Retirement & Health Benefits Industry

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Retirement & Health Benefits Industry: KPIs

Medical loss ratio (MLR), claim settlement cycle time, and claims denial rate are some KPIs for the US health plans industry. Pension fund KPIs include cost of risk benefits and market value of fund among others. These and other findings are outlined below.

OpsDog Health Insurance KPIs

Strategy2Act Retirement Process KPIs

Strategy2Act Health Insurance KPIs

  • Strategy2Act also lists around 20 KPIs for health insurance for companies.
  • The top KPIs include health insurance and financial perspective which indicates whether the firm's strategy and operations deliver value to their shareholders.
  • New business premiums is another KPI which measures the premium acquired from new policies for a specific year.
  • Internal rate of return (IRR) on new business represents the interest rate at which net present cash value flows from an investment or project equal zero.
  • External funds management of cash flow sourced outside the company completes the top 5 KPIs for health insurance.
  • Other KPIs include operating profit, operation, number and value of policies sold among others.

Additional Findings

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Retirement & Health Benefits Industry: Challenges

Low returns on public pension funds, fund revenue volatility and risk, and controlling the ballooning cost of health benefits are 3 clear challenges for the US retirement and health benefits industry. These and other findings are outlined below.

Public Pension Low Returns Impact

Revenue Volatility and Risk

  • IBISWorld also identified very high revenue volatility as a major negative factor affecting the US retirement and pension industry.
  • The report stated that public pensions' revenue is heavily tied to investment returns on various asset classes such as the equity market and broad indexes.
  • Wall Street Journal reported that state and local pension plans are shifting into US stocks and "piling on risk" to cover recent years' low returns and shortfalls.
  • As of 2019, 47% of pension plans' assets are in US stocks, the highest since 2007.
  • While public pensions have historically benefited from the equity market, a turn for the worse could also put pensions and future retirees in dire straits.
  • A decline could be followed by massive benefit cuts for government workers hired from that time.
  • Again, when a city or state shoulders the bill for pension fund returns, government budget is diverted from other public services and development.

Health Benefits Cost Controlling

  • Gallagher & Company's survey identified cost controlling as the biggest challenge to the US health benefits industry in 2014.
  • WSJ reported that courts have blocked several government efforts to cut down benefits for current workers.
  • According to the Gallagher & Company survey, controlling benefit costs was ranked number one by US employers with 100 to 1,000 full time workers as well as non-profit organizations.
  • The most popular method of cost containment was to increase employee liability.
  • This was accomplished by increasing employees' plan contributions, deductibles, out-of-pocket maximums, and co-payments.
  • Another method was to change plan carriers for lower-cost options.
  • Controlling health benefit costs has remained as employers' top concern in 2019.
  • According to the survey from HR consulting firm Willis Towers Watson, controlling healthcare costs as well as increasing affordability were top concerns for 93% of surveyed US executives employing over 11.3 million workers collectively.
  • Health benefit costs are projected to rise 5% in 2019 alone.
  • Around 66% of surveyed executives said healthcare affordability is their most difficult challenge.
  • 89% said growing health benefit costs are a "significant source of financial stress for their employees".
  • Employers looking for full-time employees are under pressure to offer competitive health benefits.
  • One way employers have coped is to address cost of pharmaceuticals as well as to explore "site of care" options such as outpatient facilities rather than hospitals.
  • Companies are also trying to add to the value of their insurance programs by motivating employees to seek preventive care as well as emotional wellbeing.
  • By doing so, health issues are both spotted early and prevented from becoming long-term and more expensive problems for both employers and employees.

Additional Findings

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Retirement & Health Benefits Industry: Trends

Some trends in the US health & benefits industry include greater emphasis on technology, the rise of voluntary benefits, and more concern about cyber security.

Greater Emphasis on Technology

  • Clients are seeking greater ease and convenience through technological solutions, changing the way in which technology is leveraged and administered in the health and benefits industry.

The Rise of Voluntary Benefits

  • Voluntary benefits are becoming more crucial to workers and employers despite "healthcare and retirement savings remaining a staple of benefit packages."
  • This trend is being driven by the need to reduce costs for employers and accelerate value by offering flexibility to an increasingly diverse workforce.
  • It is also further driven by the fact that voluntary benefits offer superior pricing, plan design, and underwriting support than what may be found in the individual market.
  • Additionally, it is characterized by the rise in the adoption of voluntary benefits by employers and its use by workers. As brand-new voluntary benefits arise every year, it leads to additions to perks packages.

More Concerns About Cyber Security

  • There are growing concerns relating to the security of healthcare data in the health and benefits industry.
  • This trend is driven by the exposure of data to new cybersecurity vulnerabilities which leads clients to become concerned over the security of their personal information.
  • It is further driven by the fact that breaches in the system can endanger human life, hinder health systems, diminish patient trust. Therefore, this makes cybersecurity very vital to the safety of patients.
  • Confronting the problem involves understanding the threat and being proactive with combating it, which means not only solving old issues but racing to protect against new ones.

Research Strategy:

For this request, we searched for news articles, press releases, and media publications on related topics. After going through numerous news articles published in leading media outlets, including Forbes, New York Times, Wall Street Journal, Financial Times, Business Insider, Fortune, and Bloomberg, among others, we were able to identify some trends in the U.S. health and benefits industry. These included greater emphasis on technology, the rise of voluntary benefits, and more concern about cybersecurity.

From Part 01
  • "Health insurance companies in the United States are required to invest a certain percentage of premiums earned back into the business to improve operations and quality of care. KPIs and metrics can help to identify areas where the health plan can improve operations and customer experience. "
  • "Here are 5 common health plan KPIs: 1. Medical Loss Ratio (MLR) 2. Claim Settlement Cycle Time (Medical) 3. Claims Denial Rate 4. Provider Contracting Cycle Time 5. First Contact Resolution Rate (Member Services)"
  • "KPIs in ‘Pension fund’ Number of investments exceeding 5% of net assets "
  • "Cost of risk benefits Annual renewal of risk benefits under Retirement Funds."
  • "Number of days to pay exit benefits When employees leave service a Retirement Fund has to pay out benefits. This KPI addresses the number of days (from date of exit) an Retirement"
  • "Market value of fund"
  • "$669.5bn Retirement & Pension Plans in the US Market Size in 2020"
  • "3.8% Retirement & Pension Plans in the US Market Size Growth in 2020"
  • "The market size of the Retirement & Pension Plans industry in the US has grown 6.0% per year on average between 2015 and 2020."
  • "The Retirement & Pension Plans industry in the US is the 4th ranked Finance and Insurance industry by market size and the 13th largest in the US."
  • "Retirement Evaluation Balanced Scorecard Screenshots Retirement planning estimate Organizational workforce distribution Retirement procedures and plans Replacement Management"
  • "This is the actual scorecard with Retirement Measures and performance indicators. The performance indicators include: retirement planning estimate, % of employees aged 50+, % of senior executives near retirement age, % of management grade employees near retirement age, % of voluntary retirements in a year, organizational workforce distribution, % of permanent employees, % part-time employees, % disabled employees, male/female ratio, retirement procedures and plans, number of retirement claims reported, % of retirement cases completed in time, % of employees participating in retirement funds and schemes, number of new retirement schemes and plans launched, replacement management, % of positions filled with internal sources, % of positions filled with external sources, number of training sessions held for new joiners, % increase in expenditure on training of new joiners."
  • "Health Insurance Estimation Balanced Scoreboard Screenshots Financial Perspective Operations Customer Perspective Service"
  • "This is the actual scorecard with Health Insurance Dashboard and performance indicators. The performance indicators include: health insurance, financial perspective, new business premiums, irr on new business, external funds under management, operating profit, operations, policies sold, value of health policies sold, policy renewals, premiums paid, customer perspective, customer profile, risks profile, consumer complaints, access to insurance, service, claims processed, claims pending, average processing time, hearings processed ."
From Part 02
  • "What factors affect growth of the Retirement & Pension Plans industry in the US? The primary negative factors affecting this industry are yield on 10-year treasury note and a very high revenue volatility."
  • "Industry revenue is heavily tied to investment income or losses for retirement plans' assets because the performance of various asset classes, including equities, determines the strength of a plan's investments. Consequently, industry growth is heavily influenced by any change in equity market values, as reflected in broad indexes, such as the S&P 500."
  • "As the fiscal year ends and pension plans look at their annual investment returns, one thing becomes clear — these returns have seen better days."
  • "High pension returns of prior years might suggest hope for future market recovery, but a deeper analysis reveals that these low returns are perhaps the new normal. "
  • " Despite these adjustments, market research firms forecast that the next decade is still likely to see even lower returns than the adjusted expectations."
  • "Pension boards also got false confidence from the fact that most pension plans in the U.S. were fully funded until 2001. So, some pension funds expanded benefits to workers without properly funding the changes ...That mistake has contributed to challenges today."
  • "Public pensions currently have an estimated 1.5 trillion in unfunded liabilities, meaning they have that much less than they owe in retirement obligations. And because of the anticipated low-market returns, this already enormous funding gap is likely to grow if pension plans don’t make proper changes."
  • "The majority of plans have yet to recover from the 2008 crisis, which puts plan sponsors in a tough position, because these benefits are frequently guaranteed by the state constitution, meaning they will have to be paid. "
  • "As the bull market enters its 11th year, state and local pension plans are piling on risk, as they try to make up shortfalls."
  • "Taking on more exposure to stocks is a riskier bet, especially as global economic growth is slowing and talk of a potential recession has grown louder. "
  • "Those risks can translate to consequences in a decline: Big hits to pension funds’ stock portfolios during the financial crisis were followed by a wave of benefit cuts for government workers hired since then."
  • "“They are looking for risk and finding it in the equity market, and historically they have been benefiting from that,” said Robert J. Waid, managing director at Wilshire Associates. “The concern is going to be when and if that changes.”"
  • "Pension-fund returns can have profound impacts on a city or state because when returns fall short, the amount the government must contribute increases, potentially diverting money from other public services."
  • "Meanwhile, some state and local governments facing budget pressure repeatedly decided not to make the full contributions recommended by their actuaries. Courts have also blocked some government efforts to reduce benefits for existing workers."
  • "In fact, according to the 2014 Benefits Strategy and Benchmarking Survey, conducted by Arthur J. Gallagher & Company, the two biggest challenges employers face are 1) controlling benefit costs and 2) attracting and retaining a competitive workforce. "
  • "Although controlling employee benefit costs ranked number one in the overall challenges that employers face, the survey revealed that only 31 percent of these employers polled have quantified the cost of healthcare reform."
  • "Another trend revealed in the survey were the most popular methods of healthcare cost containment. Increasing employee liability was in the top four out of five strategies:"
  • "1) Increase employees’ plan contributions 2) Increase deductibles 3) Increase out-of-pocket maximums 4) Increase copayments 5) Change plan carrier"
  • "Top Health Benefits Challenge: Attracting and Retaining a Competitive Workforce The second largest challenge employer participants reported was attracting and retaining a competitive workforce while controlling benefit costs."
  • "How big a problem? With costs projected to rise another 5% this year (twice inflation), 93% of executives from 610 companies that employ more than 11.3 million workers across all industries said that curbing the cost of healthcare and increasing its affordability remain among their top priorities over the next three years, according to a new survey from the human resources consulting firm Willis Towers Watson."
  • "Almost two-thirds of the respondents said that healthcare affordability is the most difficult challenge they face during this period and 89% believe that rising healthcare costs are a significant source of financial stress for their employees."
  • "In a full-employment economy, employers feel the pressure to offer competitive benefits and can’t compromise on employee affordability."
  • "For starters, these companies are increasing their focus on the cost of pharmaceuticals. They’re influencing the “site of care” where treatment is delivered, such as outpatient facilities or doctor’s offices rather than inside hospitals."
  • "More companies are also trying to expand the value of their insurance programs by encouraging employees to seek more preventive care, screenings and diagnostics to lower the probability of a medical issue."
  • "They’re doing this by creating incentives for employees to take advantage of these procedures and increasing the out of pocket costs for repetitive, unnecessary or out of network care. The idea, according to Stone, is to “create value-based design that makes a smaller dent in employees’ wallets and a big impact on their health”."
  • "The third area, according to the survey, is increasing benefits that focus on an employee’s emotional wellbeing. The idea is to help detect and manage employee stress within a more holistic approach to mental health and address these issues early on before they become longer-term and more expensive problems for the employer and the worker."
  • "Top Five Retirement Challenges 1. The concept of retirement is changing and many will be forced to postpone full retirement."
  • "2. Defined contribution (DC) plans are becoming the norm. 3. As more responsibility for retirement is shifted to the individual, there is a disturbing lack of employee understanding of how to ensure a secure retirement. "
  • "4. Retirement benefits may be inadequate for many employees. 5. Global governance is on the rise to ensure compliance and competitiveness in all markets in which a company operates."
  • "Top Five Health and Welfare Challenges 1. Rising employee expectations for state-of-the-art health care conflict with private sector concern about the rising costs."
  • "2. Workers differ on the value of individual benefits, depending upon their age and personal circumstances. 3. Lifestyle diseases are on the rise, straining health-care budgets. "
  • "4. Understanding and managing how changing health risks can affect employer liabilities is essential but often overlooked. 5. Tracking global health benefit costs and ensuring good governance of programs worldwide is a challenge."