please consider the following:
Time to implement: Implementing a flex plan takes time so don’t rush it. Plan on 12 to 18 months lead time between the start of your project and the new flex program effective date. Simpler flex plans in smaller organizations may be implemented with slightly shorter lead times. And more complex plans at larger organizations may require even longer lead times.
Administration: Keeping track of employees’ choices adds administrative complexity to a benefits program. Depending on the degree of choice, plan sponsors may need to use some sort of electronic enrollment tool. Whether you decide to use a tool available through your insurer, consultant, third-party administrator, purchase and HR information system add-on or build something in-house, it’s going to come with a cost, which typically includes both set-up and ongoing maintenance fees. The larger the organization, the more economical these fees become on a per capita cost basis as fixed costs can be spread out over a larger group. You’re also going to need more resources to administer a flex program, so you may either need more staff, more reliance on your consultants or both.
Communication: Increased complexity requires increased employee communications. The last thing you want to do is spend a lot of money, time and resources to develop a new flex program and not follow through with a robust supporting communications campaign. Studies have shown that employee satisfaction with their benefits is directly correlated with their understanding of the program.
Employee satisfaction: If you’re going to implement a flex plan, make sure the changes you make provide meaningful choice that promises to improve program satisfaction for the majority of your employee population. Many times I’ve seen plan sponsors spend considerable time and resources only to have a high percentage of employees select flex options that were the same or similar to the coverage they had before. Therefore, the plan only really satisfied a small percentage of employees who actually made a change.
I believe that in many of these cases the same level of employee satisfaction could have been achieved at a fraction of the effort and cost by making a few minor plan modifications, adding some flexibility with a simple heath spending account and supplementing these changes with a solid communication campaign. However, if your organization is comfortable with the additional time, effort and potential cost impacts noted above, then you just may be ready to take the next step towards the implementation of a flex plan.