We often find ideas for blog posts in group emails sent by colleagues looking for help with an issue raised by a client. This one from a few weeks ago seemed pretty typical: “My client is looking for strategies to make health care more affordable for low-income employees. If you have examples, please share.” What wasn’t typical was the volume of responses. More than a dozen busy consultants took the time to reply, usually beginning with some variation of the line, “This is a really important issue for my client too.” We’ll be summarizing what was shared in these emails in a series of posts over the next few weeks.
But first, to help frame the issue, we went to our National Survey database to see what we could learn about the financial burden that health insurance and healthcare expenses place on low-wage employees. We divided the survey respondents into quartiles (four roughly equal groups) based on average employee pay. In the bottom quartile, the average salary for full-time employees was less than $48,000 in 2016; in the top quartile, the average salary was $80,000 or more. Turnover is significantly higher in the low-wage group (34% vs. 13%), which includes more employers in retail, hospitality, and other industries characterized by low pay and high turnover. (See below for more detail about the groups.)
Here are some of the key differences in health benefits between the two groups. In the low-wage group:
Employers in the low-wage group have taken steps to address the issue of healthcare affordability for their workers, while operating within business and budget realities. These employers are more likely than employers in the high-wage group to offer voluntary benefits to fill coverage gaps, such as critical illness or hospital indemnity coverage. They are slightly more likely to provide an onsite medical clinic, which can make accessing primary care more affordable as well as more convenient. They are also more likely to offer health coaching and targeted programs for diabetes management.
But clearly, as the email conversation among our colleagues showed, employers want to do more. We’ll be back with some ideas to share that could help your organization tackle this difficult but critical challenge.
About the analysis
An important caveat: In this analysis, organizations were grouped and compared based on average pay. However, virtually all organizations have a range of pay levels, meaning that there will be some low-wage employees at companies with high average pay and some highly paid employees at companies with low average pay. The analysis thus does not represent the experience of all low-paid or all high-paid employees. It illustrates the general relationship between benefit levels and compensation on an organizational level.
To minimize differences due to organization size, we limited the analysis to employers with 500 or more employees. Organizations with a low average salaries tend to be larger (average number of employees is about 14,000, compared to about 7,000 for the high-income group). There were demographic differences as well: employees in the low-wage group are younger (average age of 41 vs 44), more likely to be female (52% vs 40%) and more likely to be in a union (on average, 12% of employees are collectively bargained among employers in the low-wage group vs 6% of those in the high-wage group).