Biglaw, Health Care / Medicine, Perks / Fringe Benefits

What's Going On With Law Firm Benefits?

A new study reveals that law firms are engaged in “stealth cost shifting" when it comes to health benefits.

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While 7.1 million Americans enrolled in Obamacare and Fox tries to explain why this is a bad thing, the majority of Americans just sauntered along with their employee health plans like nothing ever happened.

But in the legal sector, a lot was actually happening. By and large, law firms were engaged in what can be called “stealth cost shifting” where the high-profile benefits remained unchanged while the firms subtly reduced the cost of plans through other avenues.

Basically, this means employees pay more for stuff they don’t need. Now you know how the client feels…

Adam Okun at Frenkely Speaking teased the highlights out of the Frenkel Benefits 2013 biennial Law Firm Survey. The survey included 51 firms, accounting for nearly 25,000 law firm employees and $330 million of healthcare spending. In a nutshell, law firms suffered higher inflation in health care costs than the rest of the nation’s employer-sponsored plans because law firms refused to cut back on benefits. That’s admirable, right? Or perhaps it’s just a ploy to keep any muckraking publication — cough, cough — from easily calling out a firm shafting its employees to save a dime. But don’t worry, the rising cost of health care didn’t mean the partners had to suffer too much:

Associates and staff have shared the burden of runaway plan costs, as the majority of firms tether the employee cost to a percentage of the total plan rate (varied by salary and tier). However, 35% of law firms surveyed actually increased the employee share of monthly premium as one of their primary cost control strategies – resulting in contribution increases greater than the plan’s underlying medical trend

Despite the earlier quip, law firms shouldn’t pathologically fear blowback from cutting benefits as much as they seem to. Law firm health benefits can be lavish, but many benefits are also unnecessary. Keeping associate and staff contributions lower is worth a slightly higher deductible.

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Law firms also seem behind the times when it comes to self-insuring medical claims:

While more firms have embraced self-funding, many law firms remain resistant. Only two-thirds of firms with more than 1,000 employees self-fund their medical claims (compared to over 80% of employers nationally). After considering the additional taxes introduced by the Affordable Care Act, expected savings from self-funding have widened to 7-10% of gross premium rates. It is now commonplace to see employers as small as 50 employees self-insure their programs, although quite infrequently in the law firm sector

There are 7-10 percent savings to be had? Thanks Obama. Seriously though, the extent to which law firms lag behind other businesses never ceases to amaze.

In other benefit news, there was one big change from the previous Frenkel report. Back then, wellness programs were all the rage:

Wellness offerings from law firm survey participants have scaled back, with fewer providing newsletters, gym discounts and on-site screenings, but there was an increase in firms offering on-site exercise facilities. Participants offering programs listed the desire to improve the health of employees as the primary driver – nearly double those who said their main reason was reducing healthcare costs. Over 80% of law firms did not know or had not considered the expected ROI on their wellness initiatives – about 15% higher than our non-law firm survey results

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Has anyone ever read one of these newsletters? If a firm is looking into cost-cutting, there’s a prime target.

The report also notes a few miscellaneous developments ranging from increases in paid time off and movement toward kicking retired partners to the curb when it comes to medical benefits.

All in all, the message from this report is that firms think employees see health care benefits as bright, shiny objects and are willing to pay more out of pocket for something they may never need. And unfortunately, the firms are probably right about this.

Law Firm Benefit Trends Paint Conflicted Picture [Frenkely Speaking]

Earlier: Biglaw Perk Watch: Deterring Dependents

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