Translating between finance and benefits: becoming an employer of choice
by Rick Wald, National Practice Leader, Employer Health Care Community, Deloitte Consulting LLP
I once heard former president Bill Clinton speak about his thoughts on key differences between the role of the “commander in chief” and those who hold seats in Congress. He stated that it is important to understand that Congress is focused on the short-term—what’s in the budget this year, what bills to bring to the floor—while the president is focused on the long-term strategy and goals for the country.
I often see a similar relationship between chief financial officers (CFOs) and human resources (HR) executives. CFOs are generally known for their ability to understand their company’s strategic vision and marry that vision with its long-term financial plan. However, as it relates to health care, as soon as the word “benefits” enters the conversation, many CFOs shift decision making over to HR. Meanwhile, due to the more tactical nature of benefits strategies, their HR colleagues often focus on the short-term, aiming to execute on plans built for the next one to two years.
Findings from Deloitte's 2013 Survey of U.S. Employers highlight some of the key similarities and differences betweetn CFOs and HR executives:
- Both place hospital costs (81 percent and 70 percent, respectively) at the top of their list for why the health care system is expensive…
…but they disagree from there: CFOs pin the blame on waste/inefficiency (69 percent) and HR executives on government regulation (60 percent) as the second most impactful driver of health care costs.1
- Both agree that increased transparency around health care costs could improve the performance of the system (58 percent and 52 percent, respectively)…
…but HR executives place more faith in the possibility that increased use of health information technology could help improve the performance of the overall health care system (49 percent vs. 36 percent, CFOs).2
- CFOs and their HR counterparts present different views on their company’s preparedness for health care reform: 40 percent of HR executives believe their HR department is completely prepared to navigate the changing health care environment for their company, while only 28 percent of CFOs feel the same way.
This divergence of perspectives raises the question ofwhat might happen if CFOs and HR executives worked together to understand what a healthier, more engaged workforce could look like in 2025 and to create a future vision for their organization
A strategic partnership between the CFO and HR executive could help companies take a more forward-looking view. If a consensus on a shared vision can be reached across the C-suite, it will be up to the CFO and HR executive to work together to set milestones that work backwards from their ultimate goal: 2025, 2020, 2017, 2015…eventually defining next year’s objectives and a tactical implementation plan.
Once the organization’s shared vision is identified, it will be critical for the CFO and HR executives to identify the tools they will need to successfully implement their strategy. There are three key market opportunities for companies to consider:
- Public health insurance exchanges (HIX): while the first open enrollment season continues into next year, employers will need to monitor HIX enrollment and develop a strategy that recognizes that some employees may be eligible for a subsidy. CFOs and HR executives will need to understand the options that they might pursue to take advantage of these opportunities for some portion of their population.
- Private health insurance exchanges: many questions surround the private exchanges, as employers continue to work to understand what those exchanges are and what the pros and cons for participation might be. In this case, slow and steady may win the race and CFOs and HR executives should research the options and select a strategy that offers the best fit with both the company’s and employees’ needs.
- Wellness and disease management programs: to the extent that employers wish to continue providing insurance to an increasingly older employee population, more attention will and should be given to wellness, disease management, care management and disease initiatives to improve the health of entire workforce populations.
For CFOs, the increasing cost of health care will make designing effective benefit and wellness strategies a vital component of a strong financial plan. And, HR executives will need to align benefits strategies with the long-term financial goals of the company in a way that helps to establish a healthier and more productive workforce. Moreover, an attractive benefits proposition can help to position a company in competition for talent retention, build a strong company culture and bill the organization as an “employer of choice.”
Companies who place value in translating across the two worlds of finance and benefits are likely to see a more cohesive vision for the futureand a heightened level of employee satisfaction, performance and productivity.
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Notes: 1The total costs of the health care system have increased by about 4% annually in the last few years. Many factors drive those costs. In your view, how much influence do each of the following have on overall health care system costs? Percent of those answering “Major influence” is shown. 2Please rate the likely impact of each feature shown below on improving the overall performance of the U.S. health care system. Percent of those answering “High impact” is shown.
Rick Wald is the national practice leader for Deloitte Consulting’s employer health reform strategy practice and the employer health care consulting practice. He has 30 years of consulting experience and specializes in employee benefits strategy in a post-health reform environment, rewards transformation and health care consumerism.