Forecasting the future is hard and few companies get it right. This is true in “normal” times but is exponentially more difficult during times of extreme uncertainty. While you likely still face many of the same challenges as in the past – keeping healthcare costs down, engaging employees, meeting your sales goal – the context has changed. Even on a personal level, the COVID-19 pandemic has changed the needs and wants of your employees.
How will your total rewards strategy evolve to meet your people where they are in this new normal?
It’s impossible to know exactly what will happen in employee benefits 5, 10, 20 years from now. And, it seems especially daunting to predict if you’re trying to answer, “what will be true?” Instead, look below the surface for events driving trends you need to anticipate and consider, “what must be true?”. By shifting your mindset in this way, you can better visualize what the current and future states might be.
How Healthcare is Changing
Part of determining your benefits strategy is to understand how the definition of healthcare is changing. Today, most of healthcare is “sick care” or problem-solution. This is the traditional definition of healthcare, which is far less preventative and much more symptom management.
The emerging definition of healthcare includes more “discretionary healthcare” that improves life vs. addresses problems. This could include more medical aesthetics to improve one’s physical appearance or very niche areas, like myopia prevention in children by parents with severe myopia.
Looking at the diagram above, we anticipate more demand to shift to the top (for me) and the far right (life care, benefit enhancement). Companies should shift their emphasis to the upper right, while also being prepared to offer employee benefit solutions in all quadrants. At a minimum, you must be intentional about your choices of where to invest and where to pull back.
Context is King
As with so many things, context is king. Decisions like work from home vs. in-office should not be treated in unidimensional fashion, but rather with 20-year trajectories, “what must be true?” questions and “both/and” mindsets. Employers that proactively create the future they want – while focusing on a win-win environment that benefits the organization and employees – will have a significant advantage in the years to come.
Creating that advantage requires working with partners who are watching and interpreting trends and developing actionable insights that help to address your most significant challenges. No one has all the answers, but NFP’s US Benefits Trend Report will help you and your organization align with the more productive “both/and” mindsets.
Below are some of the key insights from the report to help spark your thinking and empower the kind of actions that make a difference for you and your people.
Employee Benefits Trends Highlights
For the first year since at least 1960 – when the Centers for Medicare and Medicaid Services (CMS) began tracking national health expenditures – total health spending in 2020 was less than in the previous year. NFP’s year-over-year trend calculations reflect averages across coverage tiers, regions, industries and employer group sizes. Among the major contributors to the decline were hospital care, the largest component, which was 7.0% lower in 2020 than in 2019, and dental services, which dropped 20.2% in 2020. These declines and those in other categories occurred as some services were temporarily curtailed and patients avoided seeking care to avoid exposure to the coronavirus. At the same time, spending on prescription drugs and home healthcare increased for the year, the latter likely related to individuals selecting home care rather than nursing homes to avoid exposure.
COVID-19 and Benefits Compliance
In 2020, the continuous bombardment of federal and state legislative and regulatory rules resulted in challenges, complexities and exhaustion for employers.
Two massive new laws, the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act in the first half of 2020 were followed by seemingly endless regulatory clarifications. The second half of the year brought a Supreme Court vacancy, extensions to COBRA and other important employer and employee deadlines, and other new exceptions for health and dependent care FSAs and Section 125 elections.
Thankfully, even with the constant barrage, employers have reason for optimism with respect to their compliance responsibilities. As the pandemic eases and employees return to a sense of normalcy (and/or accept some new normalcies), many of the burdensome pandemic-related requirements will fade.
Even so, compliance continues to carry significant weight in shaping employer strategies. Proactivity, agility and individualism will drive success, particularly with respect to three hot issues: pandemic-related rules, remote work and shifting political priorities and judicial decrees.
In a year where human resources leaders faced a wave of new challenges – a global pandemic, new legislation, more compliance requirements – it became even more difficult for employers to keep up. The complexities of how federal leave regulation interacts with state laws and the evolution of employee expectations converged with the impact of COVID-19, accentuating the need to consistently audit leave policies and adjust accordingly.
Through all the complexity, one reality became clear: it’s increasingly difficult for an employer to take a strategic approach to HR. And even harder to do it alone. As HR leaders strive to take a strategic seat at the table, it will be more important than ever to have a trusted partner by their side.
We’ve all heard the saying that necessity is the mother of invention. This held true in 2020, when COVID-19 created new levels of disruption in nearly every aspect of our lives. The need to adapt accelerated the development, implementation and adoption of new tools, resources and processes. From working from home to the creation of vaccines, circumstances didn’t allow for a slow and steady approach to anything.
One emerging trend is virtual Open Enrollment – a great example of something accelerated by COVID-19 that will become the norm for most employers. Many organizations knew that in-person employee benefits meetings weren’t going to happen in 2020. They quickly pivoted to creating digital benefits guides for open enrollment — data-driven, personalized sites that helped employees understand the benefits available to them and make informed election decisions. If they had questions and needed live support, Zoom or Teams was there to facilitate the interaction.
Prior to 2020, there were strong indications that many employees were struggling. They were facing rising deductibles and copays, difficult choices involving essential healthcare, and devastating financial pressures. Then COVID-19 hit.
In the wake of the global pandemic, employers have an opportunity to provide supplemental health and lifestyle benefits that empower employees to address a variety of challenging circumstances. To that end, it was found that 60% of Americans don’t have $1,000 in savings to cover an unexpected expense.
Consider this. Your employee gets injured cleaning out their garage. They go to the emergency room for care and leave with a bill that includes more than $1,000 in out-of-pocket costs not covered by your health plan. If they’re one of the people in the above stat, they have to make a difficult choice. Savings isn’t an option, so they have to pay with a credit card, borrow from family and friends or their 401(k), or take out a personal loan.
That’s where a supplemental health benefit through their employer can help. By paying for this additional coverage – which is a small fraction of their emergency room bill – your employee could cover the unexpected medical costs. Offering voluntary health benefits to your employees alongside your traditional medical plans can help them avoid hardships that include taking second jobs, delaying medical care and putting off life events (e.g., marriage, education, home purchase).
Prescription Drug Costs
Prescription drugs continue to be a powerful driver of overall healthcare costs. National health spending grew by 4.6% to $3.8 trillion in 2019 – 17.7% of gross domestic product. In fact, for the first time ever, more than half of pharmacy spend was on specialty drugs.
These and other trends present a daunting challenge for employers who want to continue to provide robust support to employees and enhance their ability to compete for top talent. Employers seizing the opportunity to consider prescription drug trends in the context of their own challenges will gain the insight that is critical to refining strategy, achieving key objectives and elevating value for their organization and key stakeholders.
After a year like no other, employee well-being is facing a variety of challenges. Public and personal health crises, family demands, financial instability and social and racial unrest are creating new levels of stress.
The good news is that you have an opportunity to provide the support your employees and their families need. And, many employers are seizing the opportunity. Ninety-two percent of CEOs say their companies are more focused on mental health because of COVID-19 (Workforce Attitudes Toward Mental Health, ed. 2, Ginger, 2021).
The myopic view that well-being is just a way to reduce healthcare costs has evolved. Investing in well-being is no longer a nice to have. It is a business imperative that enhances recruiting and retention, elevates productivity and demonstrates an organization’s commitment to caring for people.
Circumstances often accelerate adoption of new methods, and the global pandemic is no exception. Both patients and providers were forced to get comfortable with telemedicine as a care delivery mechanism. From March 2019 to March 2020, we saw a 154% year-over-year increase in telehealth visits. COVID-19 also drove an expansion of the types of care provided virtually, going beyond acute care to include chronic disease management, physical therapy and mental healthcare.
As COVID-19 vaccinations continue across the country and limitations are lifted on in-person visits, will telemedicine remain a first choice for patients?
Telemedicine provides some cost efficiencies and can be a way for employers to lower costs. The key is doing it without diminishing the quality of care. For example, employers can push employees to use telehealth platforms, but if the experience, quality and scope of practice fall short for the patient and provider, there won’t be any cost savings. It’s also important to recognize that telehealth isn’t everyone’s first choice, and it still has limitations. That’s where things like direct primary care and on-site clinics can help.
I might sound like a broken record, but this is so important: You must have a multi-year employee benefits strategy and continually evaluate it. Shifts in your employees’ wants and needs over time and impactful events such as COVID-19 make this a moving target. But, when you take the time to evaluate data and trends, listen to your employees and open yourself to change, you can create a successful benefits program. At the end of the day, it’s about meeting the unique needs of each of your team members and helping them be happier, healthier, more productive human beings.
Written by Paul Ashley, Vice President & Consultant. Feel free to drop him a note or reach out on LinkedIn.