Fearful companies are curtailing employee insurance, retirement perks

March 2, 2009
Huntington Bancshares last month stopped contributing to 401(k) retirement plans of its 650 Indiana workers. Earlier, Lafayette-based Wabash National Corp. trimmed the amount it gives to 401(k) plans for its 3,100 employees.

Ohio-based Huntington, along with Wabash and scores of other Indiana companies, is taking a scalpel to fringe benefit plans to relieve financial pressure during the worst economic slump in a generation.

Some firms are trimming health care benefits even before annual renewal times. The measures are often minor, but at least one employer more than doubled employee contributions to its health plans.

Huntington CEO Steven Steinour said its cuts will save $100 million, but then stressed all the benefits the bank didn't touch, including employee pensions, health insurance, life insurance and tuition reimbursement.

"By implementing broad-based changes that impact all associates, we were able to minimize the number of positions eliminated," Steinour said.

To be sure, not all companies needing to reduce spending are targeting benefits. But some experts worry that if unemployment worsens, more companies could be forced to cut benefits, especially health insurance.

Indiana's jobless rate shot from 6.2 percent in September to 8.2 percent in December.

As workers lost jobs — and their critical health insurance — Clarian Health laid off 28 people in December.

Then in February, Clarian cut salaries of its top 45 executives 10 percent. It also delayed 2008 bonus payments and new building projects and is trying to renegotiate prices with suppliers.

But Clarian cut no fringe benefits.

CEO Dan Evans said in an interview. that he wants to avoid job losses as much as possible. "We can do bricks and mortar next year; we've got to do human capital every day," he said.

Nevertheless, Clarian will participate in a six-month study conducted by Indiana University looking for ways to reduce health insurance costs. Clarian operates IU Hospital in Indianapolis.

IU's health care costs have galloped at an 8-percent to 12-percent clip for several years and, if not slowed, could absorb 10 percent of the system's overall budget by 2012.

"Containing these costs is essential if we are going to continue to advance as a great university," IU President Michael McRobbie said in a statement.

Dramatic steps

The economy's tumble into recession has pushed a number of Indiana employers to take dramatic steps to reduce health care costs, according to Indianapolis benefits brokers. Some companies are even tweaking health benefits just months after their annual renewals — all but unheard of in better times.

"They're definitely grasping for options to control the damage," said Bryan Brenner, CEO of Benefit Associates, a benefits consulting firm. Whereas most employers change benefits plans only once a year, about 15 percent of Brenner's clients have called since December to make changes.

Such changes range from halting contributions to workers' health savings accounts to trimming wellness programs.

Other brokers said their clients are increasingly rooting out employees' family members who are not eligible to be on their plans, requiring higher premium payments from higher-wage workers and, in general, shifting a larger portion of costs to employees.

John Gause, president of Apex Benefits Group Inc., is working with a company that in one swoop more than doubled employee contributions to health benefits. Through last year, the company required workers to pay 20 percent of health insurance premiums. Now they pay 50 percent.

Gause declined to name the company. In fact, no broker IBJ interviewed was willing or able to persuade clients to speak publicly about their benefits changes. Clients worry public disclosure of their dramatic benefits changes could tarnish their image, spook customers or anger employees, the brokers said.

Also, companies that are making unusual changes to their benefits appear to be in the minority. Nevertheless, they could become the majority if the recession lengthens and unemployment worsens.

Such a scenario scares people like Keith Reissaus, vice president for employee development at Goodwill Industries of Central Indiana.

The not-for-profit operator of secondhand stores has relied on an aggressive wellness program to hold insurance costs steady. Goodwill will pass on its first premium hike in three years in April. Even so, Goodwill's employees will pay only $1,000 a year for health insurance, which includes no co-pays.

But if more employers drop insurance coverage, doctors and hospitals will have fewer paying customers. They will have to raise fees, which will raise insurance premiums for other employers. And those higher fees will likely price more employers out of the insurance market, kicking off a self-feeding cycle.

"It may be an accelerating trend," Reissaus said, adding, "That's why we kind of watch the unemployment rates."

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