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What's being offered? Annual survey of Indiana employee pay and benefits.

Mention employee benefits, and health care immediately comes to mind. It's a natural reaction because it's the elephant in the benefit package that packs on more weight each year. It's cold comfort knowing it gained a little less this year than last.

Although the rate of increase has gone down for the sixth straight year, says Amy Kaminski, manager of marketing programs for Kansas-based Compdata Surveys, it's still double-digit, with an average health insurance premium increase for Indiana employers at 11.8 percent in 2007. That's higher than all surrounding states.

Compdata has been providing pay and benefit survey information since 1988, and now covers 39 states. Its 2007 Compensation Data--Indiana survey, covering 450 employers and 284,000 employees in 532 job titles, provides a good source of information about what the other guy is doing to attract and retain the best employees.

Paychecks. Pay in Indiana increased an average of 3.48 percent for 2007 with a projection of 3.46 percent in 2008. That's up from 3.4 percent in 2006. The highest increase in 2007 was with service organizations, 4.1 percent, the lowest in utilities at 3.06 percent. Despite reported worker shortages, total pay increase budgets in the health-care sector average 3.33 percent this year. By region, Indianapolis leads with 3.72 percent in 2007, with the same projected for 2008. Kokomo came in lowest this year at 3.11 percent, but employers in Bloomington/ Columbus project the lowest increase for next year at 3.17 percent.

Across all industries, regions and sizes of employer companies, CEO base salaries on average were $303,082, while administrative assistants made $33,496. "Top engineering executives" averaged $148,582 and CAD draftspersons drew $35,293. "Top marketing executives" were paid $142,564 on average and inside sales representatives: $40,313.

Time off. Extra vacation time is offered as a recruiting tactic by 15.3 percent of the Indiana organizations surveyed this year, remaining steady, and flexible scheduling is another way to attract employees and keep them employees happy The survey shows 52.7 percent of companies allow flexible schedules, and they are used most for technical/ professional employees, 39.6 percent.

"As Gen Y enters the work force, many companies are looking for new ways to recruit top talent," says Kaminski. "Offering extra vacation time in the recruiting process and allowing flexible schedules are two practices that appeal to this group."

Carrot or stick? As Baby Boomers prepare to exit the workforce over the next decade, businesses are spending more time looking at the projected shortages of workers. Keeping employees healthy then, will not only save help the health-care bottom line, it will boost productivity in the workplace. But will employers use a carrot or a stick to keep employees well? In June, Clarian Health, the Indianapolis-based hospital group, announced a change in its own employee benefit plan for 2008 and 2009, which could lead to deductions from paychecks for failing to measure up in five areas in a health risk appraisal. The first to kick in was for smoking, $5 bi-weekly The policy made national news, and the employee backlash resulted in a reversal of the policy in August.

"Employers have always needed to use a carrot rather than a stick," says Ken Williams, an employee benefits specialist at Tobias Insurance Group, Indianapolis. "You use a stick in a performance review. We take umbrage to the stick." A positive approach is paying for the health risk appraisal, annual physical and giving access to nurses for follow-up with any health issues uncovered. Sixty to 70 percent of the health plans he arranges for clients offer prevention benefits, with some now including the cost of the annual physical at 100 percent rather than going toward the deductible and co-pay. And where it used to be common for only larger employers to have on-site health risk appraisals, smaller companies will begin to follow their lead, he says.

Wellness pays. "With an aging workforce and high obesity rates, more organizations are taking an active role in prevention," said Kaminski. "This year, 71.6 percent of organizations in Indiana offered wellness programs aimed at lowering health-care costs through prevention of illness. This number has increased over the last three years and is the highest for the area when compared to Illinois, Michigan, Ohio and Kentucky."

Employers used to question whether there was a return on investment with wellness programs. That's pretty settled now, says Bryan Brenner, CEO, Benefit Associates, Indianapolis, providing both brokerage and consulting services. While the first-year costs are higher with screenings finding health problems that need attention, by the latter half of year two, you begin to see savings, he says, and by the third year there's a good ROI, about 2.3 to 2.4 on every dollar spent.

Fourth drug tier. A three-tier co-pay is still popular for drugs, says Brenner, but a lot of companies are adding a fourth, mostly to cover the high-end injectable drugs that are very expensive and becoming more prevalent. They can cost a couple thousand to $15,000 to $20,000 a month. Rather than a flat co-pay, the fourth tier might require that employees pay 25 percent to 50 percent of the cost up to an out-of-pocket limit. "Employers are setting up a cost control for the long haul." The good news is, employees are getting used to using generics, both because there are more available now and they recognize the need for cost control. From 48 percent to 62 percent of drugs used are now generic, he says.

Advantage Health offers a four-tier drug option, says CEO Vicky Perry, with the new self-injectable biotech drugs included in the top tier. They have a $2,500 to $5,000 co-insurance levels.

Advantage has 60,000 members covered by employer plans now in central and northern Indiana, and is making aggressive steps to gain market share. It's in its second year drive to sell services to self-funded employers, and it has offered high-deductible, consumer-driven health-care products, health savings accounts and health reimbursement accounts, for three years. They've been popular options with larger companies, she says, but smaller companies are slow to make the leap.

Advantage offers a traditional HMO, where only in-network providers can be used, and a more user-friendly point-of-service plan where you can go out of network, with a reduced benefit. "Forty percent of members are in point-of-service," says Perry.

More stats. The Compdata survey shows 67.2 percent of employers do not yet offer consumer-driven health-care plans. About 40 percent of Benefit Associates clients offer a high-deductible HSA option. "Very few have it as their only option," says Brenner. Where it is offered, he sees a 30 to 50 percent adoption rate with employees.

As cost-control measures, 38.5 percent of Indiana companies increased the employee portion of the premium this year; 32.1 increased deductible levels and 25.2 percent offered a choice of deductible level; 19.6 percent increased employee co-insurance levels; and 14.9 percent of employers switched carriers.

While health care dominates employee benefit discussions, there are a couple other trends that deserve mention. In the retirement area, Williams at Tobias Insurance is seeing more employers move to cash balance plans. The dwindling number of defined benefit plans provide a specific benefit at retirement, while the benefit from defined contribution plans, including 401(k)s, depends on the amount of the contributions as well as the gains or losses of the employee's account. A cash balance plan is kind of a hybrid, says Williams, mixing the features of both, but ultimately it defines the promised benefit in terms of a stated account balance, and is paid as an annuity, lump-sum pay out or rollover into an IRA on retirement. "Employers have to make a contribution for every employee, generally a percent of pay." The employer is left with the ups and down of the market, he says, and is at risk, rather than the employee in a 401(k).

Brenner is seeing a lot of interest in a two-tier benefit platform that provides additional benefits for top executives and key staff. Long-term-care plans that are partially funded by the company, more comprehensive disability plans, and better life insurance coverage are a few of the perks you might expect if you are in this select group. "Things are getting more competitive to find the best top talent."
Health Insurance Premium
Percentage Paid by Employer

% Premium Paid by Employer Employee Only Per Family

Less than 50% 8.6 9.7
50 to 59% 2.8 6.6
50 to 69% 4.6 10.3
70 to 79% 24.5 28.4
80 to 89% 35.2 -28.8
90 to 99% 17.1 12.8
100% 7.3 3.4

76.8% of companies pay a percent of premiums

Source: Compensation Data 2007-Indiana

Annual Deductibles Per Person (%)

Industry $1-$249 $250-$499 $500-$799 $800+

Distribution /warehouse 0.0 50.0 37.5 12.5
Financial services 6.5 32.3 48.4 12.9
Health care 6.3 31.3 28.1 34.4
Manufacturing 18.2 36.5 26.5 18.8
Not-for-profit 12.8 44.7 29.8 12.8
Real estate/construction 9.1 18.2 45.5 27.3
Services 11.1 33.3 37.0 18.5
Technology 0.0 22.2 55.6 22.2
Utilities 28.6 57.1 7.1 71.1
All industries 13.4 36.6 31.4 18.6

Source: Compensation Data 2007--Indiana

Measures to Reduce Health Premiums

Incresed employee portion of premiums 38.5%
switched carriers 14.9%
Implemented managed care program 4.2%
Increased deductible levels 32.1%
Offered choice of deductible level 25.2%
Incresed employee co-insurance level 19.6%
Reduced benefits management 7.2%

Source: Compensation Data 2007--Indiana

Cost-Containment Measures Utilized

Pre-existing condition clause 61.0%
Utilization review 59.7%
Pharmacy benefit management 49.6%
Network or health care professionals 70.6%
Coordination of benefits 74.3%
Wellness programs 71.6%
Second surgical opinion 18.6%
Disease management 51.7%
Pre-edmission testing 27.6%

Source: Compensation Data 2007--Indiana

Employee Maximum Out-of-Pocket (%)

$ Paid by Employee Indemnity HMO PPO POS

1-500 8.3 5.9 6.6 0.0
501-1,000 21.7 23.5 16.6 9.1
1,001-1,500 25.0 23.5 21.4 27.3
1,501-2,500 26.7 35.3 33.8 45.5
2,501+ 18.3 11.8 21.7 18.2

Source: Compensation Data 2007--Indiana
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Title Annotation:EMPLOYEE BENEFITS
Author:McKimmie, Kathy
Publication:Indiana Business Magazine
Date:Oct 1, 2007
Words:1754
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