Survey Report: Employee Benefits
Wine Industry Continues to Offer Above-Average Medical Benefits Costs are likely to rise in the next year, perhaps in even larger jumps than years prior.
One year ago, in the last Employee Benefits Survey Report, wineries and employers across the country were starting to feel the effects of the Affordable Care Act (ACA). Costs were expected to increase anywhere from 5 to 10 percent, and many were hoping that employees would pick up some extra costs to obtain a higher quality of care.
For the most part, that’s exactly what happened. According to the latest Wine Industry Healthcare Report provided by Woodruff-Sawyer & Co., healthcare for the wine industry rose an average of 7 percent in the last year. Wineries adjusted the plans they offered, with more moving to a High Deductible Health Plan (HDHP) than in previous years.
Now that the country has finally adjusted to the Affordable Care Act, there’s a good chance that a number of the terms and reporting requirements under it will change, thanks to the efforts of the Republican-led executive and legislative branches. However, it’s not all bad news, according to Chris Reiter, senior vice president, employee benefits at WS&Co.
The majority of large wineries didn’t need to make many adjustments to their plans as a result of the ACA, but a number of small- to mid-sized wineries did. Part of that is because the ACA changed the definition of “small” employer, increasing the threshold from one to 50 employees to one to 100. With less bargaining power, employers started incorporating more HDHPs into their benefits packages.
The Rise of HDHP
Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plans remain the most prevalent plans across all industries, but employers have also started to include HDHPs in the mix. According to Reiter, just about 25 percent of his clients do not offer some type of HDHP, and the same case could be made across the practice.
“It has become a standard offering at this point, even a plan of choice,” he said. “People were slower to adopt it, both geographically and within the wine industry. It goes back to the ‘paternalistic nature’ of family-run businesses. These plans [HDHPs] are more confusing and harder for those that need to use the services.”
The number of employers that offer one has dramatically increased over the last two years, and in the last year he’s seen the most year-over-year growth than in the many years since it was introduced.
Part of the reason for that inclusion was the cost savings. Wineries were driven to inclusion by the attractiveness of offering a better health plan at a lower price tag. Now, a full 55 percent of wine industry employers offer at least one.
To further manage costs in the last year, 23 percent of wine-related companies negotiated lower costs with their current carriers, 14 percent implemented or enhanced an HSA or HRA plan, 14 percent increased deductibles, 13 percent increased the employee share of the monthly premium and 10 percent implemented a wellness program.
Enticing New Hires with Benefits
“This industry continues to be a generous industry that cares about its employees, and that is reflected in the benefits,” Reiter said.
Attracting top talent is a never-ending quest for wineries across the country, though especially true in California’s wine country, where the cost of living grows exponentially each year. Wine companies continue to use benefits packages as a key tactic. In addition to healthcare, dental and vision, 43 percent of wine employers offered some sort of wellness program. The top five are employee assistance programs (programs that assist employees with personal and/or work-related problems that might affect job performance, health, mental and emotional well-being) (22 percent), flu shots (17 percent), wellness newsletters (16 percent), web-based resources for healthy living (12 percent) and health club discounts/reimbursement (10 percent). However, there are hurdles to the success of these programs, with 60 percent of survey respondents reporting a lack of employee participation/interest and 47 percent reporting time as the two main roadblocks.
Paid time off (PTO) remains another key benefit. New hires receive 13 days on average, those employed one to five years receive 15 days, those employed six to nine years receive 19 days and those employed for 10 or more years see an average of 22 PTO days. Of those surveyed, 29 percent of employers only offer a PTO Bank.
Sixty-four percent of wine employers offered a defined contribution plan in 2017; the most common employer match for defined contribution plans (i.e., 401(k) and 403(b)) was 50 percent up to 6 percent of an employee’s salary. Nearly all of the employers included in the report have an employee-directed investment allocation.
The most common ancillary benefits remain long-term disability (74 percent offer it), basic life insurance (84 percent) and basic AD&D (81 percent).
ACA’s Future and Implications
Of the main wine industry concerns, 38 percent of survey respondents said they were worried about the associated costs of the ACA, but more telling is the 31 percent who listed “keeping up with changes in the law” as their top concern.
“The Republicans are determined to try to make changes to the ACA, but at the current time there are not enough votes to make it happen. I don’t see it dying, and there are parts of the bill that both sides have agreement on,” said Reiter.
The fate of the Republican healthcare bill changes frequently, but there are some likely outcomes. Both Democrats and Republicans want to see the repeal of the Cadillac Tax, an excise tax levied on luxury plans. If, for some reason, that tax is not repealed by its 2020 start date, that could have some pushback—the wine industry, as collective employers, would be affected by the tax because of the abundant plans they offer. Reiter does remain optimistic that the Cadillac Tax will be defeated before then, however.
One of the great burdens of the Affordable Care Act is the additional forms and paperwork employers must fill out, but Reiter thinks there could be a reprieve from the extra work.
“This is the third year in a row that the new regulatory burdens will not be penalized if not done accurately. It’s supposed to be for the government to track affordability and coverages offered, make sure employees get subsidies, etc. The IRS is just not doing it,” he said. “The system, as set up today, is not being properly administered.”
Though the Internal Revenue Service may not be living up to the expectations set by the ACA, Reiter advises clients to “make a good faith effort” and complete all required forms. Even if there is inaccurate information, enforcement will be relaxed for another year.
Predictions for 2018 Costs
The majority of wine industry employers expect a 6 to 10 percent increase in costs next year. Indications from insurers have not been released yet, but they are expected to see some increases. Reiter says there was a key tax that was sunset for a year and not built into the overall premium structure for 2017 that will take affect this year. He says it should add a 2 to 3 percent increase in insurers’ costs. He also reports hearing that pooled increases will be a bit higher this year as well.
Expect high single-digit to low double-digit increases from Kaiser and several other insurers—one, however, is pushing an 18 percent jump in costs. Increases have remained in the mid single-digit range for many years, and in 2018, owing to the pressures of ACA taxes, we can expect to see those increases reach the high single-digit, possibly even double-digit, range next year.
On a more positive note, Reiter was happy to report that the wine trust WS&Co. runs will not see any increases in costs this year. “It’s the law of large numbers. The more wineries and employees we have in the pool, the better the overall risk. As evidence to that is the 0 percent increase,” he said. The Wine Industry Employee Benefits Collective, which allows smaller companies to collectively gain the purchasing power of a 5,000-plus employee organization, is available to all wineries. Rates for the collective will be locked in through January 1, 2019 and allow those companies to maintain a large group status.
Benchmarking Your Benefits
According to the latest survey, wine companies are providing benefits as good or better than other industries in the area. Reiter said some of this is due to the fact that many companies are family-owned, small and more likely to want to take care of their employees. Rates for wine industry plans are, in general, rising in line with other area industries.
Wine companies use different types of plans: 34 percent offer Preferred Provider Organization (PPO) plans, 36 percent offer Health Maintenance Organization/Exclusive Provider Organization (HMO/EPO) plans, and 29 percent offer a High Deductible Health Plan (HDHP).
Of the wine companies surveyed, 17 percent only offer one plan, 26 percent offer two plans, 20 percent offer three plans, and 36 percent offer four or more plans. The number of wineries offering four or more differing plans increased in 2017 from the 24 percent reported in 2016.
PPO Plan Benchmarking
Not much has changed for single coverage PPO plans offered by wine companies between 2016 and 2017. The median deductible for wine company PPO plans in 2017 continued to be $500. Median coinsurance remained at 80 percent, with the median maximum out of pocket costs running at $3,500, the same as in 2016. The median office visit co-pay for PPO plans remained flat at $30.
HMO/EPO Plan Benchmarking
The wine industry median deductible for HMO/EPO plans dropped from $50 to $0. Employee coinsurance continues to cover 100 percent of costs. The median out-of-pocket maximum increased from $3,500 to $4,000. Median office co-pay remained at $30.
HDHP Plan Benchmarking
There has been a steady increase in the number of wineries interested in offering HDHP plans For these types of plans, the wine industry median deductible remained at $2,000. Median coinsurance remained at 80 percent, and the out-of-pocket maximum held steady at $5,000. Average employer contribution ran $1,400 for employee only coverage and $3,000 for families.
Dental and Vision Plans
Wine industry employee contributions for a Dental Preferred Provider Plan (DPPO) have lagged behind the national average, but this year have caught up and remain on par. Seventy-eight percent of wine companies offered one dental plan, 13 percent offered two, 1 percent offered three, and 7 percent offered no coverage. Vision coverage remains consistent. WBM
Methodology
The data quoted in the report are for the wine industry in 2017 unless otherwise indicated and only represent part of the extensive study. Because of the complexity of the study, this summary focuses on median responses for this year. The full study with historical data is available from Woodruff-Sawyer & Co.
The survey included the wine industry out of a total population of 2,593 companies that participated nationally, 215 in the San Francisco Bay Area and 69 in the wine industry.
Those represented 1.5 million, 92,271 and 12,929 employees respectively, and $15.8 billion, $1.2 billion and $168.7 million in healthcare spending.
This article originally ran in the October 2017 issue of Wine Business Monthly