employers as payors: A 101  guide to selling care benefits

For many families, some of their most important purchasing decisions happen within the care economy, while accessing essential products and services to help loved ones thrive. But families are just a portion of the story. Employers, insurance, care providers, and government are all growing segments of buyers of solutions in the care economy. People are waking up to the fact that care is an economic consideration that impacts all payors, not just families.

Of the range of payors, employers are foundational in the care economy. More and more companies are paying for care in the form of care benefits, which have shifted from a “nice-to-have” to a “table stakes” benefit in the minds of many. The types of care being funded by employers run the entire range of care needs including: backup child care and elder care services, care coordination services, new parent support, and mental health support services amongst others.

Not surprisingly, large employers are leading the way on adopting and expanding care benefits. Companies with over 10,000 employees represent approximately three-fourths of the total $1.3B care benefit spend.¹ The care benefits these companies prioritize are representative of their employee demographics. The early parenthood population (age 25-44) makes up 44% of the employees, and the sandwich generation (age 55+) 23%.²

Our 2023 macroeconomic environment

The current macroeconomic climate, marked by uncertainty and turmoil, has undoubtedly influenced employer purchasing behaviors with regard to care benefits. While it is impossible to predict with certainty how employers will act, it is clear that they play a crucial role in the care economy and will continue to be a major source of funding for care over the long term. This chapter serves as a comprehensive guide on how to engage with employers and build successful partnerships in the rapidly evolving landscape of care benefits.

As companies fight for talent in a hyper-competitive labor market, a recent McKinsey & Company survey highlights the power of employer child care benefits to attract, retain, and advance employees:

attracting new employees

69%

of the women with children aged five and under who are currently looking for employment said they would be more likely to choose an employer that offered assistance with child care expenses or provided access to on-site child care

retaining employees

83%

of the women and 81% of the men in our survey with children aged five and under said that child care benefits would be a ‘very important’ or ‘somewhat important’ factor in the decision” to stay with their current company or switch to another

advancing employees

40%

of respondents who refrained from pursuing promotions said having access to on-site child care would have allowed them to reverse that decision

1 The Holding Co., Investor’s Guide to the Care Economy, 2021

2 The U.S. Census Bureau, 2019; EMSI, 2021

Entering the Employer-Funded Benefits Market

With the emergence of employers as payors of care, it’s important to understand how to engage them.

How do employers find out about care benefits? What actually are the care needs of their employees? How do they know that they need this benefit for their employees? To unlock this payor group, we look at three main channels on how employers would purchase care benefits:

The first channel is employers buying directly from a care benefits company.

This pathway to buying directly could look like a competitive Request For Proposal (RFP) that an employer runs a selection process for. Another pathway would be an employee suggesting a care benefit solution to HR or an employee resource group identifying a need for a specific benefit offering. As one HR leader responsible for buying benefits shared: “Often, as part of the employee-led advocacy, a senior leader emerges who champions a specific potential benefit offering and insists that the company provide the benefit.”

Other employers conduct regular reviews of peer benefit offerings in order to identify any new benefits the company should add to keep pace with competitors. Once a need is identified, employers will often pilot the care benefit with a small group of users. If the pilot proves successful, company-wide roll-out often follows.

The second channel is through benefit brokers.

The broker identifies care benefit options and presents those, alongside a suite of other benefit options, to employers. A few large brokers take the lead on bundling care benefits to large employers. Marsh & McLennan Cos. Inc. leads the space with $5.0B in benefit revenue, followed by Willis Towers Watson PLC with $4.6B, Aon PLC with $3.5B, Arthur J. Gallagher & CO. with $1.3B, and NFP Corp with $743M.³

In addition to the industry leaders above, there are also ~7,600 small and medium-sized employee benefit broker firms and agencies in the U.S., the majority with less than $10M in revenue. These smaller brokers are predominantly serving the ~48% of U.S. businesses with under 500 employees.⁴

How Benefit Brokers Assess New Care Providers

One way that benefit brokers serve employers is by working to vet and validate that care company providers are reputable and recommended to work with. When assessing a new supplemental care provider, the criteria brokers consider include:

How long has the company been in business and what is their track record of success?
What is the biggest client that the company has served? What does that mean in terms of their capabilities?
How reliable is their funding and what round of funding are they in (e.g., “what venture capitalists are on their cap table”)?
Is there demonstrated impact for employers? Either “hard dollar” savings (e.g., lower prescription drug costs) or “soft dollar” savings (e.g., an estimate of long-term costs avoided etc.)?

Is the company confident enough in their service to have a performance-based or fees-at-risk payment structure?
Is there a professional services team assigned to each employee customer?
Do their customer support and care provider teams have multilingual capabilities to be able to serve employers with diverse workforces?

The third channel is through third party vendors, such as benefit platform aggregators or “lifestyle spending accounts.”

Employer benefit buyers are increasingly inundated with a wide range of supplemental care provider options, including everything from care coordination and concierge services, to mental health services, to back-up child and elder care, to egg freezing services, etc. To navigate the landscape, employers increasingly look to “benefit balance.” Benefit balancing is the art of making sure that if one employee segment has a care benefit they highly value, that other employee segments also benefit from something of equivalent perceived value.

Increasingly, employers are opting for a different approach to avoid having to do the benefit balancing themselves: contracting with a platform provider and funding a lifestyle spending account (an “LSA”). An LSA allows employees to opt into the care services they desire. Platform providers–such as Forma, Fringe, and Espressa–contract with a range of supplemental care providers, as well as other services like meal delivery or gym memberships. Employees can then select which services they want from the full range of providers, drawing from an employer-funded LSA to cover the costs.

Spend by employers can vary widely, but typically it involves a per member per month fee to provide the platform to employees (typically ~$3 - $5 PEPM). Employers then provide an annual, quarterly, or monthly funded spending account. One benefit broker estimated that, “LSA amounts can range from up-to $350 per-employee-per-quarter on the high end, to $150 per-employee-per-quarter on the opposite end.”⁵

There are two standard payment models for employer care benefits:

Per Employee Per Month (PEPM)

Employers pay a flat rate purchase covering the right of all employees to use the service, with the flat rate either based on a simple calculation of total employees receiving the benefit, or a more sophisticated estimate of likely utilization. As one care entrepreneur shared, “Even though PEPM may be more expensive than a usage based model, many employers select it because it is predictable. They know they are not going to exceed the budget.”

Usage Based Model

Employers pay based on actual employee benefit usage. Employees often supplement the employer’s spend with a co-pay. For example, many child care benefits provided by employers reduce the cost of child care services, but not entirely; employees often still need to pay some amount to access the benefit.

3 Business Insurance, 2021

4 McKinsey & Company analysis

5 Interview with a Benefit Broker serving employers with 5,000 employees and above

Four insights on how to work with employers

Here are four insights on how to sell to employers, informed through interviews with senior HR leaders and care entrepreneurs who currently sell to employers.

1

Research the employee demographic of an organization and what benefits are offered.

Most sales processes start building a lead funnel through employer demographic segmentation by size or geography. However, we have found that the two biggest indicators of whether a company is primed to buy care benefits starts with whether a company has “foundational benefits” in place e.g., 401K, health plans, and PTO. If a company does not have these foundational benefits in place, they are unlikely to invest. States that employers operate out of also have different foundational benefits requirements - be sure to know the corresponding state services that an employer is legally bound to provide.

The second biggest indicator is the needs of their employee base. Employers often don’t know the care experiences that their employees are having and can use support in surfacing them. Until very recently, employees have kept caregiving responsibilities out of the workplace so the tools to understand care needs are still developing. HR often takes action when employees signal that a need is not being met, and this is a powerful way to help employers gain a deeper understanding of their employee base.

2

Identify where in the journey employers are in purchasing care benefits.

Employers who purchase care benefits are typically divided into two categories - the progressive buyers who are actively seeking solutions, or the curious buyers who are on a longer purchasing journey. Right size your pitch and messaging to the profile that you are targeting. For buyers who are actively seeking solutions, show both examples of impact through case studies and give concrete examples of what the employee experience will be like.

If the buyer is on a longer journey, show the impact of caregiving and work. A 2016 report from HBR shows that 80% of surveyed employees have said that caregiving has affected their performance, yet only 24% of employers said they thought caregiving affects employee performance.⁶

6 Harvard Business Review, https://www.hbs.edu/managing-the-future-of-work/Documents/The_Caring_Company.pdf

Segmenting employers
and developing personas

These two categories of employers–progressive buyers or curious buyers–are just the beginning of what segmentation could look like. Developing personas is typically a more involved process, created by talking to users, segmenting by size of employers, demographic and behavioral data in order to improve messaging and targeting.

Here are the three principles to keep in mind for persona development:

Behavior segmentation

Defines customers according to their unmet needs, aspirations, motivations, and mindsets. In other words, behavioral segmentation defines users primarily from a psychographic, instead of a demographic, perspective.

Comprehensive + actionable

Personas are rich narratives that describe the holistic “story” of a target user, putting emphasis on the personas’ motivation, intentions, and ultimately what will drive them to act.

Tailored to phase

Personas work can be applied both holistically and specifically. It’s important to continuously revisit and re-examine them and how they relate to your offering at each phase of the sale process.

an example buyer persona

Outspoken CHAMPION

This persona is a key influencer in the buying process

Mid-sized (1000+) company

Role: HR Generalist

Company offers 401k, generous healthcare, PTO, parental leave policy

KEY Characteristics

Cares about:

Being the voice and advocate for others who have care needs

Influenced by:

Direct personal experiences with caregiving, care benefit products that were purchased by current or past employers, voices of the employees and talent

Decision-making:

Limited decision making power in organization but a key influencer to the main decision makers - CHRO and CFO. Helps to share key statistics, available options, and brings main decision makers closer to the needs of employees

Organization decision-making:

Works in an analytical culture and they need financial numbers and evidence to sell the organization on a new care benefit

3

Leverage competitive industry dynamics as a way to get your foot in the door.

Employers are very attuned to what their competitors are launching and doing. They are substantially more likely to offer a care benefit when they see that top talent is getting these kinds of packages from other companies. An example of a competitor dynamic is back in January 2018, Lyft made an announcement that they would expand paid parental leave for both men and women who work full time to 18 weeks. This was the result of the efforts of an employee resource group within Lyft who was advocating for equality of Lyft’s paid leave for both men and women vs. favoring a single primary caregiver. Four months after Lyft’s announcement, pressured by their main competitor in a talent market, Uber rolled out a similar benefit: the extension of their parental leave, globally for everyone for 18 weeks.

Care companies can harness this competitor dynamic by showing case studies data of “companies like me” or competitors that are supporting their employees' care needs. Harnessing this dynamic can be especially powerful when ERGs are involved, just like in the Lyft example. Employers are more attuned to the needs of their employers as they have created a space for employees to share their needs.

4

Offer an easy way to sample your solution.

Care benefits are still a new and growing benefit that employers might not have encountered before. In a small qualitative study conducted by The Holding Co., employers stated that one of the top values that they are looking for in a care benefits solution is an easy way to try the solution.

Wellthy, a B2B care company, is a digital platform and care concierge service for families with chronic, complex, and ongoing care needs, helping employees manage ”logistical and administrative aspects of care.” Top employers such as Salesforce, Kohler, Fidelity, and News Corp have engaged Wellthy as a care benefit. Lindsay Jurist-Rosner, Founder and CEO of Wellthy, shared her experience in launching with employers: “A pilot is usually the most powerful way for organizations to see how Wellthy works within an employer’s culture and with their employees and how it benefits their organization. They quickly see it’s a benefit that pays for itself as caregiving employees need to take fewer days off and employers retain valuable employees who previously had to quit or take a leave of absence to care for those they love.”

Ianacare working directly with employers

Ianacare, a care coordination platform, conducted a study documenting the outcomes of a pilot program run by Anthem, Inc., a leading health insurance company, to understand the effectiveness of ianacare's unique approach to comprehensive caregiver support, through the use of both technology and human connection. The results showed that the platform greatly impacted the experience of Anthem, Inc. associates who were also caring for a loved one.

Demonstrating increased employee satisfaction and engagement. Ianacare cites 96% of users feeling supported by their employer, and experience a 30% decrease in stress.Showing increased employee productivity and reduced absenteeism from a reduction in time-off for care-related situations.
Ianacare cites a 83% increase in productivity (defined as an increase of taking zero days off due to care) and a 30% decrease in feelings of overwhelm, stress, and burden.

The care benefits space has grown significantly in recent years as employers look to increasingly support their employee base.

We are seeing companies expand their fertility and women’s health coverage, employers looking for alternative ways to support retirees, and some companies leading the care benefit charge.

Source: A national survey with n=2485 respondents to understand household willingness to pay for products and services that reduce the time spent on household management tasks. Conducted in April 2021 by McKinsey & Co.

As the space continues to grow and evolve, hear from two leaders who are in this employer space as they share their perspectives as buyer and seller of care benefits:

Priya Krishnan

Chief Client and Experience Officer, Bright Horizons

Amanta Mazumdar

Vice President of Total Rewards, Hilton

Source: A national survey with n=2485 respondents to understand household willingness to pay for products and services that reduce the time spent on household management tasks. Conducted in April 2021 by McKinsey & Co.