September 2015 | Vol. 4 / No. 12

PAY & BENEFITS

Access to specific provisions of employer-provided benefits: new estimates

By Keenan Dworak-Fisher

Many employers offer some type of health or retirement package, but their provisions vary considerably from employer to employer. Knowing the details of the types of coverage available affords a better understanding of benefits in the workplace. For example, health plans may be prepaid (health maintenance organizations, or HMOs) or fee for service (such as preferred provider organizations, or PPOs), and may or may not offer dental coverage. Defined contribution plans may be structured around company matches on employer contributions or may consist of non-elective employer contributions alone. The Bureau of Labor Statistics refers to these details as plan provisions.

This Beyond the Numbers article describes the prevalence with which people working for private employers in the United States are given the opportunity to enroll in health and retirement plans with various provisions—the extent to which they have access to those provisions. But note: just because a worker has access to a given plan does not mean that he or she participates in the plan. Once given access, the worker often must affirmatively enroll in the plan in order to be counted as a participant (and to receive and enjoy the plan’s benefits laid out in its provisions). The rate at which workers enroll in plans to which they are given access is known as the takeup rate. Often, the takeup rate for a plan is less than 100 percent, perhaps because enrolling in the plan requires that the worker incur some cost or because the worker also has access to several alternative plans. As a result, the participation rate—the extent to which workers in the economy participate in plans—is often lower than the corresponding access rate. The analysis that follows explores this dynamic by presenting participation and takeup rates for plan provisions alongside the access rates.1

Health plans: access and participation

During the third quarter of 2012 through the second quarter of 2013, 70 percent of private industry workers had access to a health care plan. Table 1 displays estimates of access, participation, and takeup rates for major health care categories. Almost all of these private industry workers had access to a medical care plan,2 but the access rate for vision care plans was 24 percent. These variations in access rates were similar among participation rates, but takeup by type of plan varied within a tighter range (from 72 percent for vision care to 78 percent for outpatient prescription drug coverage). Although some benefits had lower rates of access, they were taken up at rates similar to those of benefits that were available to more workers.

Table 1. Access, participation, and takeup rates for health care benefit plans,private industry workers, third quarter 2012 through second quarter 2013 Type of plan Access rate Participation rate Takeup rate All health care plans 70 55 79 Medical 70 51 73 Dental care 45 35 77 Vision care 24 18 78 Outpatient prescription drug coverage 67 49 72

Table 2 takes a closer look at medical care plans, breaking them out by type. As a reference, the table’s top line repeats table 1’s second line, which gives the top-level medical care plan incidence numbers: 70 percent access and 51 percent participation, yielding a 73-percent takeup rate. Within the medical care category, workers had access to several different types of plans. For example, 61 percent had access to fee-for-service plans and 19 percent had access to HMO plans. Using the data from this table, one also can calculate the access rates of particular types of plans among workers to whom any medical plan was offered. For HMOs, this figure would be 19 percent ÷ 70 percent = 27 percent; that is, among workers having access to a medical plan, 27 percent had access to an HMO. A similar calculation using participation rates reveals that 18 percent of medical plan participants were HMO participants. The factor underlying this contrast is that the HMO takeup rate of 49 percent was considerably less than the 68-percent takeup rate of fee-for-service plans.

Table 2. Incidence of different types of medical care plans, private industry workers, third quarter 2012 through second quarter 2013 Type of plan Access rate Participation rate Takeup rate All medical care plans 70 51 73 Fee for service 61 42 68 Traditional 3 1 42 Exclusive provider organization 6 3 47 Preferred provider organization 52 34 65 Point of service 6 3 53 Health maintenance organization 19 9 49 Traditional 16 8 46 Open access 4 2 46

A closer look at HMOs

In table 3, we try to glean some insight as to why HMO takeup was lower than fee-for-service takeup. The table lists the medical care plan access rate (70 percent) in the first column of the first row and reiterates the participation and takeup rates for fee-for-service, HMO, and all medical care plans from table 2 across the remainder of the first row. The rest of the rows and columns of table 3 display the respective incidences of fee-for-service plans being offered, but not HMO plans; HMO plans being offered, but not fee-for-service plans; and both fee-for-service and HMO plans being offered. The numbers show that fee-for-service plans usually are offered without an HMO alternative (51 percent of workers have this experience, whereas only 10 percent have access to both types of plans). In contrast, 9 percent of workers are offered HMO plans without also being offered a fee-for-service plan. This difference is a key driver of the lower takeup rate for HMO plans observed in table 2. Indeed, the takeup rates of fee-for-service and HMO plans are quite similar (72 percent and 71 percent, respectively) when attention is confined to workers who do not have access to both types of plans. When workers do have access to both, however, they are more likely to take up a fee-for-service plan (45 percent) than an HMO plan (31 percent). In these cases, the combined takeup rate for both types of plans (76 percent, last row of the table) is somewhat higher than it is for all medical care plans (73 percent, first row of the table).

Table 3. Joint incidence of fee-for-service and health maintenance organization plans among medical care plans, private industry workers, third quarter 2012 through second quarter 2013 Type of plan Access rate Fee-for-service plan Health maintenance organization plan Medical plan Participation rate Takeup rate Participation rate Takeup rate Participation rate Takeup rate All medical care plans 70 42 68 9 49 51 73 Fee for service only 51 37 72 ... ... 37 72 Health maintenance organization only 9 ... ... 6 71 6 71 Fee for service and health maintenance organization 10 5 45 3 31 8 76

Table 4 shows access, participation, and takeup estimates for plans having coverage of selected services. There are no stark differences in the takeup rates, as one would expect if workers “shop” for particular kinds of coverage: most of the rates are between 71 percent and 73 percent.

Table 4. Incidence of medical care plan coverage of selected services, private industry workers, third quarter 2012 through second quarter 2013 Type of plan Access rate Participation rate Takeup rate All medical care plans 70 51 73 Hospital room and board 68 49 72 Inpatient surgery 64 46 72 Outpatient surgery 64 46 72 Physician office visit 69 50 73 Inpatient mental health care 59 42 71 Outpatient mental health care 57 40 71 Inpatient substance abuse detoxification 54 38 71 Outpatient substance abuse rehabilitation 54 38 71

Retirement benefits: takeup and access

Analogous tabulations can be performed for employer-provided retirement benefits. Table 5 breaks out defined contribution plans by type of plan,3 with access and participation estimates in the first two columns and the corresponding takeup rates in the third.4 The table illustrates that takeup rates for money purchase pension plans, deferred profit-sharing plans, and employee stock ownership plans, none of which usually require an employee to contribute in order to participate, range from 85 percent to 88 percent; the takeup rate for savings and thrift plans is considerably lower (64 percent). Note, however, that these differences are not due to a dynamic like that discussed earlier for medical plans, according to which, a choice of plans is associated with lower takeup rates: separate calculations show that the takeup rate was 70 percent among workers who had access to a savings and thrift plan and at least one other defined contribution plan and 63 percent for workers who had access to a savings and thrift plan and no other defined contribution plan.

Table 5. Access, participation, and takeup rates of defined contribution plans, by type of plan, private industry workers, third quarter 2012 through second quarter 2013 Type of plan Access rate Participation rate Takeup rate All defined contribution plans 61 41 68 Savings and thrift 50 32 64 Money purchase pension 9 8 86 Deferred profit sharing 9 8 88 Employee stock ownership 2 2 85 Savings incentives match plan 2 1 62 Simplified employee pension 1 <1 62

Table 6 focuses specifically on savings and thrift plans, and shows the prevalence of various detailed provisions among those plans. The first row of the table reiterates the overall savings and thrift plan incidence percentages from table 5: specifically, 50 percent of private industry workers have access to a savings and thrift plan, and 32 percent of private industry workers participate in them. Looking down the table, we see that 14 percent of private industry workers have access to a savings and thrift plan with an automatic enrollment provision and 10 percent of them participate in such a plan. The observed takeup rate for such plans (74 percent) is significantly higher than the takeup rate for the average savings and thrift plan (64 percent).

Table 6. Incidence of savings and thrift plans with selected provisions, private industry workers, third quarter 2012 through second quarter 2013 Type of plan Access rate Participation rate Takeup rate All savings and thrift plans 50 32 64 Savings and thrift plans with: Option of Roth (pretax contributions) plan 20 14 73 Choice of investments for employer contributions 39 25 65 Automatic enrollment 14 10 74 Annuity distribution option 10 7 69

Table 7 breaks out the various types of defined benefit plans observed among private industry workers in 2012–2013. The most popular type of defined benefit plan is the traditional one, with an access rate of 13 percent and a participation rate of 11 percent. The table lists a takeup rate of 89 percent for all defined benefit plans, reflecting the ratio of the participation rate to the access rate. Note, however, that most of those employees not participating in a defined benefit plan likely are constrained by eligibility requirements, rather than having chosen to forgo the benefit. This circumstance gives the term “takeup” an unorthodox flavor, but the term is retained here for consistency with NCS terminology.5 Among traditional defined benefit plans, the most prevalent type of benefit formula bases itself on a percentage of a worker’s final earnings. The nontraditional types of plans—cash balance and pension equity plans—have access rates of 6 percent and 1 percent, respectively.

Table 7. Access, participation, and takeup rates of defined benefit plans, by type of plan and selected provisions, private industry workers, third quarter 2012 through second quarter 2013 Type of plan Access rate Participation rate Takeup rate All defined benefit plans 18 16 89 Traditional defined benefit plan 13 11 88 Percent-of-final-earnings formula 7 6 84 Percent-of-career-earnings formula 1 1 76 Dollars-times-years formula 4 3 96 Employer-contribution formula 1 1 94 Cash balance plan 6 5 77 Pension equity plan 1 <1 73

Table 8 investigates the extent to which the participation rate is affected by the presence of “frozen” plans in the NCS sample. Such plans have been closed to new employees but may still accumulate benefits for longer tenured workers who are already enrolled. The table stub divides workers into three categories: those with access to a frozen defined benefit plan but not an open plan; those with access to an open plan only; and those with access to both a frozen and an open plan. This last group, which makes up 1 percent of all private industry workers, includes workers in establishments that have instituted a tiered benefit offering by freezing out new employees from one defined benefit plan but providing them with another. Among workers with access to only a frozen plan, the takeup rate is 76 percent. But among workers with access to only an open plan, the takeup rate is 95 percent, and among workers with access to a frozen and an open plan, the take-up rate is 97 percent. Table 8 also explains why the takeup rate among all open plans (the top row of the table) is only 91 percent: this percentage is affected by a low takeup rate of 41 percent in open plans at jobs that also have access to frozen plans. Such plans are likely to be lower tier plans offered to new employees. In this case, only newer employees would take them up; older incumbents would not be attracted to them.

Table 8. Joint incidence of frozen and open defined benefit plans, private industry workers, third quarter 2012 through second quarter 2013 Type of plan Access rate Frozen plan Open plan All plans Participation rate Takeup rate Participation rate Takeup rate Participation rate Takeup rate All defined benefit plans 18 5 74 11 91 16 1 Frozen plans only 6 5 76 … … 5 76 Open plans only 11 … … 10 95 10 95 Frozen and open plans 1 1 56 <1 41 1 97

The analysis and tables presented in this article provide some added context for users of BLS benefits publications found at the Employee Benefits Survey website. Readers are encouraged to explore that site if they desire fuller details on the employer-provided benefits offered to workers in the United States.

This Beyond the Numbers summary was prepared by Keenan Dworak-Fisher, economist in the Office of Compensation and Working Conditions, U.S. Bureau of Labor Statistics. Email: dworak-fisher.keenan@bls.gov. Telephone: 202-691-6308.

Information in this article will be made available upon request to individuals with sensory impairments. Voice phone: 202-691-5200. Federal Relay Service: 1-800-877-8339. This article is in the public domain and may be reproduced without permission.