About 10 percent of the average full-time worker’s total compensation in Florida is missing from his or her paycheck. OK, it’s not missing, but it’s not directly in their checks. It’s money that an employer spends on its share of an employee’s monthly health insurance premium.
The average salary in Florida is just over $43,000. According to the Kaiser Family Foundation, the average Floridian getting health insurance through their job spends about $1,400 dollars a year on premiums. Their company spends another $4,300. That’s money the employee doesn’t directly see.
Managing this at cruise line Royal Caribbean is a big job. The company has more than 74,000 employees around the world. About 6,500 of them are in South Florida, making it one of the biggest employers here. Paul Parker is the chief human resources officer at Royal Caribbean Cruises.
Q: How does Royal Caribbean work to find a balance between the company investment in employee health coverage and the cost to the employee?
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A: We make trade-offs. We try to make sure that people understand that our goal is to make sure that we’re coming flat for our employee premium and enhancing the benefits. For our employees, we constantly survey what things do they want so that we can design a plan for every individual.
If you’re single and 20 years old, you may not want to pay for insurance because you’re healthy and you’re invincible. So we try to create a high deductible plan. If you’re a person that has a family with kids, you may want to be in an HMO that allows you to pay a visitation fee [to see a doctor] but have a low premium. We provide three or four plans for each kind of spectrum of employees that we have.
We feel that we’ve got great plan coverage and at the same time we can maintain a cost. You see a movement going more toward wellness and preventative care. If we can incentivize our employees to stop smoking and to work out, we see our incident rate go down, which also drives our premiums down.
Q: Within South Florida, how many different insurance carriers do you work with?
A: One. We just use Florida Blue. That gives us a chance to leverage [our size] and say, ‘If you guys can’t remain flat, we can go someplace else.’
Q: What kind of response have you had in that engagement in the past year?
A: Our insurance carriers always like to cite the Affordable Care Act as having impacted them. And I guess going to impact us. We like to have that discussion and say, ‘We have a lot of numbers and we can go elsewhere.’
Q: How much negotiation is there between you and the insurance carrier about what hospitals and doctors are going to be in your network?
A: If we were going to make a switch and go with another insurance company, one of the key things we would want to know is, what is the coverage? We would want to do a comparison of the kind of the doctors that were in the network that were going to go out of the network. It’s a large communication to our employees.
While you may think [by switching insurance carriers] the employee pays five dollars less a month, [but their] doctor’s not in the plan, [then they are] not happy. If there’s a huge percentage of drop-off, we would have to figure out if that was the right thing to do or how we would enroll those doctors.
Q: How do you balance communication with your employees between what is available to them versus what they are asking for?
A: It’s a year-round effort. Health benefits are complicated. The reality is that until you need it, until it’s personal for you, it’s not something that you think about. Dental care is one of the simple things. Just getting people to go get their teeth cleaned — this is free.
Q: It’s not free. There’s no additional payment after the monthly premium.
A: It’s a lot cheaper than getting a tooth extracted. So if you think about it that way — if you keep your teeth cleaned, you can do it twice a year and get X-rays every four or five years.
The education around preventative care is really what drives your incident rate down. It really drives your premiums down over time. It really is a year-round exercise of asking people what’s important to them and at the same time asking what can we really afford if we want to keep the employees’ portion of the premium flat.
Q: You are a large buyer of healthcare services. What do your employees want when it comes to the healthcare services and finding that balance between service, convenience and price?
A: Every individual is different. On the whole, I think people don’t want to see an increase in their premiums. They want to maintain the medical coverage that they have. They want to see enhancements. We find that people are very interested in having health savings accounts and flexible spending accounts.
Q: How has the plan design changed at Royal Caribbean to address some of those employee desires? Specifically trying to lower their contribution to the premium or at least stem the tide of the increases.
A: We want to drive our employees into the most effective things for them. We try to differentiate the pricing. We try to tier the pricing from a standpoint of where we want our employees to go that benefit the company, but at the same time, provide them coverage. We’ve done some different things around pricing. We’ve done different things around deductibles. And we’ve done some different things around prescription medicine because prescription becomes a major piece of medical costs.
Q: What percentage of the total monthly premium does Royal Caribbean contribute for the employee?
A: North of 80 percent.
Q: Is that the contribution for an employee’s spouse or employee’s child as well?
A: If an employee’s spouse has the ability to have coverage someplace else, we make them pay a premium if they want to take our coverage. They pay a surcharge. It’s like a one-time fee that you would pay because your spouse could get medical coverage at his or her employer, but you chose ours, which increases the likelihood of incidence, which ultimately drives your premium up. You want everybody to get insurance someplace else. In addition, we’ll pay you if you take insurance at your spouse’s [employer].
Q: In addition to that surcharge, are you still paying north of 80 percent for that family member?
Q: For an employee who doesn’t take advantage of the Royal Caribbean health insurance benefit, do they get additional compensation for not participating?
A: Just like we would charge if your wife or husband wants to be on our plans, we would encourage you if your spouse has healthcare to take their healthcare.
Q: How do you do that?
A: It would be like a one-time payment.
Q: Would that total that 80 percent cost that Royal Caribbean would contribute to a premium?
A: Not completely.
Q: But ultimately it becomes cheaper for Royal Caribbean?
Q: How sensitive are you to doctor networks, office visit co-pays, deductibles? How much are you looking at the cost of the care itself?
A: We look at it almost every six months because once we finish the plan design for one year, we start to plan design for the next year. We try and get as much data as possible on what employees actually are besides what they desire. You may want something, [but] they never use it. And we pay for it. We try to figure out where we can modify things that may make it cheaper for the company and doesn’t impact the employee. We’re very sensitive to it.
This is a major part of people’s lives, and I think it’s as people get older, they think more more about healthcare coverage.
Q: How involved are you with the negotiated rates between the healthcare providers and the insurance companies?
A: We have some partners and some consultants that help us with this. But ultimately, it’s our decision because they’re our employees.
Q: Are your employees communicating anything regarding the price of healthcare services in their plan after insurance kicks in?
A: That’s a tough question. To be honest with you, I don’t think we’ve asked them that. We’ve asked them how they feel about their coverage, how they feel about the network, how they feel about the premiums that they pay. We’ve asked about the service that they get and the availability of services in their area. I don’t think we’ve ever asked them how they feel about [their plan] after their co-pay, after insurance kicks in and the part that they pay.
I think employees, in general, really care about the quality of care. If your child is sick or injured, the last thing you’re going to worry about is if it’s going to cost you $50 more to go to this hospital. If this is the best hospital and it’s near my neighborhood, I want to make sure it’s in the network.
Q: You’re the chief human resources officer for 6,500 employees locally and 74,000 across the globe. What has been the impact of the healthcare portion of compensation on overall employee compensation?
A: When you talk about total rewards, it’s a major piece of the pie. I think most companies don’t spend enough time educating people. People think about their compensation as the cash that they get in their check versus the premiums that we pay for them and the availability they have for healthcare. As employees mature, that becomes more relevant. People start to make decisions on where they become employed based on the type of healthcare that’s provided.
Q: How do you connect the dots between what the negotiated payment rate of something is between an insurance carrier and a healthcare provider and the take-home pay at the end of the month?
A: We do a lot of sensitivity analysis around paycheck impact. If you raise a premium by $100 a month, the reality for somebody that makes $40,000 or $50,000 a year is huge. All of sudden, that’s $2,400 ? 100x12...$1200, no? .. that just impacted this person’s paycheck, and the benefit may not have changed. It’s hard to explain to somebody why you’re paying $2,400 for something and there’s not an increase in benefit. That’s where you really have to be creative around health plan design and be sensitive around paycheck impact.
Before you start increasing premiums, you may want to do something else, such as increase deductibles. It doesn’t really impact you every day in your life. Raising the premiums is the last thing we want to do when we do plan design: How do we not impact people’s paycheck but actually impact their behavior?
Paul T. Parker
Job title: Global senior vice president and chief human resources officer.
Experience: Before joining RCL, Parker was global vice president, human resources of Sabra Dipping Company, LLC, where he implemented a talent management process across the business; reduced turnover by 50 percent; increased employee engagement scores by 25 percent; and developed and implemented the company’s “Share the World” vision. Parker also held top HR management positions in other leading companies, including Deloitte, Colgate-Palmolive, Campbell Soup Company and the Nabisco Biscuit Company.
Education: Parker has a bachelor’s in human resource management from Ithaca College and an MBA from New York University’s Leonard N. Stern School of Business.
About RCL: Royal Caribbean Cruises Ltd. [NYSE: RCL] is a global cruise vacation company that owns Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises and CDF Croisières de France, as well as TUI Cruises through a 50 percent joint venture. Together, these six brands operate a combined total of 44 ships with an additional eleven on order. They operate diverse itineraries around the world that call on approximately 490 destinations on all seven continents.
Also: You can listen to a version of this interview at http://wlrn.org/post/how-health-care-costs-can-impact-your-paycheck