Every organization should understand the importance of benefits benchmarking.
At a minimum, employers need to know if their offerings stack up against the competition. And at its most effective, benchmarking helps employers to balance and match their benefits with employee needs and expectations.
Benchmarking is not simple — employee populations are widely diverse, and simply comparing benefits between different organizations may not reflect the different needs of each.
However, organizations that use a modern approach to benchmarking are well positioned to keep and nurture top talent. Their benefits offerings stand out because the employer chooses where it wants to be average and where it needs to differentiate, based on its diverse and varied employee base.
Where employee benefits analytics tools fall short
Relying on plan benchmarks like average deductibles and average contributions to shape benefit programs is dangerous. No employer benefits package should seek to match benchmarks. Every population and culture are unique in their needs and goals.
Being average doesn’t help differentiate organizations. Getting a handle on the right data can prove daunting and building the customized benefits requires sophisticated analytics: For instance, HR needs different data for benchmarking than five years ago.
In addition, commonly used benchmarking tools often define a “small” benefits group as 500 lives or fewer, instead of up to 50, which is more relevant. Some tools use broad locations, such as multi-state regions instead of more localized benchmarks.
And some tools fail to benchmark competitors with the same Standard Industrial Classification (SIC) code or benchmark competitors in related industries.
A lack of context to guide benefits decisions hampers benefits analytics tools. Benchmarks are averages, but one employer may have a younger workforce, resulting in low healthcare insurance premiums and additional money to fund benefits that may not be applicable at other employers. Another organization may have a high percentage of spouses or domestic partners with richer benefits because live near a large employer with robust offerings.
Benchmarking tools should analyze solutions that are relevant to the organization, its size, industry, location and employees. Importantly, HR managers need benchmarking solutions that are dynamic and provide sufficient context to drive strategy.
What to consider in employee benefits analytics tools
Organizations seeking a competitive advantage through benefits need analytics that examine the components of benefits design as well as the strategies of peer groups.
Analytics should have specific survey areas for comparison (such as employer cost reduction, or communication or engagement strategies) and be able to best fit against competitors by SIC, size and location.
A strong menu of options separates outstanding benefits analytics tools from average ones. The menu allows employers to examine in detail the different ways that they can build effective benefits programs. Comparisons to peers is only a start; organizations need to determine their next steps and strategies through benchmarking and analytics.
The question of what to do next has no single answer, as the best survey data can signal how different actions will affect benefits strategy and how that strategy will change the organization’s positioning over time.
For instance, an organization concerned with reducing benefits costs would likely evaluate its prescription drug benefits, managed through use of deductibles and co-insurance. Benchmarking could reveal that relevant competitors are optimizing their pharmacy benefit manager (PBM) contract, evaluating alternative formularies and narrowing prescription networks. The organization could do the same for its prescription drug benefit and lower costs while improving the benefit itself.
Understanding strategic benchmarks as well as plan specific parameters that fit the employer better enables it for success now and in the future.
HUB International’s employee benefit specialists consult with employers of all sizes and in all industries on every aspect of employee benefits program planning and management.