Todd McLean, a partner with Eckler Partners in Toronto agrees. “I think that, inevitably, plan sponsors tend to underestimate how much work [flex benefits] are because there are a lot of moving parts to them.”
Trowell says one surprise is often members’ selections. Many sponsors offer three benefits plan options: Plans A, B and C. But the majority of members end up in one plan. “So it makes you think—is it worthwhile implementing a flex care plan if only 20% of employees are picking different plans?” he says.
Additionally, members choose the plan they know they will use most to save themselves money. This creates anti-selection—the process by which a member selects a plan based on the knowledge they will have higher-than-average claims.
THE BEST OF FLEX
Trowell advocates what his firms calls “pseudo flex”—taking the best that flex has to offer and eliminating its downsides. Step one is to survey employees on their needs before creating the plan and to design one based on the findings. He says the option to make future changes to the plan is still open to sponsors. But the administrative costs of setting up three plans are eliminated.
THE RISE OF THE HSA
Another option is to employ health spending accounts(HSAs) as a cost-containment component of a flex plan. HSAs are benefit spending accounts, in which an employer annually puts aside a set amount of money for each employee, leaving the decision of how to spend it up to the member. The money can be used for a predetermined list of services, such as vision care, prescription drugs, dental care and massage therapy. That way, the employer knows how much money to budget annually for benefits costs and plan members have the flexibility to spend it as they choose. Though the concept isn’t a new one, it has been slow to catch on in Canada. “The interest in them is very high but the implementation of them is something different,” says Trowell.
One attractive aspect of HSAs is their predictability. McLean says that, should provincial governments offload health expenses to sponsors, “an HSA is a good way to cover off those expenses without increasing the plan sponsor’s costs.” He adds HSAs are simple to administer and easy for members to understand.
Will there be increased flexibility around benefits plans down the road? The answer depends on whether sponsors will feel more comfortable paying higher prices for their benefits in traditional flex plans or letting their employees make their own benefits choices using HSAs. “I think it’s a bit of an evolution,” says McLean. “Employers were a bit nervous to let employees make benefits decisions. Now, they’re much more used to the idea.”
Anna Sharratt is managing editor of BENEFITS CANADA.