As businesses tally expenses and set their budgets for next year, many won’t be able to escape the fact that health care price inflation continues to fuel increases in the cost of benefits.

According to Arthur J. Gallagher & Co.’s 2017 Benefits Strategy & Benchmarking Survey of more than 4,000 U.S. employers, the average medical plan premium increase in Washington this year was 7 percent. This is in line with national increases and up 2 percentage points from last year.

While health care continues to be a hotly debated political topic, the stark reality for employers is that unchecked costs are steadily rising, keeping benefit budgets front and center as a top human resource concern.

Increases in medical and pharmaceutical costs also can squeeze family budgets, which is why employer-sponsored medical plans are becoming a more important part of employee total rewards packages. Some 80 percent of companies consider their benefits offering key to boosting employee loyalty and productivity, according to MetLife’s 15th Annual U.S. Employee Benefit Trends Study.

The upward trend in health care costs is particularly worrisome for Spokane organizations. Although health premiums have risen at consistent rates across Washington, median wage growth in Spokane lags behind other parts of the state.

That means benefit costs are taking an increasingly bigger cash-compensation bite out of the total rewards pie. And as the eastern part of the state reinvents itself as an alternative hub for high tech, biotech, and financial services, local companies compete for scarce talent with other urban centers across the West and nationwide. Beyond touting Spokane’s affordable cost of living as a prime attraction, how do local businesses compellingly position themselves as destination employers?

Because of Washington’s highly competitive labor market, the first two of the four trends identified below distinguish state employers from the national group, setting a pattern for inland organizations.

Trend No. 1: Shielding workers from cost increases. While employers across the country commonly shift the growing cost of health care to their employees, companies in Washington often take a different path. 

Forty-seven percent cover the full premium for employee-only coverage, compared to 25 percent of employers nationwide. The savings for Washington workers extends beyond premiums. The median deductible for an individual’s medical plan is $750—half the national median of $1,500.

Simply raising employee health care subsidies isn’t viable for many Spokane companies already battling to preserve thinning margins while maintaining the status quo. Deeper studies of employers who consistently excel at both employee retention and below-average health care costs show they avidly adopt innovative tactics, which help manage the root causes of cost increases.

Such tactics include consumerism and cost-transparency tools, creative provider network arrangements, and hands-on management of costly prescription drug programs.

Trend No. 2: Focus on choice. Employees in today’s increasingly diverse workforce want benefits tailored to their needs. Twenty-seven percent of Washington employers offer five or more medical plan options, compared to just 6 percent of employers nationally.

In addition to medical plans, workplace fringe benefits are expanding beyond the “usual” options to include anything from supplementary life insurance to more specialized selections, such as group legal coverage and pet health insurance.

While managing broader benefits offerings brings welcome flexibility for employees, that task also can be an administrative challenge. New solutions in the benefits technology space are helping employers solve that challenge, including private exchange or benefit marketplace platforms that are seeing increased adoption.

Beyond these two proactive approaches to managing the cost and delivery of benefits, two other key national trends distinguish employers who are best positioned to compete for talent.

Trend No. 3: Three dimensions of employee well-being. Wellness programs have become a common element of employee benefits in recent years. More than two-thirds of employers say that promoting employee health and well-being is a top organizational priority.

Besides the obvious gains in satisfaction and productivity, a healthier workforce also means lower medical plan premiums.

Establishing an effective wellness program, however, isn’t an easy task. More than 70 percent of employers who currently offer one are frustrated because they’re often investing in a benefit their employees don’t use. As a result, wellness is evolving from a narrow focus on physical health to encompass financial, career and other aspects of wellness—all considered dimensions of total well-being.

Financial well-being includes programs that help employees manage monetary stress, reduce debt, and adequately plan for retirement. 

The chief idea is to develop a holistic, interconnected strategy that takes into account all the resources employers commit to engender loyalty and productivity in their workforce.

Trend No. 4: Measuring engagement. As the cost to acquire and retain talent increases, employee engagement becomes an especially acute issue. The understanding of “engagement” has evolved from a qualitative descriptor to a quantifiable measure used to gauge how well an organization is succeeding at motivating employees to give their best.

Where human resources departments once conducted surveys on employees’ satisfaction with their benefits, compensation, and training programs, a more sophisticated, rigorous approach can now measure the elements of engagement more deeply.

For example, Harrisburg, Pa.-based Best Companies Group, which conducts surveys used to determine the winners of regional awards, including the Journal of Business’ annual Best Places to Work in Inland Northwest recognition program, uses attitudinal questions such as: “Are you willing to give extra effort to help this organization succeed?” Results are then weighed, segmented by a variety of demographic criteria, and benchmarked against peers.

The next step for employers is to act on insights from the findings by determining what levers can help improve engagement. Developing a well-constructed, organization-specific internal survey can be helpful for that purpose because it provides more visibility into areas that need improvement.

Almost a third of U.S. employers say they’ve conducted an engagement survey within the past two years to assess the motivation, satisfaction and commitment of their workforces.

Overall, these four trends shaping benefits and other total rewards—in Washington as well as nationwide—indicate a growing desire among employers to build a “destination workplace.” They’re realizing that outperforming the competition in the current business climate has two elements, and the first is attracting and engaging talented employees who are essential to driving a better bottom-line. 

Charlie Isaacs is area president of Arthur J. Gallagher & Co.’s Benefits and Human Resources division in Spokane, winner of 2017 Best Places to Work Inland Northwest. He can be reached at Charlie_Isaacs@AJG.com.