Mercer Canada | Employee Consumerism and benefits costs

Is it time for employee consumerism?

Author: Brian Lindenberg

I had an excellent chat with an employer client recently about why the concept of employee consumerism hasn’t really caught on in Canada. Is it a concept that is (or was) before its time or are the dynamics of the Canadian benefits marketplace such that it’s simply not relevant?

What do we mean by employee consumerism? At its core, consumerism is about educating employees on how to best use their benefits programs. The focus to date has been on helping employees understand the choices they have in the plan’s use, which may save both them and the plan sponsor money.

For example, a number of plan sponsors have communicated to employees about pharmacy dispensing fees, including how they vary in the market and how they can save money by shopping around. More recently, the focus on employee consumerism has shifted to a more holistic conversation about health, including how employees can reduce their reliance on the benefits plan and reduce costs how by managing their health. There are still conversations about how to use the plan smarter through, for example, taking generic drugs instead of brand-name medication.

So why has employee consumerism not been a bigger focus for plan sponsors? There are a number of reasons, not the least of which is the fact that it’s difficult to change behaviour. I would also suggest the pain factor hasn’t, for the most part, been high enough for either the plan sponsor or the employee. While costs have been increasing, plan sponsors have either been able to absorb them or rely on other mechanisms to control them through, for example, the competitive insurance market.

Employees don’t necessarily see the gains associated with being better consumers as significant enough, particularly when measured against the effort required to change behaviour. And from many employees’ perspectives, there’s a limited financial incentive for them to undertake that effort when the plan covers the majority of expenses.

In short, the environment hasn’t been overly conducive to a consumerism strategy.

I do believe the market dynamics are changing and plan sponsors may wish to give consumerism another look. These changes include:

1. Bigger risks and costs:
The risks assumed by benefits plans are growing along with the associated costs. After a period of relatively modest cost escalation, many factors point to a return to more significant year-over-year cost increases. The insurance market also seems to be more resolute in pursuing cost increases. As an organization, there are many ways to manage these risks and costs, including sharing them with employees. And if plan sponsors do share more, they may wish to help employees understand how they can manage their own risks and costs.

2. More information and increased accountability:
There’s so much more information available about health. Whether it’s accessing general information on the Internet or gathering specific data points through wearable technology or genetic testing, individuals are in a far better position to own their health and, ultimately, how they use the health system.

3. Greater opportunities:
Investment in health is exploding with new technologies  introduced to the market on a regular basis and new service providers entering the space with a focus on individuals and helping them better manage their health. The opportunities to be better consumers of the health system have never been greater, but individuals will need help navigating the exciting new, but daunting, landscape.

4. Broader system changes:
It’s difficult to predict how Canada’s health-care system might evolve. As concern about affordability grows, one of the more likely outcomes is that individual Canadians will need to fund a larger portion of health-care expenses. Certainly, in the short term, there’s an increasing focus on individual accountability for health. These broader system changes lend themselves to a consumerism message.

So, if you believe, as I do, that the time is indeed right to rethink how employers might implement a consumerism strategy within a benefits program, there are a number of things they can do to improve their chances of success.

They include:

  • Objective setting: Whenever an implements any type of strategy, it needs to be thoughtful about what it’s trying to achieve. Within the context of consumerism, what’s the end game?
  • Plan design: As mentioned previously, there’s very little incentive for individuals to modify their behaviour under many benefits plans. If plan sponsors want consumerism to really work, there has to be a financial incentive for employees to pay attention.
  • Benefits education: Consumerism is mainly about education that ensures individuals have access to the information they need to make better choices. Often, what seems to be missing is some basic understanding of how the benefits plan operates. Far too often, individuals are under the impression that it’s insurance with little understanding of how personal decisions can ultimately influence the cost of coverage. A little back-to-basics education can be helpful in positioning a consumerism message.
  • New vendors: There are tremendous opportunities to plug into new vendors focused on helping both organizations and individuals better manage health. Insurers will continue to be critically important in paying claims and managing the costs, but these new vendors provide the opportunity to better manage health.
  • Preferred provider networks: A consumerism strategy aligns with the implementation and use of preferred provider networks. If employers are going to ask employees to use a one, they need to understand both the benefits of doing so and the potential negative consequences of choosing not to.

The time is right to adopt an employee consumerism strategy. The opportunities have never been better. However, it will take some effort. Behaviour change isn’t easy, particularly when the status quo seems to be far more compelling for most. But the stars do seem to be more aligned to push individual accountability onto employees for not only how they use the benefits program but how they can better understand and manage personal health.

Brian Lindenberg is a senior partner and the health and benefits leader at Mercer Canada. He has more than 30 years of experience in the employee benefits field.

This article was originally published in Benefits Canada on February 24th, 2016.

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