Transcript Introduction

In Conjunction with MassMEDIC,
WGA is Pleased to Present:
Employee Benefit Trends
In The Medical Device Industry:
An Overview
Presented by:
Louisa C. Bolick, Senior Vice President
William Gallagher Associates Employee Benefits Practice
September 19, 2006
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WGA & The Medical Device Industry
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WGA is the largest independent insurance broker in
New England, with Property & Casualty and Employee
Benefits services, comprised of many specialty
practices.
For over 23 years, WGA has specialized in working with
companies in the Life Sciences, High Technology, and
Health Care sectors.
WGA works with over 400 Life Science and Health Care
companies, almost 100 of which are Medical Device.
While industry does not play the same role in benefits
as it does in other types of insurance, it is a significant
factor when designing a competitive program.
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The Medical Device Industry –
Companies Discussed
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Medical Device is so diverse, ranging from companies
whose primary focus is manufacturing components to those
companies researching and developing brand-new
technologies.
Size also varies widely, from start-ups to industry “giants”.
Within the industry, benefits can vary significantly
depending on size (number of employees) and their
demographics – with demographics driven by type of work
conducted.
For this discussion, the focus will be on small to mid-size
companies whose employees are working primarily in
research, development, design, support & marketing.
In order to attract and maintain these key personnel,
Medical Device companies need a strong compensation
program, of which benefits are a significant component.
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The Medical Device Industry –
Standard Plan Offerings
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The Basics:
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Medical
Dental
Basic Life AD&D
Short & Long Term Disability
Flexible Spending Accounts
401K Retirement Plan (matching varies)
Paid Sick / Vacation / Personal Time
The Extras:
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Vision
Employee Assistance Plans (inc. Work/Life)
Business Travel Accident
Tuition, Transit, Adoption Assistance
Group Voluntary Benefits (Life, AD&D, Vision, Home & Auto, Long
Term Care, Pet Insurance, etc.)
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The Employee Benefits Market –
Health Care Trend
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Rising health care costs – and how to control them – are
near or at the top of everyone’s list of concerns today, and
is the # 1 priority among benefits specialists*.
Health care trend, or inflation, has remained stuck in the
double digits for the last several years.
Although the rate at which trend is increasing has slowed
slightly in the last year or so, various industry surveys are
estimating average trend to be 11.9% for 2007.
It’s predicted that health care costs will continue to rise
steadily, largely due to the aging population and growing
demand for better (and more costly) services, particularly
in the medical technology area – devices, testing, drugs,
and hybrid technologies, etc.
Med Device companies are acutely aware of this, from both
a general business as well as benefits cost perspective.
* Deloitte’s Top 5 Total
Rewards Priorities Survey, 2006
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Employee Benefits Trends –
Consumerism
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Consumerism is hot - talking about it, not adopting it (at least
not yet).
Forrester Research predicts that by 2010 24% of employees
will be enrolled in a CDHP .
In general, companies are interested in consumer driven
health plans (CDHP) as a way to contain costs.
In Medical Device, the interest is two-fold: in addition to cost
containment, there is genuine interest in the transparency
aspect and in making employees (and customers) better
consumers of health care services.
In MA, adoption of these plans in the Med Device sector will
be gradual, with start-ups and industry giants leading the way.
In mid-size companies, the trend will likely catch on in the
next year or two, with a CDHP as a option rather than a full
replacement (Want to get started now? Try a Section 105
feature, or perhaps an HRA).
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Employee Benefits Trends –
Wellness
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Wellness is also a very hot benefits trend – and Med Device
companies are actually doing something about it.
Individuals are drawn to this industry because they want to
improve the health & quality of life for people worldwide, but
are they taking care of themselves?
Med Device companies are more committed than most in
promoting health & wellness initiatives.
Although reducing costs over the long-term is clearly
beneficial, most Med Device companies want to encourage
healthy habits and employee wellness because it’s the right
thing to do.
Companies are taking action – quarterly wellness newsletters,
lunch & learn workshops, discounted fitness memberships,
annual wellness fairs, incentive programs.
Take advantage of what your carriers offer, particularly
Medical and EAP providers.
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Medical Device in MA –
General Benefits Profile
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Small to mid-size Medical Device companies in MA have a very
well-educated, highly skilled work force.
Benefits are a large component of overall compensation, and
expectations are high for a comprehensive & generous
package.
This high expectation is both regional and industry-driven, as
benefits in MA tend to be more generous overall than in other
parts of the country.
Historically, the benefits “budget” has been somewhat smaller
for Med Device than for some of its Life Science counterparts.
Careful analysis and planning go into every benefits decision.
So when MA-based Medical Device companies promote a
“competitive” benefits package to prospective employees,
what does this entail…?
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Medical Device in MA –
Benefits Benchmarking
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Medical plans tend to be fully insured (self-funding for larger
companies) and include MA mandates. The most popular carrier
is, overwhelmingly, BCBS of MA.
For companies whose employees reside primarily in NE, an HMO
plan with an “out of area” PPO is the most popular model. HMO
and PPO are also offered as a buy-up dual option, with High /
Low PPO plans gaining in popularity (addresses the out of state
employee parity issue).
The most popular PPO plan in MA is still 100-80, and HMO
coverage remains at 100%, with no deductible. OV copays
remain low by national standards (avg. is $15-$20)
Hospital & Outpatient copays (i.e. $250 / $500) are now a
standard feature of these plans, while the most common Rx
copays are $10 / $25 / $45, 2x for 3 month MOD.
Average employer contribution is between 75-80%.
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Medical Device in MA –
Benefits Benchmarking
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Dental plans also tend to be fully insured (although selffunding has little risk), and the most popular carrier is,
again overwhelmingly, Delta Dental.
A single DPO+ offering is the most popular option.
When getting started, some Med Device companies go with
a more basic plan and gradually upgrade to include Major
Services and a higher benefit maximum.
The most common Calendar Year Maximum is still $1,000,
but this is gradually increasing (a handful are even at $2K).
A number of companies do offer Orthodontia, primarily for
children only, but it’s still considered to be an “extra”.
Employer contributions typically follow Medical, at 75-80%.
Stand-alone Vision plans are not particularly common in
the industry. Companies rely on basic Medical carrier
coverage & discounts, and encourage FSA utilization.
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Medical Device in MA –
Benefits Benchmarking
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Life/AD&D benefits are employer-paid, usually 1x or 2x salary
(some include an Executive class).
Short Term Disability benefits are typically employer-paid and are
often self-funded. The most common benefit is 60% for 13 weeks.
The industry-standard Long Term Disability benefits are also 60%,
with a 90-day elimination period and a 2-year own occupation
clause (may also include an Executive class).
Giving employees the option to pay the premium (for tax
advantage) is becoming the norm.
Flexible Spending Accounts are a standard offering.
401K plans are by far the most popular retirement benefit.
Companies will often start a plan with no match (or a
discretionary one), but gradually work up to a defined employermatch with a vesting schedule.
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Medical Device in MA –
Competing with Large Companies
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How do you compete with those extremely comprehensive
benefit plans that large companies provide? Don’t!
There may be less variety, but less really can be more.
Small things that can make a difference:
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Don’t forgo a good EAP and BTA policy – they’re not overly
expensive, and these benefits do matter to people
Do cover Domestic Partners, and students to age 25
Don’t have a benefits waiting period
Do offer tax choice LTD, and consider a parental leave policy
Do offer employee-paid insurance options (Vision, Auto, Pet, etc.)
Don’t be shy about “selling” your benefits program
Do establish a wellness plan, and then back it up with regular
communication and small incentives
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Medical Device Benefits –
General Observations
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* MDDI 2003 survey
Employees are overwhelmingly satisfied* with their jobs, due
in large part to competitive wages and attractive benefit
packages.
The Medical Device benefits approach in MA is one of cautious
generosity. Benefits are definitely competitive, but they are
practical, not extravagant.
Companies actively solicit feedback from employees on the
benefits programs - what’s working and what might need
improvement.
Med Device companies are very focused cost containment, but
not at the expense of quality and taking care of employees.
As an industry, there is more interest in health care cost
transparency and consumer-driven models, as well as
promoting wellness initiatives.
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In Conclusion for
MassMEDIC Members
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The cost of providing benefits, particularly Medical, will
continue to rise. Do not hesitate to tell employees how
much you’re spending on them! One suggestion – simple
employee benefit statements.
Sometimes small improvements can make a big difference.
Add an EAP with good work / life benefits, and then
encourage utilization.
As the demand for experienced, senior-level employees
grows, you may want to consider executive benefits such
as supplemental Life, LTD, Long Term Care or perhaps a
Deferred Compensation plan.
Add voluntary benefits to the menu. They don’t cost the
company money, and employees do appreciate the
convenience.
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Thank You!
Any Questions?
The following sources were reviewed in developing this presentation:
WGA’s book of business and Medical Device clients
Booz Allen Hamilton’s “State of the Medical Device industry and Trends for 2006”
“The Medical Device Industry In MA”, UMass Boston (for MassMEDIC)
“Innovation and the MA Medical Device Industry” (MassMEDIC, 2002)
MDDI Salary Survey, 2003 (devicelink.com)
Deloitte’s “Top Five Total Rewards Priorities for 2006”
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