Benefits for the aging workforce

The recent release of the 2011 census shows a significant increase in the number of Canadians over the age of 65.

Over a five-year period, the senior population grew 14.1%, more than double the increase of the Canadian population as a whole. In addition, 42.4% of the working-age population was between ages 45 and 64—a record number.

This has a significant bearing for insurers and plan sponsors, but for different reasons than are most often discussed.

Much of the recent discussion in the benefits and insurance sector has focused on cost implications such as prescription usage and chronic diseases. While there is no doubt that these issues indeed require focus, effort and innovation, plan members’ needs and wants are sometimes overlooked.

The recently released 2012 Sanofi Canada Healthcare Survey found that 51% of employees surveyedexpect access to benefits after retirement. However, only one-quarter of retirees actually receive benefits, and there are indications that further reduction of retiree benefits is being considered by employers as a cost containment measure. A likely reason for this is that retiree benefits are perceived as an expensive and unnecessary cost, given that retirees would no longer be contributing to the productivity of the organization.

However, there appears to be willingness from retirees to pay for benefits (their desire is more around access and better group-based pricing). Also, the focus on productivity perhaps needs to shift to a focus on access to retiree benefits as a recruitment and retention strategy of highly skilled “boomer generation” workers. With an aging workforce, and as the boomer population moves toward retirement, effective recruitment and retention strategies should look to address the desire for retiree benefits. Plan sponsors providing options for these benefits have the potential to stand out as leaders.

Another implication of the aging workforce is the desire for benefits or benefits enhancements that are rarely, if ever, offered in the marketplace. Long-term care insurance (insurance that pays for home care and/or nursing home expenses), for example, seems to be an increasingly attractive product for plan members, according to the Sanofi study. This is not surprising, given the aging of the workforce, and that 27% of employed Canadians are caring for a loved one, according to the January 2009 studyBalancing Paid Work and Caregiving Responsibilities: A Closer Look at Family Caregivers in Canada. And that number is expected to grow over the near term, with a boom in the over-65 senior population.

However, at present, long-term care insurance is rarely made available to Canadian benefits plans. Recent indications suggest that Canada significantly lags its U.S. counterparts in this regard, with 34% of U.S.-based employers offering long-term care insurance, according to the 2012 National Study of Employers. The obvious challenge for insurers and plan sponsors looking to address this demand is to make plans attractive from a benefits and cost perspective. Since these types of products are typically employee-paid (sometimes there may be cost-sharing from sponsors), the plans need to be mindful of costs to increase their attractiveness. This could be accomplished through some group rating and/or pooling, similar to group critical illness plans.

Additionally, there is a need to make long-term care insurance useful and interesting for employees over the short term, since most claims cannot be made until two or more activities of daily living are affected (i.e., you are no longer able to bathe and clothe yourself). By introducing useful services that the insured can access as needed—such as case management and advocacy services to assist with present-day caregiving of an elderly parent or loved one—the long-term care insurance product can become more attractive to a younger population. In doing so, employers also gain, not only as innovators by offering unique benefits, but through productivity gains by helping to address employees’ caregiving challenges.

With population shifts and the significant increase of both senior and boomer Canadians, organizations need to look at innovative ways to engage plan members, in addition to looking at cost-containment measures. Plan sponsors and insurers can improve the value of their benefits packages through the introduction of unique benefits such as long-term care insurance (with improved enhancements in some cases). Also, plan sponsors need to increase access to retiree benefits, as employees will seek out those leading employers that offer options to their employees and future retirees. These strategies can be part of an effective recruitment and retention strategy for highly skilled workers.