11 minute read
BENCHMARKING
CONTINUED HIKES IN HEALTHCARE COST FORCE EMPLOYERS TO SEARCH FOR SOLUTIONS
By Rachael Pfenninger, Director of Strategic Execution, AMBA
In AMBA’s recent 2021 Business Forecast Report, mold manufacturers indicated that, on average, healthcare costs accounted for 20% of total company expenditures. This is shockingly high when compared to recent data from the National Compensation Survey (NCS) program, which reported that healthcare costs constituted an average of only 8% of total compensation for civilian workers in March 2020.1 It also indicated that for the mold manufacturing community, mitigating healthcare costs that continue to rise year-overyear is becoming an urgent priority, particularly in an industry recovering from months of COVID-19-related environmental and economic challenges.
To address this area of interest and provide urgently needed insight and guidance, AMBA again has benchmarked the costs and plan offerings of mold manufacturers in its second annual 2021 Health and Benefits Report. To provide additional perspective, the AMBA benchmarking team worked alongside the Manufacturers Association for Plastics Processors (MAPP) and the Association of Rubber Products Manufacturers (ARPM) to expand the report scope, which is inclusive of yearover-year increases, cost mitigation strategies and more. RIPPLE EFFECTS OF WORKFORCE REPRESENTATION
MANUFACTURERS CONTINUE TO BATTLE RISING HEALTHCARE COSTS According to numbers reported during this benchmarking effort, which collected data from more than 200 companies and represented nearly 27,000 fulltime employees, eight out of 10 executives indicated that their health insurance rates increased in 2020. More alarming is that, while 38% of these executives reported a rise that ranged from 6% to more than 30%, 47% anticipate a similar rise in 2021.
With an average enrollment of 70%, the total average annual company cost to provide medical benefits (inclusive of all three industries) equaled $727,000, with an average cost per participating employee per year (PEPY) of $10,143.
While the perspective of all surveyed manufacturers is helpful to understand, it is important to note that the mold manufacturers segment only averaged an annual average cost of $384,000 (a slight decrease from 2020 data). The average cost per PEPY also differed significantly from the overall report results. While the average cost PEPY in this year’s report equaled $10,143, surveyed mold manufacturers continue to pay approximately $11,150 PEPY, equal to 10% more than the average manufacturer surveyed. A deeper dive into the specific data for mold builders surveyed in this report revealed that this incremental cost largely can be attributed to the contract type as more than eight out of 10 executives use “fully insured” health plans, which have higher costs due to no sharing of risk between plan sponsors and plan providers (aka insurance companies).
One significant factor that may contribute to rising healthcare costs for many manufacturers (and mold builders, in particular) is the trend data associated with employee representation by age group. For instance, as the workforce representation rose
for groups of employees aged 18 to 30, 31 to 40, 41 to 45 and 46 to 50, average cost per employee steadily dropped. However, as the percentage of employees above the age of 50 rose, the trend began to reverse – for companies where a larger percentage of the workforce was aged 51+, the average cost of healthcare per employee steadily rose. This trend held true for ages 51 to 55, 56 to 60, 60 to 65 and 66+.
CONTRIBUTING FACTORS TO HEALTHCARE COSTS To combat escalating changes in healthcare costs, executives are exploring a wide variety of options; however, 50% of the survey respondents have no real strategy for dealing with the variables affecting their most inflationary expenditures.
Chart 2 In fact, the majority of the tactics being used today are ones that have been used and reused by employers for the last two decades, and truly do not address the core issues that impact employers’ ability to provide insurance benefits to employees over the long-term.
Currently, the most popular tactic – used by 42% of executives – is the use of Health Savings Accounts (HSA) in conjunction with the utilization of high-deductible health plans. Other tactics being implemented to offset rising costs include the use of flexible spending accounts (used by 32%), Section 125 Plans (used by 30%), wellness plans (used by 27%) and dropping dependent coverage (used by 5% of the surveyed population).
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Unfortunately, nearly one in four executives is cost-shifting premiums to employees. In other words, leaders are moving more of the expense of insurance to the employment base – an approach that is estimated to negatively impact employee retention as the battle for talent continues to be the number one challenge for US businesses.
KEY STRATEGIC INITIATIVES ADDRESS CORE ISSUES This report does reveal that a small segment of organizational leaders in the mold building sector are using true strategies to insulate themselves against health insurance premium escalation. For example, 4.6% of the surveyed population now are using captive funding arrangements to buffer themselves against market fluxuations. Although insurance captives have been in use for decades, it is very importrant to note that nearly every insurance captive operates differently. However, a basic princple of insurance captives is to control the insurance dollars and to either eliminate or reduce the opportunity for insurance companies to make profits and recapture profits on the dollars spent.
The second strategy being used is the use of onsite and nearsite clinics. This concept is contrary to most insurance business models, providing free medical care and free commonly used
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generic medication to employees. The reason the use of clinics is growing in popularity is that the model reduces the use of highly marked-up services and prescription drugs and makes it easier and more affordable for people to be proactive in their own personal care.
Finally, one notable area of interest in this year’s report is that although only 12.5% of respondents in the mold building community – one in eight – indicated that they are engaging in wellness plan implementation, this is in stark contrast to the 27% of all surveyed manufacturers who are exploring this strategy. For any mold manufacturer not considering wellness plan implementation, this strategy could be a potential competitive advantage in 2021 and beyond – particularly because, according to the Society for Human Resource Management, more employers than ever are identifying
wellness plan implementation as a form of cost mitigation when it comes to healthcare costs. In fact, as much as 70% of healthcare spending can be attributed to behavioral and lifestyle choices, which has led employers to provide continually robust health improvement opportunities.2
Ultimately, education provided to employees on how to use their health plan benefits, early detection, wellness and efforts to address the root cause of health issues can reduce long-term cost significantly. If employers continue to implement met hods that address these key areas, they will be able to mitigate their current costs and address potentially catastrophic issues in the future.
REFERENCES 1.https:/www.bls.gov/ncs/ebs/factsheet/medical-care- premiums-inthe-united-states.htm 2.https://www.shrm.org/resourcesandtools/tools-and-samples/ toolkits/pages/managinghealthcarecosts.aspx
The AMBA 2021 Health and Benefits Report covers a vast array of topics, including significant details on health insurance, the process of managing insurance, ancillary insurance benefits, prescriptions drugs, 401K plans and more. Access the full report at AMBA.org.
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[1] AMBA CONFERENCE 2021 – REGISTRATION OPEN Registration now is open for AMBA Conference 2021 – Connections Reimagined! This year’s theme is designed to foster enriched connectivity within the mold manufacturing community by bringing industry professionals together through the use of fresh perspectives, impactful keynote addresses, reimagined breakout styles and re-invented networking opportunities. The annual conference will be held in-person in Grand Rapids, Michigan, June 22-24, 2021, and will be held with AMBA’s new safety protocols in place so that attendees can meet safely and in accordance with CDC guidelines.
Please note: This event has limited attendee registration due to state restrictions. Interested industry suppliers and service providers should contact Susan Denzio at sdenzio@amba. org or Kym Conis at kconis@amba.org for details.
For agenda, hotel, registration and more, visit ambaconference.com.
AMBA EMERGING LEADERS PRE-CONFERENCE SESSION ANNOUNCED AMBA again will offer its AMBA Emerging Leaders the opportunity to participate in a pre-conference session at AMBA Conference 2021. During this half-day workshop, Phil Van Hooser will coach AMBA’s Emerging Leaders through decision-testing methodologies and red flags with the use of decision-making principles, including the Decision-Making Foundation Keys and the 5 Bases for Practical Decision-Making Success. For more information, contact Rachael Pfenninger at rpfenninger@amba.org.
[2] NEW WEBINAR: WHY MARKETING MATTERS – HOW STRATEGIC CONTENT CAN PAY OFF FOR YOUR BRAND In today’s day and age, marketing matters more than ever, especially in an environment where in-person visits continue to be limited and electronic communication is king. Join Alliance Specialties and Laser Sales representatives to hear how they use their company’s values to embrace a variety of marketing opportunities, including: • The development of a formalized marketing plan • Strategic content distribution • Pointed relationship development • Measurable activity
Attendees will learn how these strategic marketing elements and a laser focus on the customer have positioned the Alliance marketing team as leading experts within the manufacturing industry, clearing a pathway towards internal success and goal progress. To register, visit AMBA/org/events.
[2] AMBA REPORTS NOW AVAILABLE FOR SALE The AMBA benchmarking team has released two recent reports that are available for sale – the 2021 Health and Benefits Report and the 2021 Customer Relationship Management Report.
2021 AMBA Health and Benefits Report AMBA’s benchmarking team has published its annual 2021 Health and Benefits Report, which benchmarks current benefits offered by manufacturers in three areas - mold manufacturing, plastics processing and rubber products manufacturing. Benefits reviewed include health, vision, dental and life insurance and retirement programs. The final report includes aggregate data for all surveyed manufacturers, as well as an appendix with data specific to each industry. Member cost: $109. Non-member cost: $209. Purchase at AMBA.org.
AMBA Customer Relationship Management Report AMBA’s most recent benchmarking effort, the 2021 AMBA Customer Relationship Management (CRM) Report, now is available for sale. This report benchmarks the use of CRM systems across three manufacturing sectors – mold manufacturing, plastics processing and rubber products manufacturing – and provides executives and sales and marketing professionals with evaluations of CRM system features and overall use in these industries. Features evaluated include prospecting and lead generation, customer relationship management and database use, analytics and automation, and investment and ease of implementation. Member cost: $89. Non-member cost: $189. Purchase at AMBA.org.
AMBA LAUNCHES NEW BENCHMARKING INITIATIVE AMBA has launched its newest benchmarking opportunity, the 2021 AMBA Shop Rate Survey. This survey will allow AMBA members and participating nonmembers to benchmark their shop rates against AMBA’s nationwide community of mold
manufacturers, providing them with comprehensive data that will clarify on which services their shop is most competitive and how they stack up compared to the rest of the industry. AMBA members who participate will receive this report at no cost. Participating non-members will receive this report for a discounted rate. This report will be unavailable to any nonmember who does not participate.
[3] EXPERT INDUSTRY INSIGHTS FEATURED IN AMBA’S NEWEST RESOURCE Born out of a desire to connect AMBA mold manufacturers with the technical knowledge possessed by AMBA’s network of industry suppliers, AMBA Expert Insights: An Industry Blog is designed to provide AMBA’s Premier Partners with a platform on which to share their technical expertise. These perspectives and insights provide mold manufacturers with the opportunity to deepen their industry knowledge and industry trends. Visit AMBA.org for recent posts and updates.
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