Health Insurance Employee Compensation in 2011

According to Hay Group’s 2010 Health Insurance Survey, there is some positive news on the horizon for health insurance employee compensation in 2011.

The report notes that median salary budget increases (total available budget to invest in employees through salary) for 2011 are expected to hit 2.0 percent for executives and 3 percent for all other employee levels. This is a minimal gain from last year’s survey that noted median salary budget increases of 2 percent for executives and 2.5 percent for all other employee levels.

Merit increases, which are one portion of the total salary budget, are also expected to jump in 2011 by up to 0.5 percent depending on the employee level.

According to a spokesperson for Hay Group’s Healthcare Practice, this added merit budget, while relatively small, will permit organizations to provide raises for employees who show added value, an especially important fact as companies look for major alterations in the wake of health care reform.

The survey goes on to note that 48 percent of organizations have not looked over their performance-based employee incentive plans in five to 10 years, compared to the cross-industry standard of three to five years.

Another spokesperson for the company points out that with a vast number of questions around the new payment structure resulting from healthcare reform and the economic recovery, health insurance organizations are working to define what ‘performance’ will mean down the road.

She adds that as the industry becomes additionally aware of the impact of these variables on their business performance, reviewing incentive plan design and metrics will be a key initiative. Companies will certainly want to ensure employees focus in on driving the performance of the organization by developing metrics that are aligned with the overall business strategy and providing payout options that are meaningful to the employees.

All those who participated in Hay Group’s 2010 Health Insurance Survey stated having a formal annual incentive program, demonstrating a universal acceptance of “at risk” pay among health insurance organizations. Performance measures for executives, middle management, supervisory and clerical positions were based on a mix of factors and vary based on level. Overall, they primarily centered in on operating income, product quality, customer satisfaction and individual goal achievement across the levels.

Looking at health insurance organizations’ salary structure adjustments (the framework in which salaries are based), Hay Group’s study found a noticeable drop from prior years.

In fact, median salary structure adjustments are at their smallest point in a decade. In 2010, respondents are planning an average salary structure gain of 2 percent, compared to a high of 3.1 percent in 2001 and a previous low of 2.7 percent in 2008. Salary structure increases are expected to stay at 2 percent through 2011 as well.