Every industry has its own challenges and nuances. Since our client base is widely varied, we routinely partner with our clients to tackle unique, industry specific obstacles as they build out customized employee benefit programs and strategies. When it comes to the airline sector, a specific pain point relates to adequate long term disability coverage for their licensed pilot employees.

Background

Pilot union contracts typically require airlines (the employer) to provide long term disability (LTD) insurance to their pilots, but this coverage has become nearly impossible to procure in the traditional LTD market, for a range of risk reasons:

Pilots are humans like the rest of us, but given the stressful nature of their job and the consequences of their environment, they might be in greater need of LTD coverage than the average worker. For example, the FAA estimates the prevalence of substance misuse is 8.5% among pilots, with other sources placing that rate as high as over 15%1.

Sensibly, the FAA’s regulations around pilot licensing are very stringent, so there is a large risk that a pilot will lose their license over a medical condition, including the substance issues referenced above. As a result, the gap in the market for conventional LTD coverage has yielded a specialty market specific for pilots, which is based on the loss of a pilot’s license instead of the traditional definitions of disability, which are based on the ability to perform either the material and substantial duties of one’s own occupation or any occupation which could be reasonably expected to perform in light of their background. Since these loss of license plans are generally structured either as a monthly benefit while a pilot is grounded or as a lump sum, pilots who do not lose their license essentially have no product option available that provides income replacement as a traditional LTD plan would. In addition, even when the specialty coverage would provide a benefit, it is limited in availability and, with very little competition, premiums are high and there is minimal, if any, room for customization.

Potential Solution

At Spring, we often say that captives are the whiteboard of insurance, meaning that they can be leveraged and crafted in a diverse range of ways to solve for unique and evolving challenges. LTD coverage for pilots can be added to that whiteboard.

Most airlines currently have a captive insurance company, which they may only be utilizing for property and casualty (P&C) lines of coverage. Even when an airline does have employee benefits in their captive, they are typically not leveraging the captive for long term disability insurance or other voluntary benefits.

Long tail risks such as disability are particularly beneficial for captives. Traditionally, when premiums are paid to carriers they hold and maintain any investment income earned on reserves. When funding these long-term liabilities through a captive, the investment income earned is held until the time of loss and stays within the captive.  These investment returns are substantial and serve as yet another benefit for placing disability coverages into the captive.

Having employee benefits (including LTD) in a captive provides the following advantages:

The biggest benefits for airlines placing LTD through their captive program is creating greater control of customization of coverage and are less susceptible to market volatility and pricing by moving away from the commercial market.

Having a combined P&C and employee benefits captive program, which incorporates LTD, would further strengthen the airline’s overall captive and risk management strategy by offering risk diversification, since LTD risks are unrelated to the existing P&C risks underwritten in the captive. Along with projected increased profits of the LTD line of coverage, this approach increases the number of statistically independent exposures, which improves the stability of the overall program. In addition to LTD, medical stop loss could also be added to the captive to protect against catastrophic claims and create more predictability.

Action Plan

LTD insurance for pilots has been an issue for years in the airline industry, and no optimal commercially available solution has come forth. Captive insurance has long been a strategic approach to niche or especially challenging insurance obstacles and essentially how and why captives were born. The LTD commercial market is prime for disruption, and for those willing to move towards a more flexible and beneficial program, a captive insurance company can provide an answer.

1 https://thehill.com/opinion/healthcare/4336555-the-faa-must-prioritize-pilot-well-being-to-improve-flight-safety/#:~:text=The%20FAA%20estimates%20the%20prevalence,identify%20these%20grave%20health%20concerns

The absence management conversation is a critical component of every employer’s broader employee benefit strategy discussion these days, especially given the competitive talent market and the rapidly evolving regulatory landscape surrounding leave of all types and at all levels (federal, state, local). Now, more than ever, employers and employees need to understand how all available benefits, including supplemental health plans, such as Accident, Critical Illness, and Hospital Indemnity, work together. Compliance isn’t the only consideration, though. Employers need to be sure not to duplicate processes which can increase costs as well as to ensure a smooth and positive employee experience.

Understanding supplemental health products and the benefits provided by them ensures that those paying for the coverage will fully utilize the benefits available. Since Accident, Critical Illness, and Hospital Indemnity benefits are paid when an accident occurs, a critical illness is diagnosed, or a hospital stay is required due to injury or illness, they offer a way to fill in the financial gaps left by traditional health insurance, disability coverage, and paid leave benefits. The lump sum benefits paid by the supplemental health plans can be used to cover out-of-pocket expenses like medical copays and deductibles, as well as to supplement the income replacement benefits provided by paid leave and/or disability plans.

The good news is that insurance carriers have made significant progress over the last few years toward the integration of absence and supplemental health products.1 Many are, now, not only bundling supplemental health products with their core disability and absence products and offering a package discount to the core products when quoting, but also tackling the more complex issue of how to ensure that employees enrolled in supplemental health plans are receiving the financial benefit of the products they pay for with payroll deductions.

To ensure that supplemental health plan participants receive the benefits they are entitled to under their policies, most carriers are digging into questions like:

Carriers are also reviewing their processes to find efficiencies and create a better claimant experience. This internal retrospection has led to things like coordinated leave, disability, and supplemental health claim intake and the sharing of medical information across all claims. Many carriers are not only building out coordinated claim paths and workflows for leave, disability, and supplemental health claims, but they are also having their leave and disability claim specialists conduct routine analysis of current leave and disability claim files to see what other coverages an insured is eligible for and whether the medical information on file could be used to adjudicate the corresponding supplemental health benefit claims. Some carriers who have access to medical claim files offer auto-generated notifications, which are sent to supplemental health plan participants, reminding them of their supplemental health benefits based on the medical claim data. Software and technology companies as well as third-party administrators (TPAs) who often handle leave benefit administration are also focused on product improvements in the areas of artificial intelligence (AI), automations, self-service portals, communications, intake, and reporting. All these claim process adaptations alleviate steps for the insured and make it easier, overall, for them to know what benefits are available and be able to utilize them. They also help claimants to maximize the value of the benefits for which they are paying and enhance the customer experience that is top of mind for employers of all types, sizes, and industries.

1 Spring Consulting Group.  2022-2023 Integrated Disability, Absence, and Health and Productivity Vendor Benchmarking Survey.

In a recent podcast from Global Captive Podcast, president and CEO of edRISK, Tracy Hassett, and our SVP, Prabal Lakhanpal, dive into the history of edRISK and how educational institutions have been able to leverage a captive to reduce health insurance costs and reduce liability. You can find the full podcast episode here.

The world of employee benefits is ever-changing. What’s hot one year may not be the next, and we are constantly seeing new products and vendors enter the market. The ebb and flow of employee benefits are typically driven by factors like workforce demands and demographics, the landscape for retention and recruitment, the economy, trends in the healthcare industry, and technological advancements. Sometimes, though, the most prominent trends stem from employers wanting to go back to the basics to understand what will drive value for employees and yield results.  This doesn’t always mean selecting the “big shiny object” of the moment.

Right now, we’re in a post-pandemic world, with an economy that seems to be recovering but still has many weary, and healthcare costs that just won’t quit. Given these factors and what we are hearing from clients and colleagues, we’ve put together this list of benefits areas you should be paying attention to in 2024.

1. Healthcare Affordability

Healthcare cost trend for 2024 is projected to be around 7%. Prescription drug costs are a large factor within this bucket, but so are inflation, healthcare worker shortages, and other causes. As a result, many organizations are strategizing around how they can offer benefits that are more affordable not just for them but for their employees. Some tactics include taking a fresh look at your plan design, cost-sharing model, and pharmacy benefit program. We are also seeing a big push toward alternative funding like captive insurance or other self-insured models. Employers may also want to take more simple actions like reprioritizing preventive care and wellness to lessen the prevalence of chronic conditions and avoid high claims costs.

Another big trend is the coverage of GLP-1 drugs for weight loss, such as Ozempic and Wegovy, a decision over which many employers are weighing the pros and cons.

2. Financial Wellness

Related to affordability, there has been a resurgence of interest in programs like 401(k)s, pension plans, student debt repayment benefits, tuition reimbursement, financial literacy and coaching, and the like. In fact, Wellable reports that 30% of companies have increased their budgets related to financial wellness in 2024. Last year, IBM announced they were bringing back their pension plan in place of their previous 401(k) match program. Regardless of your priorities, there is a large market of solutions available. We recommend doing a deep dive into your population’s needs and assessing current options (e.g., 401(k) company match), to better understand how you can strategically enhance financially focused benefits.

3. Family-Forward Benefits

Benefits with families in mind include programs around parental leave, family and medical leave, caregiver leave or assistance, women’s health and reproductive benefits, bereavement leave, childcare assistance, flexible work schedules, and more. A dependent care flexible spending account (DCFSA) is a specific solution that can offset the costs of daycare or other needs. If you’re looking to make your programs more family-friendly, check out this checklist.

4. Customization

Offering tailored benefits that are personalized for an employee will continue to be a leading objective. This might include benefits like Lifestyle Spending Accounts, flexible time off or hybrid work models, voluntary benefits like pet insurance or identity theft, commuter benefits, Flexible Spending Accounts (FSAs), and more. This approach means ensuring your program is inclusive of all employees regardless of geography, gender, age, race, sexual orientation, etc., and allows for choice between the options available. It also means meeting employees where they are and ensuring you are covering your bases when it comes to telehealth and mental health services.

5. Upskilling & Professional Development

Employers increasingly understand that it is often worth the investment to upskill current talent rather than to continuously hire out for certain roles. This is not only good for business but goes a long way in the realms of employee morale, engagement, and productivity. In fact, a 2022 Conference Board report found that 58% of those surveyed would be more likely to leave if not provided professional development skills and opportunities. As such, we have seen an uptick in programs surrounding mentorship, education and training, including learning management systems, peer coaching, job rotations, and well-defined career paths based on certain milestones.

We’re excited to see these trends take shape and the impacts they’ll have on the benefits sphere! If you could use help evaluating or implementing any facet of your benefits program, please get in touch with the Spring team.

Unfortunately, news of rising healthcare costs seems less like news and more like the norm. In the last two years, we saw medical cost trend level out a bit, but it’s projected to spike back up. According to a recent survey by PwC’s Health Research Institute, the projected medical trend for 2024 is around 7% year over year, about the same as it was for 2021 and higher than both 2022 and 2023. Other sources predicted an even higher trend, coming in around the 8% – 9% range. Much of the cost burden falls on employees. The Kaiser Family Foundation reports that employees will pay an average of $6,575 for their health plan on a family basis, and around $1,400 for single coverage.

Cost Drivers

What’s behind the increase? There are a range of factors working behind the scenes here, most notably:

It is our job as health and welfare consultants to help employers navigate this landscape and identify solutions that can address the cost curve.

Combative Strategies

In such a difficult environment, it’s important to discern any tactics you can take to establish more control over your plans and create a sustainable program that works better for your organization and your employees. Here are a few of the strategies we typically evaluate on behalf of our clients:

  1. Alternative funding. By considering an alternative risk financing vehicle like captive insurance, employers can expect to save between 10% and 30% on costs in the long run. However, a range of self-insured models exist for organizations lacking the risk appetite for a single parent captive. This is a trend that has caught on. IFEBP reported that 79% of employers surveyed are self-insured. A captive or similar solution is even more powerful if paired with stop-loss insurance, which can protect against those catastrophic claims we mentioned above.
  1. Pharmacy benefits strategy evaluation. With the staggering prescription drug prices we are seeing, it is imperative that you ensure your Pharmacy Benefit Manager (PBM) is truly working on your behalf by considering a PBM audit, contract review, or market check. In addition, make sure that you have protocols in place for utilization control, like prior authorization. We also work with clients to improve plan design, utilize clinical programs geared toward population health goals, and dig into data to make informed decisions around possible solutions, whether they be formulary changes, point solutions, or something else.
  2. Wellbeing. Often overlooked as a buzzword, wellbeing programs can have an impact on your bottom line. To yield results, it’s important to be targeted toward workforce demographics, ensure you can measure success, and that employee engagement is maximized.
  3. Plan design. It may be time to reevaluate items like cost-sharing (high deductible health plans, copays, etc.), dependent eligibility, the inclusion of telemedicine and mental health, and more.

At Spring, we work across four main pillars: plan design, process, technology, and funding while leveraging benchmarks to look comprehensively across clients’ programs and identify areas for improvement. If you could use objective guidance on how your organization might be able to better manage rising healthcare costs, please get in touch.

Each year on International Women’s Day, I take time to reflect on the women in my life, the state of women in the workforce and the progress and barriers that remain. While there has been great progress to encourage greater equity and opportunity both here and in the workforce broadly, obstacles still exist that prevent women from building generational wealth.

In fact, one of the largest gaps we see in our clients’ employee benefits and healthcare programs pertains to women’s health issues. Organizations and society at large continue to take a narrow view of women’s health, limiting their approach to traditional pregnancy-related benefits. However, women’s health covers a much wider spectrum of issues including infertility, menopause, the stress of caregiving, breast cancer, and so much more.

Over the years, more and more women have joined the workforce, but their home and personal lives have not stopped for the benefit of their careers. Meanwhile, the health and benefits environment has not caught up to where we are or what is needed. I am proud that we routinely help employers assess whether their health plans take a 360-degree view of all components of women’s health issues and if they address gaps that may exist to help provide a level playing field for women in the workforce.

Only when we provide women the healthcare they need to be successful, can we begin to make a real and meaningful impact on ensuring women have the tools and support they need to build the futures they imagined. This means women can be more productive and build wealth to have greater access to opportunity. With greater health equity, she can access the care she needs, along with paid time off and treatment without exiting the workforce, which we have seen time and time again. In fact, healthier women are proven to expand their wealth which, in turn, means expanded opportunity.

While this year I do feel more positive about women’s position in the workplace than in years past, let’s not forget that pay inequity still exists – 84 cents is not equal to a dollar – and that women across the country are struggling to meet their basic health needs with any type of support.

In 2024, let’s make healthcare inequity a thing of the past, and healthier and better-supported women our future. 

Title:

Senior Consulting Actuary

Joined Spring:

I joined Spring in May 2014, shortly after graduating from Northeastern.

Hometown:

Central MA

At Work Responsibilities:

My actuarial focus is mainly health and medical stop-loss.

Outside of Work Hobbies/Interests:

Sports

Fun Fact:

I’ve been known to card count.

Describe Spring in 3 Words:

Never a dull Moment!

Favorite Movie/TV Show:

Inception/Seinfeld

Favorite Food:

Cheese

Favorite Place Visited:

Italy

Favorite Band/Musician:

Changes by the day!

If You Were a Superhero, Who Would You Be?

Batman.

Name One Thing On Your Bucket List:

Retire

What is One of Your Proudest Moments?:

I don’t know that I have any singular big ones, but I am proud every time we get positive client feedback

If You Win the Lottery, What is the First Thing You Would Do?

Invest!

What are You Passionate About?

Financial Literacy

The Problem

In the insurance, healthcare and benefits world, we have been helping clients challenged by things like inflation, hardened insurance markets, rising healthcare and prescription drug costs, remote and hybrid work, and other trends that continue to ebb and flow. On top of these dynamics, many consumers and organizations are beginning to open their eyes to the crisis that is long-term care in the U.S. The issues in this area became alarmingly obvious in the wake of the pandemic, and has continued to remain a top concern over the last several years. State Medicaid programs pick up significant long-term care costs and they are looking for ways to minimize these expenses.

Multiple studies show that 70% of Americans over the age of 65 will need Long-Term Care (LTC) at some point in their life, with the average duration being 3 to 4 years. The cost of an LTC stay is even more unaffordable than other components of healthcare in the U.S., with 2021 national annual averages as follows:

Long-Term Care insurance (LTCi) exists to prepare and provide a cushion for LTC needs.  With the LTC costs and expected use of the LTCi policy,  individual LTC is expensive. Forbes reported that the average LTCi cost for a male age 60 looking to purchase an LTC pool of $165,000 of coverage costs $1,200 a year. When we weave these factors into the aging population shift we’re experiencing, where the number of Americans aged 65 or older is expected to increase by 47% by 20501, we can see a huge problem on the not-so-distant horizon. Over the last 2 decades, the challenging environment has caused many LTCi carriers to exit the market, making coverage and pricing even more of an uphill battle.

Legislative Developments Driving New Entrants and Programs

Like with Paid Family and Medical Leave (PFML), states are starting to take things into their own hands regarding an LTCi funding solution, recognizing the dire situation for their constituents and the extensive drain LTC puts on publicly-funded programs like Medicare and Medicaid.

The State of Washington was the trendsetter in this area, passing its WA Cares program in 2022, key points of which include:

While Washington may be the first, many other states have LTC legislation on their docket. In 2019, California created a Long Term Care Insurance Task Force to explore the feasibility of developing and implementing a competent statewide insurance program for LTC services and support. To date, the Task Force has made the following recommendations for a more flexible program of that in WA:

The state of the California legislation is still in flux and it is uncertain when it will go into effect. In addition, some sort of LTCi plan is being or has been considered in over 10 other states including Connecticut, Colorado, North Carolina, Georgia, and Oregon. Legislation has been proposed in New York, Massachusetts, Pennsylvania, Minnesota, and Michigan, in addition to the two programs highlighted above.

While the maximum benefit payout (in the case of WA) will not be sufficient for most LTC needs, it is a step in the right direction, necessitating conversation and planning, and reducing some of the state’s burden. We do believe this trend will gain steam and momentum in the coming years. While some may be tempted to “wait and see,” we saw in Washington that many didn’t have time to secure a different option prior to the legal deadline and so were responsible for the tax. For this reason, we strongly advise our clients and their employees to review their LTC options now, while options still exist.

While state LTCi programs such as WA Cares revolve around an employee or employer tax, there is still administrative and compliance burden on employers to withhold, report, and submit those taxes. For these and other reasons, it may behoove employers to explore other options for employees either through a voluntary program or one partially sponsored by the employer.

Solutions in the Market

Luckily, long-term care insurance products have evolved from standalone LTC insurance to a hybrid program including life and LTC, or life and chronic illness riders. We also expect to see annuities becoming a bigger option in the future. Traditional medical insurance and long-term disability (LTD) typically will not cover much of anything related to LTC. More prevalent options include the following:

These solutions can be structured for groups (employer-paid or voluntary), executive carve-outs, or for individuals. Underwriting can come in the following formats: guaranteed issue, modified, or full.

Takeaways

For employers, LTC needs and insurance should be one piece of your reward and risk management strategy. We encourage companies to look at the LTCi realm and support employees where they can. A captive insurance model may provide a unique and cost-effective funding strategy. For individuals who already have an LTCi plan, you may want to consider “layering up” to ensure adequate coverage. Take a look at your duration limits, inflation riders, and other components. Regardless of your current position, a statutory LTC program could be coming to your state, and it’s best to be proactive in this area. Your broker/consultant should be equipped to help you navigate this complex landscape and provide solutions that make sense for your organization and its employees.

1 https://www.prb.org/resources/fact-sheet-aging-in-the-united-states/

Within the employee benefit market, the term point solution has become watered down and leveraged for all add-on programs that complement a core benefit offering. Unfortunately, this has led many benefit professionals to feel like point solutions do not add value. The truth is that some point solutions add immense value while others fall short, but the challenge is the answer is different for each employer.

Employers must consider their healthcare and employee benefit spend, including but not limited to potential incentives; corporate culture and goals related to employee engagement, health and productivity; capability and service guarantees with core providers; and anticipated utilization of core and point solutions to evaluate their offerings and where point solutions may make sense.

Assess Current Offerings

The first step in considering point solutions is to evaluate your current offering(s). Catalog your current partners, what services they perform, what you are paying them, and when your contract renews. In addition, summarize any performance guarantees or return on investment metrics as well as standard reporting that is provided and at what frequency. 

For most employers, this exercise in gathering data related to your offerings will shine a spotlight on a few critical areas:

In order to address these questions and come to any conclusions regarding your point solutions, this assessment needs to run in tandem to a market analysis.

Understand the Market

It is important to understand the plethora of solutions available in the market. The most efficient way to gather this intelligence is to talk with your current health plan and broker/consultant. We help many clients, including edHEALTH, on mapping out and understanding the universe of options in the realm of point solutions and then creating a targeted strategy based on tailored benchmarks. But don’t stop there. Find other resources that can educate you on options, perhaps another advisor or an industry conference. These conversations do not require a deep dive (yet) into each solution. Instead, they should provide enough for you to think about what’s possible as you compare and contrast what you have versus what you anticipate needing in the future.

Identify Pain Points

The most valuable point solutions work to solve a pain point that your core health offering cannot address as well as serve as a targeted comprehensive solution. This is why solutions around specific diagnoses have evolved (e.g., musculoskeletal, cancer, fertility, hypertension, etc.) and for engaged claimants often provide better experiences, more favorable outcomes and even potential cost savings. 

Consider your pain points both qualitatively and quantitatively. Look at data from employees to understand what is not working well for them in the process. Then look at the data from your health plan and understand where you are above their benchmark in spend by major diagnostic category, or have any outliers in the data. For example, our client edHEALTH, a captive for educational institutions, recently began offering a new diabetes management program, which was implemented based on their member schools’ input and supporting data.

Bringing it all Together

Once you have assessed your current offering, gotten a better understanding of what is available in the market, and identified your pain points, it’s time to compare and contrast those three areas of review and arrive at your desired future state. 

Start where program overlaps exist and see if you can simply remove programs without employees experiencing a loss in coverage/benefit. In some instances, those overlapping programs may be provided free of charge from your vendor but still may cause confusion among your employees or be absorbing credits that could be used for other programs. In addition, vendors may be willing to negotiate removal of those services, freeing up funds for other programs. 

After you have explored overlapping programs, consider programs that are currently offered but do not seem to align with your pain points. It’s possible that a point solution is working so well and achieving the desired impact that it is positively impacting spend. If so, this is a point solution you want to continue. Your vendor partner should be able to demonstrate via data how the point solution is working, what employees/claimants are being impacted and how to continue these favorable results. If the vendor partner cannot prove successful data for your population, be skeptical; it may still be a value-add program, but some cynicism is helpful in this very complicated review of point solutions. 

Once you have reviewed overlapping programs and those that do not align with your pain points, you should review all other point solutions against market offerings. Ensure your solutions are keeping pace with the market both in pricing as well as service offering and performance standards. For programs involving considerable spend, a request for proposal (RFP) may be necessary,. For programs with minimal spend, a few calls with competitors may provide enough insight to determine if an RFP is necessary. If your solutions are not competitive, do not have appropriate performance standards, or have not demonstrated their value, you should consider replacing them or, at a minimum, renegotiate with strong performance or return on investment parameters. 

This review must be data driven, but it will often involve both art and science. Sometimes a program may be a worthy partnership for your culture even if cost savings may not materialize. Only you and your team will be able to make that decision, but just because the decision is not solely routed in cost savings doesn’t mean you shouldn’t track utilization, engagement and return on investment. Those may be even more critical for programs that will need to be defended in the future.  Many HR and benefits professionals are feeling point solution fatigue, and are asking questions around impact, risk, and reward. If you could use assistance conducting a point solution audit, or would like advice on best practices in this area, please get in touch with the Spring team.