REACH

NEW HEIGHTS
Best-in-Class Benchmarking Analysis for Large Employers

U.S. Edition
 LARGE EMPLOYERS

Table of Contents
EXECUTIVE SUMMARY............................................................................................................................................................................................................................4

OVERVIEW..........................................................................................................................................................................................................................4

METHODOLOGY................................................................................................................................................................................................................ 5

BEST IN CLASS FOR HEALTHCARE COST CONTROL.................................................................................................................................................................6

BEST-IN-CLASS ATTRIBUTES — HEALTHCARE COST CONTROL................................................................................................................ 7

BEST IN CLASS FOR HR MANAGEMENT..........................................................................................................................................................................................11

BEST-IN-CLASS ATTRIBUTES — HR MANAGEMENT........................................................................................................................................12

BEST OF THE BEST FOR BOTH PROFILE GROUPS................................................................................................................................................................... 24

BEST-OF-THE-BEST ATTRIBUTES.......................................................................................................................................................................... 24

FINAL REMARKS.......................................................................................................................................................................................................................................31

ABOUT GALLAGHER..............................................................................................................................................................................................................................32

The intent of this document is to provide you with general information regarding the status of, and/or potential concerns related to, your current employee compensation
and benefits environment. It does not necessarily fully address all of your specific issues. It should not be construed as, and is not intended to provide, legal advice.
Questions regarding specific issues should be addressed by your general counsel or an attorney who specializes in this practice area.

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Executive Summary
Overview
Wherever employers are on the road to a better workplace, better benchmarking can speed their progress. Objective comparisons
make it possible to fold short-term goals into long-term strategies, smoothing the way to operational excellence and organizational
wellbeing. And benchmarking against employers that are already reaching high levels of success can uncover untapped opportunities
— both large and small — for improvement.
The Best-in-Class Benchmarking Analysis showcases statistically significant patterns, best practices and philosophies common
among organizations that most effectively manage their healthcare costs and their people. These employers have arrived at a
winning formula for attracting, rewarding and retaining the right talent, and ultimately retiring them at the right time — helping to
minimize turnover and unlock cost efficiencies. Savings can be invested in salaries, wages, bonuses and specific employee benefits
that target competitive advantages, and support revenue and market growth.
This report interprets data from large employers with 1,000 or more full-time employees (FTEs) that responded to Gallagher‘s 2018
Benefits Strategy & Benchmarking Survey. A separate report on midsize employers with 100 to 999 FTEs is also available.
Based on findings, the analysis describes key attributes of best-in-class organizations in two profile groups, defined by excellence in:
• Healthcare cost control
• Human resource (HR) management
Each group represents a best-in-class competency that’s critical for outperforming other large employers. The report also describes
the strategies, tactics and programs that distinguish the best-of-the-best employers — those organizations that lead their peers in
both healthcare cost control and HR management.

4 BEST- I N- CLASS BENCHMAR KI N G A NA LYS IS

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Methodology
Gallagher followed a six-step process to identify and characterize best-in-class large employers:

BEST-IN-CLASS ANALYSIS PROCESS

Identify the Profile Groups Run a Quartile Analysis Determine the

and establish evaluation criteria to identify each group’s Best-in-Class and
• Profile group 1: Healthcare cost control best-in-class employers Best-of-the-Best Attributes
• Profile group 2: HR management • Total score = upper 24%-29% (1st quartile) based on statistical significance

1 2 3 4 5 6

Analyze Data Select the Survey Questions Identify the Best

from Gallagher’s and Score Responses of the Best
Benefits Strategy & for each profile group • Top-performing
Benchmarking Survey employers in both groups

1 Analyze data from Gallagher’s 2018 Benefits Strategy &
Benchmarking Survey.
2 Identify the profile groups and establish evaluation criteria:
• Profile group 1: Healthcare cost control
• Profile group 2: HR management
3 Select questions from the survey that are relevant to the
two profile groups. For each group, score the responses,
and then total those scores.
4 Divide the total scores for each profile group into quarters
— or quartiles — according to their values, and assign each
employer to a quartile. The top quartile for each group
includes the highest-scoring, best-in-class employers for
healthcare cost control (29%) or HR management (24%).
5 Identify the best-of-the-best employers among the best-in-
class pool. These exceptional performers scored in the top
quartile of both profile groups. Just 24 large employers (7%)
qualified as the best of the best in 2018.

• 340 large employers responded to the entire set of 6 Determine the attributes that separate the best-in-class
profile group questions. and best-of-the-best employers from all other large survey
participants, by analyzing response data for questions on
strategy, tactics and programs.

340LARGE EMPLOYERS
THAT RESPONDED TO ALL
PROFILE GROUP QUESTIONS

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LARGE EMPLOYERS | Healthcare Cost Control

Best in Class for Healthcare Cost Control

Three criteria determined the large employer group that’s
best in class at controlling healthcare costs. Employers were
assigned points and placed in quartiles based on their relative
performance in each measure. While quantitative data on health
plan premium increases — or decreases — counted the most in
scoring, qualitative data was also a factor.
Employers most likely to rank as best in class reported:
• Consistently low premium increases of 4.9% or less —
across a three-year renewal period
• Higher prioritization of health benefits cost management
• Greater confidence in the effectiveness of their strategy for
managing health benefit costs

MEASURES OF BEST-IN-CLASS PERFORMANCE

Priority placed on
managing health
benefit costs

3-year trend —
health plan premium Perceived success of
increases or decreases the healthcare cost
• Most recent renewal management strategy
• 1 year prior
• 2 years prior

The highest possible total score was 21 points. Scoring at least 14 points, 99 employers (29%) qualified for the top quartile as
best in class for healthcare cost control in 2018.

QUARTILE DISTRIBUTION

19% 29%

29%
23%

Top quartile: Best in class Quartile 2 Quartile 3 Bottom quartile

6 BEST- I N- CLASS BENCHMAR KI N G A NA LYS IS

 Healthcare Cost Control | LARGE EMPLOYERS

Best-in-Class Attributes — Healthcare Cost Control

When survey responses from large best-in-class employers • Emphasizing compensation, limited leave and selective
were compared to the rest of their peers, distinguishing supplemental benefits
attributes emerged. An analysis of these attributes identified • Reducing financial barriers to appropriate care
two key themes:

Emphasizing compensation, limited leave and selective supplemental benefits

The best in class are all-in with their financial focus — from
recruiting practices through engagement efforts. As part of
their total rewards package, they emphasize compensation
over benefits to gain a competitive edge in both attracting new
workforce members and retaining valued employees. And, by
taking a broad-based approach to planning compensation,
they’re more likely to ensure that HR priorities align with their
organizational strategy. One method they use more often to
achieve tighter integration is analyzing employee data, such
as length of service, gender and age. Best-in-class employers
also set themselves apart in creating a positive employee
experience. They more clearly and transparently communicate
with employees about how to earn bonuses and pay increases.

COMPENSATION-FOCUSED PLANNING AND TACTICS

Planning resources 56%

Organization’s strategic plan
46%

Workforce characteristics 38%

(e.g., length of service, gender, age) 29%

Employee communication Communicate clearly and

27%
transparently on how to earn
17%
bonuses or pay increases
Best in class Other large employers

Unlike large employers that excel in HR management, those likely to link to broader HR initiatives that often focus on
ranked the best for healthcare cost control typically don’t engagement (68% vs. 91%). Presumably, this choice allows
consider attraction and retention a top three operational a greater focus on financial performance and broader
priority. So, their employee communication strategy is less operational objectives.

ATTRACTION, RETENTION AND SUPPORTING COMMUNICATION PRIORITIES

Rank attracting and retaining a competitive 59%

workforce as a top three operational priority 69%

Link the employee communication 68%

strategy to broader HR initiatives 91%

Best in class Other large employers

Marks a best-in-class response that is lower

compared to other large employers

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The best in class are also discerning in their health benefits
and insurance coverage choices. More often than their peers,
they give employees just one or two health plan options. While
this practice may limit employee choice, it reins in expenses
related to administrative complexity and allows more focused
plan management.
Best-in-class employers are also less likely to cover infertility
services or fertility treatments. These optional and expensive
benefits are typically hallmarks of organizations that strongly
focus on fostering employee loyalty and retention. In fact, they
differentiate the best in class for HR management.
Similarly, employer-subsidized dental benefits are still the norm
for most large employers, but they’re scarcer among the best at
controlling healthcare costs.
There’s a break from this pattern when it comes to employer-
subsidized indemnity or cancer care insurance. While these
additional types of coverage are not common overall, the best
in class offer them more frequently. Employees can benefit
by gaining greater financial security in the face of unexpected
health issues and treatment costs.

OFFER 1-2 MEDICAL PLANS

59% Best in class

40% Other large employers

SUPPLEMENTAL MEDICAL COVERAGE

Medical services Infertility services or fertility 25%

treatment 36%

Employer-subsidized insurance 63%

Dental
76%

8%
Hospital indemnity
3%

6%
Cancer care
2%

Best in class Other large employers

Marks a best-in-class response that is lower

compared to other large employers

Analysis of leave types offered by large employers reveal The best in class may recognize that paid leaves can create a
some clear differences in how employees’ time away from sense of financial security, but in keeping with their emphasis on
work is managed. cost control they’re more likely to forgo certain types — including
jury duty, bereavement and time off for incidental sickness.

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 Healthcare Cost Control | LARGE EMPLOYERS

PAID LEAVES

76%
Jury duty
84%

72%
Bereavement
81%

59%
Incidental sick time
70%

Best in class Other large employers

Marks a best-in-class response that is lower

compared to other large employers

Reducing financial barriers to appropriate care

Large employers that outperform their peers in managing and out-of-pocket maximums. In fact, they’re more likely to
healthcare costs do not routinely shift costs to employees report that premiums for individual and family coverage are
through increased premiums, deductibles, copays, coinsurance affordable for employees.

REPORT AFFORDABLE HEALTH PLAN PREMIUMS

94%
Individual coverage
86%

75%
Family coverage
63%

Best in class Other large employers

Well-considered, value-driven plan design and management
makes it possible for the best in class to more stringently tamp
down costs. By limiting out-of-pocket healthcare expenses for
a healthcare cost-sensitive workforce, they make coverage and
care more affordable — increasing the likelihood that employees
will seek the services they need and adhere to treatment plans.
This strategy helps deter costly emergency health situations,
boosting employees’ physical, emotional and financial wellbeing
to support a more productive and engaged workforce.
Indeed, more than one-third (36%) of best-in-class employers
did not increase employee cost sharing in 2018, compared to
21% of their peers. They were less likely not only to increase the
employee contribution to the health plan’s premium cost, but
also to raise deductibles, copays or coinsurance. Notably, a high-
deductible health plan (HDHP) option is also less prevalent.

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APPROACH TO EMPLOYEE COST SHARING IN 2018

36%
No increase to cost sharing
21%

Increased employee contributions 59%

to health plan premiums 71%

Increased employee cost sharing through plan design 52%

changes (e.g., higher deductibles, copays or coinsurance) 62%

Best in class Other large employers

Marks a best-in-class response that is lower

compared to other large employers

OFFER AN HDHP

22% Best in class

32% Other large employers

Instead, large employers with the best cost-control results
are relying more on sophisticated tools and processes. For
instance, 23% use reference-based pricing compared to 12% of
their peers. This cost-control mechanism caps the maximum
amount employers will cover for certain healthcare services
or procedures — often those that vary widely in price but
don’t deliver superior outcome improvements, such as knee
replacement surgeries. The employee or other covered patient
pays the difference in cost above the reference price.
Likewise, best-in-class employers are reducing pharmaceutical
costs through a more calculated approach to pharmacy
benefit management. One tactic they tend to favor above
other large employers is carving out pharmacy benefits from
the health plan (42% vs. 32%). Advantages of working directly
with a pharmacy benefit manager (PBM) include more insight
into effective pharmacy management strategies, tactics and
communication — and customized alerts to underutilization of
supporting tools.

PLAN MANAGEMENT TACTICS FOR REDUCING PHARMACY SPEND

42%
Carve out pharmacy benefits
32%

Use reference-based pricing for 23%

healthcare services 12%

Best in class Other large employers

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Best in Class for HR Management

Several criteria established the large employer group that’s best
in class at HR management. Employers were assigned points
and placed in quartiles based on their relative performance in
each measure.
Two outcome-based measures were weighted nearly twice as
heavily as the others:
• Turnover percentage
• Achievement of targeted turnover rate
Each of the remaining measures accounted for an equal number
of points:
• Use of a communication strategy
• Success of employee communication efforts
• Implementation of a strategy to improve employee
engagement
• Completion of a workforce engagement survey from 2016
to 2018
• Use of an HR and benefits technology (HRBT) strategy, and
its level of sophistication

MEASURES OF BEST-IN-CLASS PERFORMANCE

Completion of an
Success of employee engagement survey
communications
from 2016 to 2018

Use of a Use and level of

communication Implementation sophistication of
strategy of an employee HRBT strategy
engagement strategy

The highest possible total score was 22 points. Scoring at least 14 points, 83 employers (24%) qualified for the top quartile as best in
class for HR management.

QUARTILE DISTRIBUTION

19%
24%

29%
28%

Top quartile: Best in class Quartile 2 Quartile 3 Bottom quartile

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Best-in-Class Attributes — HR Management

When survey responses from best-in-class employers were
compared to the rest of their large peers, distinguishing
attributes emerged across three key themes:
• Aligning people management with organizational
philosophy and operational priorities
• Investing in employee growth and wellbeing to boost job
performance and engagement
• Recognizing the role of strategic healthcare management in
engaging and retaining high-value employees

Aligning people management with organizational philosophy and operational priorities

An organization’s philosophy and culture are strong influencers
of its approach to HR management. Compared to their
peers, the best in class more often rate controlling employee
benefit costs as a top operational priority. Yet, they also have
a stronger tendency to value compensation and benefits as
integral investments in optimizing workforce performance, and
achieving business outcomes.
In a related sense, they’re more inclined to prioritize investment
in employee wellbeing as a way to compete as an employer of
choice. And this commitment makes them more likely to count
workforce inclusion and diversity among their top HR priorities.
The best in class also surpass their peers in creating a multi-year
benefits planning strategy to provide a better framework for
ongoing success (46% vs. 32%).
The best in class are more likely to use their organizational
strategy as a guide to benefits planning. And besides relying on
HR resources, they more often turn to tools such as multi-year
labor cost modeling to sharpen their insight into both benefit
and compensation decisions.
A stronger tendency to factor in workforce characteristics when
considering compensation — such as length of service, gender and
age — is also evident. Some even give their employees a voice in
planning by examining survey results on workforce preferences at
almost four-times the rate of their peers (15% vs. 4%).

APPROACH TO COMPENSATION AND BENEFITS

Philosophy and priorities Rank controlling employee benefit

49%
costs as a top three operational
34%
priority

View compensation and benefits as investments in 33%

workforce performance to achieve business outcomes 16%

Rank becoming or remaining an employer of choice as 21%

a top two reason for wellbeing investments 9%

Rank increasing workforce inclusion and 19%

diversity as a top three HR priority 7%

View compensation and benefits as 10%

simply the cost of doing business 23%

Benefits planning Have a multi-year strategy for 46%

benefits planning 32%

Use the organization’s 68%

strategic plan 55%

31%
Use multi-year labor cost modeling
18%

Best in class Other large employers

Marks a best-in-class response that is lower

compared to other large employers

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APPROACH TO COMPENSATION AND BENEFITS (CONT.)

Compensation planning Factor in workforce 40%

characteristics 29%

36%
Use multi-year labor cost modeling
26%

Consider employee preferences 15%

(survey results) 4%

Best in class Other large employers

A comprehensive strategy that addresses important HR issues Without an integrated employee communication strategy to
is another forte of best-in-class employers. The most inclusive activate success, core HR and other organizational strategies
wellbeing strategies recognize the importance of not only often fall short of their potential. Effective communications
physical and emotional health, including community and social are the connection point for employees to better access,
aspects, but also career and financial fitness. Because work and understanding and use of their benefits, programs and support
personal lives are intertwined, taking steps to support the whole tools. They also serve as a reliable mechanism for helping
employee — on and off the job — is also a strong move toward the workforce achieve a clear and consistent grasp of their
optimizing investments in the workforce. organization’s goals, priorities and mission. Best-in-class
employers are three times as likely to have a comprehensive
Employees who experience less financial stress, feel supported
communication strategy compared to other large employers.
in their career growth, and have opportunities to give back
to their communities tend to perform better and feel more
satisfied. Much more frequently than their peers, employers
that excel in HR management choose a holistic approach
centered on these particular workforce opportunities and
outcomes (52% vs. 31%).

USE OF WELLBEING AND COMMUNICATION STRATEGIES

Comprehensive wellbeing strategy holistically focused on 52%

employee physical, emotional*, career, and financial health 31%

Comprehensive employee 39%

communication strategy 13%

Best in class Other large employers

* Includes community and social aspects

Inevitably, employees need to be away from work. Policies In keeping with their support for transition programs, employers
and processes that smoothly transition them — as they leave that lead the way in HR management also see the value in
and return to work — help reduce compliance-related risk and providing enough time away from work for optimal employee
minimize operational interruptions. wellbeing. The best in class more often fund their relatively
generous short-term disability (STD) and long-term disability
The best in class seem to recognize the value of these
(LTD) policies. And the duration of STD coverage is more likely
structures, because they’ve developed stay-at-work and return-
to extend to 26 weeks, allowing employees to take the time off
to-work programs as part of their overall absence management
they need to return to work as healthy, productive employees.
strategy — at a rate that’s 15 percentage points higher than
their peers. They are also more likely to offer extended leaves of
absence or paternity leave.

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APPROACH TO ABSENCE MANAGEMENT

Strategy Absence management strategy for administering

82%
leaves and disabilities that includes stay-at-work and
67%
return-to-work programs

Leaves of absence 59%

Extended leaves
40%

51%
Paternity leaves
38%

STD plans 54%

Employer-paid plan
41%

21%
Salary continuation plan
11%

STD duration 60%

26 weeks
52%

13%
13 weeks
31%

LTD plans 71%

100% employer-paid premium
54%

Best in class Other large employers

Marks a best-in-class response that is lower

compared to other large employers

Leading employers understand the competitive importance of retirement healthcare benefits as a core offering that helps reduce
employees’ stress, and supports their long-term financial wellbeing and retirement readiness. Compared to their peers, the best in
class are more than twice as likely to make these benefits available to their workforce.

OFFER RETIREE HEALTHCARE COVERAGE

51% Best in class

24% Other large employers

Investing in employee growth and wellbeing to boost job performance and engagement
When employees see their employer as a partner in advancing employee growth and purpose — a commitment that translates
their career interests, they’re motivated to perform at their best. to more skilled, engaged and loyal workers. And far more than
The best in class tend to select benefits such as career-building their peers, they say they spend the right amount on employee
and work-related education programs that strongly promote training and development (68% vs. 46%).

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SPEND ABOUT THE RIGHT AMOUNT ON TRAINING AND DEVELOPMENT

$ 68% Best in class

46% Other large employers

Employers that expertly manage HR also lead the way in
implementing programs and practices that help advance
employee career development and wellbeing. They‘re ahead of
their peers — by 28 percentage points or more — in defining
clear performance goals for employees, supporting their
efforts to develop and pursue a career path, and identifying
and pairing their development needs with action plans. Tuition
assistance is offered by 82% to ease the financial burden for
those who are pursuing formal education opportunities.

SUPPORT FOR EMPLOYEE GROWTH AND PURPOSE

Workforce training 82%

and development Offer tuition assistance
62%

Spend about right amount on 68%

training and development 46%

Don’t spend enough on training 32%

and development 52%

Improvement of engagement 70%

Define clear performance goals
37%

Support employees in developing 64%

and pursuing a career path 35%

Identify development needs and 64%

create action plans 36%

64%
Give timely and constructive feedback
39%

Connect employees’ efforts to positive impacts on 54%

strategy, mission, vision or values 29%

Communicate in a way that 53%

fosters trust and confidence 32%

Provide interesting and 43%

challenging work 21%

Best in class Other large employers

Marks a best-in-class response that is lower

compared to other large employers

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Financial stress will often negatively affect employees’
physical and emotional health, their productivity, and even
their interactions with colleagues and customers. So it’s
notable that the best in class are more likely to offer programs
that help employees ensure their finances are in order and
their retirement planning is on target. These opportunities
include financial advisor sessions, financial literacy or related
educational opportunities, and debt counseling.
Solid best-in-class support for the social aspects of emotional
wellbeing is evident from their greater use of several benefits.
Among others, they include employee assistance programs
(EAPs), wellness committees or champions, lactation rooms for
nursing mothers and flexible work arrangements. Employees
of all generations — especially the younger set — also value
opportunities to exercise their social conscience by connecting
with the communities where they work. Some popular
programs for giving back include volunteering and community
engagement activities. All of these components are more often
provided by employers that are best in class.

INVEST IN WELLBEING AS A WAY TO IMPROVE THE EMPLOYEE EXPERIENCE AND WORKFORCE SATISFACTION

43% Best in class

$ 32% Other large employers

HOLISTIC WELLBEING INITIATIVES — PROGRAM ELEMENTS

Emotional wellbeing — 84%

social aspects EAP provider programs
68%

66%
Wellness committee or wellness champions
34%

61%
Lactation or nursing mothers’ rooms
49%

55%
Flexible working arrangements
31%

Classes to promote emotional wellbeing (behavioral health, 53%

mindfulness, stress management, etc.) 25%

Life event celebrations 43%

(birthdays, weddings, graduations, etc.) 32%

25%
Adoption assistance
14%

12%
Onsite meditation rooms
5%

Emotional wellbeing — 71%

community aspects Volunteer opportunities
44%

Community engagement 54%

opportunities 38%

Best in class Other large employers

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 HR Management | LARGE EMPLOYERS

HOLISTIC WELLBEING INITIATIVES — PROGRAM ELEMENTS (CONT.)

Career wellbeing 80%

Performance reviews
60%

Service awards or employee 72%

recognition 57%

Management or leadership 69%

development training 47%

65%
Employee development training
42%

45%
Mentoring programs
23%

23%
Career counseling
9%

Financial wellbeing 68%

Employee discount programs
50%

Financial literacy and other 61%

educational opportunities 29%

55%
Financial advisor sessions
40%

47%
Gym subsidies
34%

36%
Debt counseling
17%

Best in class Other large employers

Best-in-class employers couple rich wellbeing programs with
attractive incentives to drive participation. And they’re more likely
to boost employee involvement by giving spouses, dependents
and retirees program access. Much more often than their peers,
they rely on cash or gifts as motivational tools (59% vs. 34%).
A significant investment in wellbeing calls for tracking and
measuring program outcomes to justify spending. These
assessments come with a side benefit — they may reveal areas for
improvement or evolution that can help inform strategic planning.
The best in class measure program effectiveness at notably
higher rates than their peers — capturing data on employees’
participation, biometrics, financials (claims), engagement
and assessed health risks. Success with chronic condition
management can substantially lower healthcare costs for
employees and employers, and more than two times as many of
the best employers evaluate these results.

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APPROACH TO WELLBEING PROGRAM PARTICIPATION AND MEASUREMENT

Eligibility 37%
Spouses
25%

19%
Dependents
10%

10%
Retirees
4%

Incentives 59%
Cash or gifts
34%

Measures of effectiveness 69%

Program participation
44%

51%
Biometrics
28%

51%
Financial (claims data)
23%

46%
Health risk assessments
26%

Employee engagement 46%

(satisfaction survey) 27%

30%
Preventive care
16%

28%
Healthcare utilization
17%

24%
Chronic condition management
11%

10%
Lost work time
4%

Best in class Other large employers

As part of their attraction and retention strategy, the best in (43% vs. 28%). Conversely, they’re less likely to spend under
class invest substantially in benefits. They tend to outspend $6,000 (1% vs. 17%). The ROI of these HR management tactics is
their peers — more often allocating $15,000 or more to expressed as increased employee satisfaction and engagement,
employer-paid benefits for each eligible employee as well as lower turnover.

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AVERAGE COST OF EMPLOYER-PAID BENEFITS PER ELIGIBLE EMPLOYEE

43%
$15,000 or more
28%

1%
Less than $6,000
17%

Best in class Other large employers

Marks a best-in-class response that is lower

compared to other large employers

Recognizing the role of strategic healthcare management in engaging and retaining high-value employees
Employers commit to employee physical health and wellbeing best in class are much more likely to make improving employee
with the obvious intent of reducing healthcare costs, but the health and wellbeing a top HR priority.

CONSIDER IMPROVING EMPLOYEE HEALTH AND WELLBEING A TOP HR PRIORITY

34% Best in class

19% Other large employers

Compared to their peers, the best in class tend to place a higher
value on health, wellbeing and disease management programs
as levers to control healthcare costs. Even though these benefits
require an upfront investment, they’re more widespread
among employers that excel at HR management. For instance,
offer rates are greater for employee resources that support
convenient access to good quality, affordable healthcare. These
resources include telemedicine, an onsite clinic with medical
services, decision support, and cost-transparency tools that
help employees make better clinical and financial decisions.
Leading employers more frequently deploy a variety of health
plan management mechanisms that work together to help
prevent and minimize employee health issues and related costs.
As an example, they have a greater tendency than their peers
to integrate health and disability management programs —
allowing for early identification of risks, preventive outreach,
care coordination and a faster return to work when a disability
does occur.
They’re also more likely to directly contain plan costs by
ensuring enrollments are appropriate and designated
surcharges are applied, and offering incentives for employees
that waive coverage. Notably, the best in class were less likely
to change plan carriers in the last two years — suggesting
they may be more content with their health plan and the
achievement of their health management goals.
Several traditional health management program options are
more frequently offered by best-in-class employers. They
include flu shots, tobacco cessation, disease management
programs and an onsite wellness coordinator or health
professional. Also more common are health risk assessments
and biometric screenings, as well as weight management,
physical activity programs and the availability of healthy foods
at work. As all of these benefits work together to promote a
healthy environment that supports healthier employees, they
also mitigate the costs of medical services and prescription
drugs, as well as absenteeism and presenteeism.

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HEALTH MANAGEMENT TACTICS

Healthcare cost control 86%

Wellbeing programs
73%

82%
Telemedicine
69%

81%
Disease management programs
68%

74%
Healthcare decision support
52%

71%
Healthcare cost-transparency tools
54%

64%
Eligibility audits
46%

Integrated health and disability 41%

management programs 27%

Onsite health clinic with medical 39%

services 16%

Opt-out incentives for waiving 22%

coverage 11%

11%
Change of plan carriers
22%

Best in class Other large employers

Marks a best-in-class response that is lower

compared to other large employers

20 BEST- I N- CLASS BENCHMAR KI N G A NA LYS IS

 HR Management | LARGE EMPLOYERS

HEALTH MANAGEMENT TACTICS (CONT.)

Employee physical wellbeing

Flu shots 86%
67%

Biometric screenings 77%

47%

Weight management 74%

46%

Tobacco cessation 74%

53%

69%
Disease management programs
46%

68%
Health risk assessments
49%

63%
Physical activity programs
39%

48%
Healthy vending and/or eating
34%

Onsite wellness coordinator or 47%

health professional 24%

Best in class Other large employers

G A L LAG H E R AJ G .COM 21
LARGE EMPLOYERS | HR Management
Best-in-class employers report more generous health plan options
and coverage than their peers. They’re more likely to contribute to
employees’ health savings accounts (HSAs) — helping them bear
the burden of high deductibles or other healthcare expenses. As
an alternative to an HDHP, a health maintenance organization
(HMO) plan sets stricter limits on employee cost share, and is
offered at a higher rate by the best in class.
These employers are also more inclined to reduce medical
plan contributions for employees that complete a health risk
assessment. Overall, it’s evident they take a definite interest
in identifying and addressing employee health risks, and
then supporting improved outcomes through programs and
related benefits.
HEALTH PLAN DESIGN ELEMENTS
Plan types and cost sharing
Employer HSA contribution
HMO plan option
Employee contribution based on the
completion of a health risk assessment
Annual deductible — individual
None
$0-$749
Best in class
22
Employers that expertly manage HR set lower deductibles for
individual and family plans. The difference in their offer rates
for these plan types isn’t statistically significant for HDHPs, but
deductible amounts tend to be less than the Internal Revenue
Service thresholds ($1,350 for individual coverage and $2,700
for family coverage in 2018).
Certain elective services and procedures are more frequently
available to employees of the best-in-class organizations.
Bariatric surgery fits with their long-term view on supporting
employee wellbeing and growth — by reducing financial barriers
to appropriate care while tightly managing costs. Specifically,
this procedure can improve physical and emotional wellbeing
and curb downstream costs related to obesity and productivity.
Other expensive but highly valued benefits more commonly
offered include infertility services or fertility treatment, and
transgender-related services and coverage.
85%
69%
35%
23%
19%
12%
25%
8%
49%
30%
Other large employers
BEST- I N- CLASS BENCHMAR KI N G A NA LYS IS
 HR Management | LARGE EMPLOYERS

HEALTH PLAN DESIGN ELEMENTS (CONT.)

Annual deductible — family 24%

None
9%

38%
$0-$1,499
27%

31%
$1,500-$2,999
23%

21%
$3,000-$4,999
32%

10%
$5,000+
18%

Coverage for 57%

elective services Bariatric surgery
41%
and procedures

Infertility services or 47%

fertility treatment 28%

45%
Gender reassignment surgery
24%

Other transgender inclusive benefits (prescription 42%

drug therapy, counseling, cosmetic surgery, etc.) 18%

Best in class Other large employers

Marks a best-in-class response that is lower

compared to other large employers

Competitive health benefits — that satisfy employees — carry
an elevated importance in the tight labor market where
employers now operate. Employed or unemployed, job seekers
are evaluating and comparing employer benefit packages, and
they stand a better chance of getting more of what they want.
Affordability of health benefits is a factor that’s front and
center for employees. Compared to their peers, more leading
employers consider the cost of their plan deductibles, copays
and coinsurance to be reasonable, and their family coverage
to be affordable. In keeping with these assertions, they’re also
more confident their employees are satisfied with their benefits.

PERCEIVED ADVANTAGES OF HEALTH PLAN MANAGEMENT EFFORTS FOR EMPLOYEES

Affordable deductibles, copays 86%

and/or coinsurance 69%

Affordable premiums for 76%

family coverage 63%

Employee satisfaction with their 76%

health benefits 63%

Best in class Other large employers

G A L LAG H E R AJ G .COM 23
LARGE EMPLOYERS | Best of the Best

Best of the Best for Both Profile Groups

Top-performing, best-of-the-best employers achieved the highest combined scores and ranked in the top quartile for both
healthcare cost control and HR management. At 7%, just 24 qualified among all large employers surveyed.

BEST IN CLASS
for healthcare
cost control

BEST OF THE BEST

top quartile in
both profile groups

BEST IN CLASS
for HR management

Best-of-the-Best Attributes
Not surprisingly, many of the differentiating characteristics of • Supporting career growth and wellbeing to drive employee
the best in class in each profile group also distinguish the best engagement and organizational success
of the best. Three key themes emerged from an analysis of the • Implementing medical and pharmacy cost controls to enable
best-of-the-best attributes: employee affordability and long-term plan sustainability
• Deliberately planning compensation and benefit strategies
to align with organizational objectives

24 BEST- I N- CLASS BENCHMAR KI N G A NA LYS IS

 Best of the Best | LARGE EMPLOYERS

Deliberately planning compensation and benefit strategies to align with organizational objectives
Top operational and HR priorities shape decisions made Through the use of strategic, long-term total compensation
throughout an organization, and for the best of the best, planning, employee preference surveys and competitive
employee attraction and retention is not one of the most urgent benchmarking, they’re able to maintain a strong workforce
drivers. A more intense focus on maintaining or growing market proactively centered on business growth.
share sets these employers apart from their peers.

TOP ORGANIZATIONAL PRIORITIES

Operational — maintaining or 46%

growing market share 29%

HR — attracting and retaining a 67%

competitive workforce 82%

Best of the best Other large employers

Marks a best-of-of-the-best response that is

lower compared to other large employers

COMPENSATION AND BENEFITS PLANNING RESOURCES

Compensation planning 96%

Benchmarking information
82%

Benefits planning 75%

Organization’s strategic plan
56%

46%
Multi-year labor cost modeling
19%

42%
Survey of employee preferences
22%

Best of the best Other large employers

Supporting career growth and wellbeing to drive employee engagement and organizational success
The best of the best understand that cultivating human capital
to elevate engagement is a critical factor in achieving business
success. To strengthen and maintain engagement, they use
several tactics that support employees’ career growth and
boost their satisfaction — most often managerial processes for
communicating clear performance goals, giving constructive
feedback and addressing development needs. And these
employers also excel at making sure the workforce knows their
individual contributions are valued. They convey to employees
how their work performance has a positive impact on the
organization’s strategy, mission, vision and values — at a rate
that’s 30 percentage points higher than their peers.
There’s certainly a good reason that attraction and retention
tend to be lesser priorities for best-of-the-best employers.
Findings show they’re far more likely than their peers to have
a system in place that keeps employees engaged by providing
interesting and challenging work (58% vs. 24%). The gap is
similarly significant for those that emphasize increased diversity
and inclusion as a top three HR priority. And more often, the best
of the best communicate with the intent of fostering trust and
confidence among employees, and provide clear and
transparent information on how to earn bonuses
and pay increases.

G A L LAG H E R AJ G .COM 25
LARGE EMPLOYERS | Best of the Best

APPROACH TO EMPLOYEE ENGAGEMENT AND CAREER GROWTH

Engagement tactics 71%

Define clear performance goals
43%

71%
Give timely and constructive feedback
43%

Identify development needs and 67%

create action plans 41%

Connect employees’ efforts to positive impacts on 63%

strategy, mission, vision or values 33%

Support employees in developing and 63%

pursuing a career path 41%

58%
Provide interesting and challenging work
24%

Communicate in a way that fosters 58%

trust and confidence 36%

Communicate clearly and transparently on how to earn 33%

bonuses or pay increases 19%

Educational assistance 90%

Offer tuition assistance
65%

Best of the best Other large employers

RANK INCREASING DIVERSITY AND INCLUSION AS A TOP THREE HR PRIORITY

21% Best of the best

9% Other large employers

Employers that are the best at both healthcare cost control and
HR management are more likely to offer employee wellbeing
programs than their peers (91% vs. 75%). And to promote active
engagement in wellbeing options, they’re more inclined to use
deductible differentials — lowering costs for employees that
meet certain participation or outcome metrics.
Programs may span physical and emotional health, including
community and social aspects, as well as career and financial
fitness. Notably, there’s a heavier emphasis on financial
wellbeing (58% vs. 35%), specifically financial literacy and
related education. This suggests an awareness that employees
who feel more secure about their financial position are less
stressed on the job — and better prepared to retire at a time
that’s mutually desirable for them and their employer.

26 BEST- I N- CLASS BENCHMAR KI N G A NA LYS IS

 Best of the Best | LARGE EMPLOYERS

OFFER AN EMPLOYEE WELLBEING PROGRAM

91% Best of the best

75% Other large employers

OFFER FINANCIAL LITERACY AND RELATED EDUCATIONAL OPPORTUNITIES

$ 58% Best of the best

35% Other large employers

The best of the best have a stronger tendency to measure
wellbeing effectiveness — most frequently by analyzing
healthcare claims data and information on program utilization
and preventive care. Besides insight into ROI that guides
decisions on spending, these assessments can reveal specific
areas of opportunity for program improvement or other changes.
Half of these employers solicit employee satisfaction feedback
to get a pulse on workforce receptivity and the value they place
on their wellbeing options. They also consider clinically based
data such as biometrics and health risk assessments at a greater
rate than their peers.

METHODS OF PROMOTING AND MEASURING WELLBEING PROGRAMS

Participation incentive 13%

Deductible differential
2%

Evaluation measures 67%

Financial (claims data)
27%

Employee engagement 50%

(satisfaction survey) 30%

50%
Biometrics
32%

46%
Health risk assessments
30%

38%
Healthcare utilization
18%

33%
Preventive care
18%

29%
Chronic condition management
13%

Best of the best Other large employers

G A L LAG H E R AJ G .COM 27
LARGE EMPLOYERS | Best of the Best
Implementing medical and pharmacy cost controls to enable employee affordability and long-term plan sustainability
In their efforts to control spend, best-of-the-best employers
are more likely to take an active, hands-on approach to health
plan management, beyond design structure. They use eligibility
audits more often to ensure only qualified individuals are
enrolled in the plan — including identifying dependents who
can get coverage through their own employer — and surcharges
are applied appropriately. Right up front, these practices
provide a direct check on total healthcare spend. The fact that
they‘re also less interested in adjusting employee premiums
based on smoker status may seem inconsistent. However, there
could be a favorable cost benefit trade-off because they don‘t
need to verify self-reported tobacco use.
Two approaches for closely managing pharmacy benefits are
more highly favored by the best of the best. One is the use of
a specialty PBM dedicated to handling this expensive class of
drugs. The other is a pharmacy carve-out that offers insight
into the overall spend and how to more actively manage it. By
using a stronger hands-on approach, employers are elevating
their efforts to contain healthcare costs and manage HR efforts.
They‘re also combining health plan options with patient support
services to maximize the value of their spend. Most provide
their employees with decision support resources to inform
better healthcare choices.
HEALTHCARE COST-CONTROL TACTICS
Health plan management
Perform eligibility audits
Use a specialty pharmacy benefit
manager
Carve out pharmacy benefits
Provide nonsmokers a discount
on premiums (smoker surcharge)
Employee resources
Offer healthcare decision support
Provide employees with
cost-transparency tools
Offer an onsite health clinic with
medical services
Use reference-based pricing for
healthcare services
Best of the best
Marks a best-of-the-best response that is lower
compared to other large employers
28
The best of the best have a greater tendency to encourage
employees to select high-value care — by comparing the
costs of certain healthcare providers, medical procedures and
prescription drugs. And reference-based pricing that limits the
employer‘s outlay for very pricey elective procedures is also
more prevalent. Compared to their peers, they’re more than
twice as likely to implement this cost-control method.
Onsite clinics are a significant investment in employees’ physical
fitness and serve as a platform to deliver health and wellbeing
initiatives. They provide convenient, high-quality care at a
reduced cost or no cost, and options can be customized to
the employer’s culture and priorities. Half of best-of-the-best
employers offer an onsite health clinic with medical services,
compared to just 19% of their peers.
Characteristically, these top performers also contribute variable
amounts to the medical plan, based on criteria such as wellbeing
program participation or health risk-assessment completion. This
practice incentivizes healthy employee behaviors and creates a
financial buffer for covering those who are not actively involved
in their health or healthcare.
71%
48%
71%
48%
57%
33%
14%
33%
77%
56%
76%
57%
50%
19%
35%
14%
Other large employers
BEST- I N- CLASS BENCHMAR KI N G A NA LYS IS
 Best of the Best | LARGE EMPLOYERS

HEALTHCARE COST-CONTROL TACTICS (CONT.)

Factors impacting Wellbeing initiative or wellness 46%

medical plan contributions program participation 22%

Completion of a health 25%

risk assessment 13%

Best of the best Other large employers

Best-of-the-best employers maintain affordable health plans
by combining a dedicated focus on managing healthcare costs
with some degree of cost sharing. But compared to other large
employers, there are some notable differences in how they
divide the financial responsibilities with their employees.
They’re more likely to share annual deductible costs — although
this is a common plan design choice across the board — and
less likely to increase employee contributions to premiums.
From an outcomes standpoint, perhaps the most important
distinction for the best of the best is their belief that employees
find family coverage reasonably priced (88% vs. 65%).

COST-SHARING TACTICS

Annual deductibles 89%

Apply to an individual plan
70%

88%
Apply to a family plan
70%

Health plan premium Increased from the 42%

previous year (2017) 59%

Best of the best Other large employers

Marks a best-of-the-best response that is lower

compared to other large employers

CONSIDER HEALTH PLAN PREMIUMS AFFORDABLE FOR FAMILY COVERAGE

88% Best of the best

65% Other large employers

G A L LAG H E R AJ G .COM 29
LARGE EMPLOYERS | Best of the Best

Best-of-the-best employers are significantly more likely to offer
and pay for a STD plan. This physical wellbeing benefit comes
with a financial wellbeing bonus because it provides income
protection if health issues prevent employees from working.
And looking at STD purely from an absence management
angle, coverage may encourage employees to take authorized
time off to fully recover from health issues — allowing them to
return to work at peak productive capacity. On the flipside, the
best of the best are less likely than other large employers to
offer incidental sick leave that grants days off specifically for
employee illness. Taking a more flexible approach to paid time
off that offers a combination of sick or vacation days may be
a more effective workaround in meeting both employer and
employee needs.

ABSENCE MANAGEMENT BENEFITS

69%
Employer-paid STD plan
42%

Time off designated for incidental 45%

sick leave 68%

Best of the best Other large employers

Marks a best-of-the-best response that is lower

compared to other large employers

30 BEST- I N- CLASS BENCHMAR KI N G A NA LYS IS

 LARGE EMPLOYERS

Final Remarks
This Best-in-Class Benchmarking Analysis shifts the focus away from benchmarking averages — using data-driven guidance to
identify what high-performing organizations have in common. However, the findings aren’t meant to be prescriptive for the simple
fact that each employer has a unique set of needs, opportunities and challenges. Instead, they provide a relevant framework for
reflecting on total compensation approaches and priorities — both current and future — that more closely align with operational and
HR goals.
Fundamentally, best-in-class practices help organizations take a more proactive and structured approach to planning,
development and execution of HR and benefit policies and programs. The emerging themes and statistically significant attributes
contained in this report can be used to explore healthcare and other talent investments that have the potential to drive better
business outcomes.

G A L LAG H E R AJ G .COM 31
About Gallagher
Better. It’s something all companies strive for. Better outcomes from better performance. But how do you get there?
You start by building a better workplace. One that attracts, engages and retains top talent. What does that look like? It’s a workplace
where people feel they belong — where there’s a sense of developing a career instead of punching a clock. And a culture of
opportunity that draws new talent because it inspires employees to deliver their personal and professional best.
Gallagher Better WorksSM — a comprehensive approach to benefits, compensation, retirement, employee communication and workplace
culture aligns your human capital strategy with your overall business goals. It centers on the full spectrum of organizational wellbeing
— strategically investing in your people’s health, talent, financial security and career growth. And developing benefit and HR
programs at the right cost structures to support a multigenerational workforce.
From evaluating the demographics of your workforce to surveying and analyzing competitor trends, Gallagher helps you gather
new insights and apply best practices that promote productivity and growth. A data-driven focus allows you to continually improve.
That’s what it means to create a better workplace culture. It’s about never being content to rest each time you reach your best. Your
better is never finished.
As you develop and sustain this destination workplace culture, your people can thrive and perform at a higher level — optimizing
your annual talent investment and mitigating organizational risk to maximize your profitability. Best of all, you gain a competitive
advantage as a workplace that simply works better.
Arthur J. Gallagher & Co. (NYSE: AJG), an international insurance brokerage and risk management services firm, is headquartered in
Rolling Meadows, Illinois, has operations in 35 countries and offers client-service capabilities in more than 150 countries around the
world through a network of correspondent brokers and consultants.

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