As many companies draw towards their open enrollment periods, making decisions about employee benefits is important. Especially now, employers should be paying attention to benefits trends. Studies show that 57% of employees say good benefits are more important to them than ever before. Benefits are so important to workers that 42% of them would sacrifice additional pay every month for a better plan. It’s also worth noting that the same study showed that of respondents in poor health, only 56% feel that the employers provide them with benefits that support their health and well-being. Taking all of this into account, what will your staff (and the talent you want to acquire) be looking for in their benefits packages for 2021?
Employee benefits trends now
As expected, the pandemic is drastically changing the benefits landscape. Right now, many companies are seeing a temporary decrease in utilization of their benefits plans. This is because the pandemic and stay-at-home orders have caused many employees to put off their preventative and elective healthcare appointments and procedures. People have been using their plans at lower rates than ever. This is resulting in premium reimbursements and holidays This means that plans are either reimbursing employers because plans have been used so little (and then employers are charged with returning money to their staff) or they are being given a ‘holiday’ from paying premiums for plans (which again, should be passed down to staff).
Unfortunately, this decrease in plan usage is not a good indicator of what’s to come. In fact, it’s the opposite. Now, as shelter-in-place orders lift, workers will be using their benefits more than even pre-pandemic rates to do the procedures and appointments they were postponing. The 60% of Americans with chronic conditions will be likely see exacerbations of their health concerns and others will see new conditions or issues forming as a result of prolonging attending to their healthcare needs. In addition to physical healthcare, mental health concerns are also on the rise and will continue to be into 2021. Those with mental health issues are likely to see them intensified because of quarantine and the stress of the pandemic. Additionally, many who didn’t have mental health issues prior to pandemic will now experience them as a result of stress. All of this will contribute to the already rising healthcare costs seen in benefits trends for the year. Benefits leaders will be seeing a big rise of employee claims as 2020 ends and 2021 begins.
Employee benefits in 2021 and beyond…
Normally, the average employer sees a 6% increase in the cost of benefits every year. In 2021, however, there is predicted to be an average 7% increase in health care premiums for both self-funded and fully insured employers. This increase will be affected by how many Americans become infected with COVID, with a higher amount of COVID infection rates creating higher increases in premium rates. Depending on the plan structure, companies with fully insured plans won’t feel this increase until they renew their plans. However, self-insured employers have already felt it. Employers with these plans will need to decide if they’ll continue requiring copays for COVID testing or cover it themselves, as the major carriers are. This has, and will, add more strain to employers who are already dealing with making difficult decisions relating to staffing (like furloughs and layoffs).
Key strategies to cut benefits costs for workers and employers
Employers can do a few things to mitigate rising costs, both for themselves and for workers.
- To decrease costs for employers: Increase deductibles, co-pays, or out-of-pocket expenses. Another option is to change premium contribution amounts, making workers responsible for a higher percentage than previously. Because either of these options will be negatively impacting workers, it’s important to communicate with them about this clearly and give them plenty of warning. Let them know it’s the final resort in a year with many financial pitfalls and it’s intended to be a temporary measure.
- To decrease costs for workers: Companies can introduce an arrangement for health reimbursement (HRA). Note that an HRA won’t be helpful if the benefits plan is already generous and has little or no deductibles. Employers can also introduce a health savings account (HSA), in which staff can contribute pre-tax dollars to save for medical expenses. (Employers can also contribute to their staff’s HAS if they choose to.) By law, the company must have a high-deductible plan to offer this. Lastly, employers can introduce a flexible spending account (FSA), in which employees can also set aside pre-tax dollars. This kind of account is available to most companies regardless of plan design and the money is use-it-or-lose-it (barring any allowed rollover provisions)
- To decrease costs for both: Consider changing carriers. While many employers don’t go for this option frequently, it could be very effective. A local carrier might be able to offer a similar or better plan for less. Additionally, local carriers sometimes offer interesting new benefits that the big national carriers don’t yet supply.
Employee benefits trends during 2020 and COVID-19
Below are some of the common occurrences and patterns in benefits because of the pandemic.
- Hospital indemnity plans: These are popular in benefits trends because they’re supplemental insurance plans that pay for the costs of a hospital admission that a regular insurance plan doesn’t cover. They can be procured at a group rate or via individual contracts. Unfortunately, as many people are hospitalized for COVID and COVID complications, they’re becoming more helpful.
- Critical illness plans: These plans are helpful in situations like heart-attacks and strokes (plans that have a higher than average cost to employees). Many carriers have begun covering COVID-19 as well, which brings added peace of mind to workers.
- EAPs: These are voluntary, work-based programs that offer many different services to help workers. They can help with counseling needs, childcare, food insecurity, and more.
- Benefits perks: Many plans are adding offerings to help them stand out. These can include fitness reimbursements and smoking cessation. Some even offer unexpected benefits like free sneakers. These perks are usually centered around supporting and encouraging workers to keep up with preventative care, which statistically keeps health plan costs lower overall.
- ICHRA plans: These are the newest members to the healthcare market. Employers design a reimbursement model and their staff purchase their own insurance. Workers then submit claims to employers to reimburse. These plans give an employer a greater ability to control costs and, depending on where the company is located, give employees more options for their health insurance. Of course, if an employer is located in a place with access to fewer plans, or if employees are older or have poor health and pre-existing conditions, then this option may be less beneficial.
- Cashing in on vacation time: Some employers are offering their workers the opportunity to cash in on their vacation time. The extra money can be very helpful when families are experiencing financial hardships due to the pandemic.
- Virtual and telehealth appointments: Due to the pandemic, these options are becoming extremely popular for non-emergency conditions. The cost is usually lower than in-person visits, while patients often get better access to their PCP or other provider and can still be prescribed medications and treatments as-needed. Healthcare providers find that with telehealth options, their patients are actually more engaged in their care (ie being proactive, asking questions, doing preventative care and follow-up). Mental health visits are becoming especially popular via telehealth during the pandemic. This is a trend that, like remote work, might stick around long after the COVID crisis because it’s so beneficial, cost-effective, and popular.
Tips for educating and engaging workers on their employee benefits year-round
While it’s easy to get staff to pay attention to their benefit plans during open enrollment, what’s truly beneficial for both employer and employee is when these efforts are year-round. Staff get the most out of their plans and use them for preventative care (thus lowering costs) when they know more about them. Here are some ways to increase education and engagement all year.
- Communicate with staff about benefits throughout the year. Offer a regular touch-base, such as office hours in which they can stop by with questions about their benefits. Or, benefits leaders can invite workers to schedule 1:1 appointments for their questions or concerns. If there’s a company newsletter or website, they can take up a corner to highlight a perk or element of the plan.
- Simplify benefit summaries. Write them with simple language and keep them to one page.
- Make plans more accessible. Post them on the company shared drive, intranet, or team channels like Slack. If you’re an MP customer, use iSolved’s HR solutions to share benefit plans.
- Run a virtual benefit fair. Carriers are agreeing to do zoom meetings to explain plan offerings. Some are even retaining elements of the in-person fairs with raffles and giveaways.
- Identify areas to promote preventative care. Help employees think about how they can get, and stay, healthy. Gym memberships, weight loss programs, free sneakers, and other perks that support preventative care will also eventually help lower plan costs.
Employee benefits compliance during the pandemic
These are considerations for strategic HR planning as 2020 comes to a close.
- ACA reporting: The deadlines for 2020 ACA filing are approaching soon. Make sure forms are given to employees by January 31st of 2021. There will be new codes required if companies are using an ICHRA plan. There will also be new lines for employee zip codes. If an employer furloughed workers and they stayed enrolled in benefits, they should ensure that the enrollment is reported. If workers were laid off or furloughed and were not active benefits users, employers should report the time they weren’t employed or weren’t full-time staff (and thus had access to benefits). Lastly, if insurance carrier(s) gave a premium holiday or reimbursement because plan costs were low, employers need to report it on ACA forms.
- Federal COBRA compliance: Employers must continue following the current guidelines for mailing notices. They should remember that failing to send notices can result in very high penalties. Under new regulations, participants have more time to elect COBRA coverage (until 60 days past the point the national emergency is lifted). If participants fail to pay their COBRA premiums, employers cannot remove their eligibility for COBRA. However, if the carrier allows, an employer can suspend coverage until payment is made. What hasn’t changed is the COBRA coverage period. Participants are still only allowed 18 months on average (other qualifying events, like disability or military status may extend this periods). Employers need to have notified employees of these new regulations and will face potential fines if they don’t. The DOL created a new model notice as of May 2020 that must be used moving forward.
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