?The past year has been a complicated one for employers trying to develop benefits strategies: Organizations have had to juggle the competing priorities of holding down costs while remaining competitive with their benefits offerings in a hot labor market.
And although layoffs have hit the tech sector and other industries hard at the beginning of the year, the job market remains largely employee-driven, forcing employers to stay aggressive with benefits and compensation. Meanwhile, inflation and fears of a recession, among other factors, are causing employers and employees alike to tighten their purse strings.
In short: the overall theme of balancing priorities will likely continue this year, according to experts.
“Employee retention and inflation pressures are the two biggest issues keeping employers up at night,” said Sally Prather, executive vice president and employee benefits practice leader at Alera Group, a Deerfield, Ill.-based benefits firm. “And the ripple effect of the Great Resignation has increased the emphasis on retention as companies seek to balance economic volatility with strong benefits packages, including paid time off and voluntary benefits, to shore up their employees.
“To maintain an engaged workforce, employers will have to meet employees where they are with these offerings and both show and tell employees how much the organization values them.”
Indeed, recent LIMRA research found that 60 percent of employers are considering adding a new insurance benefit over the next two years?about twice as much interest as there was five years ago. Consulting firm Mercer also reported that more than two-thirds of U.S. employers say they are looking to enhance their health and benefits offerings in 2023 to attract and retain talent.
Still, Kim Buckey, vice president of client services at Optavise, a Carmel, Ind.-based benefits administration firm, noted that employers are proceeding with some caution this year due to economic volatility. That may mean considering layoffs and cutting benefits, although it’s not widespread practice yet.
Controlling Health Care Costs Remains a Top Priority
Keeping a lid on rising health care costs will likely remain at the forefront for organizations this year, for good reason. A confluence of factors—including widespread inflation, economic instability and increased health care utilization as a result of the pandemic—drove larger-than-usual cost increases for 2022 and predicted increases for 2023. U.S. employers expect medical plan costs per employee to be 5.6 percent higher on average in 2023, Mercer reported last year, a significant jump from 2022’s expected premium increase of 4.4 percent.
To remain appealing to current and potential employees, many employers are choosing to absorb premium increases, rather than pass them along to workers. That makes cost containment a big focus, Prather said.
“Some [employers] are looking to implement plan design changes to combat rising health care costs, others are considering self-funding, and others still are embracing specialized health management programs and teletherapy to cope with inflation in the industry, all while over-communicating with employees,” she explained.
Other strategies employers are considering to keep costs down include implementing plan design changes, such as higher deductibles and self-funding; offering more wellness programs; implementing disease management programs; and encouraging employees to use cost- and quality-comparison tools to make better-informed health care decisions. Organizations also are implementing narrow, high-performing networks that deliver high-quality and cost-effective care.
“As organizations seek to design benefits around their employee populations, innovative strategies, such as specialty carve-outs and onsite labs, often present win-win situations,” Prather said.
Buckey said some employers are introducing programs that target specific high-cost health conditions, such as musculoskeletal, gastrointestinal, bariatric, cardiac and kidney care—a trend she expects will continue in the coming months.
Voluntary Benefits Set to Grow in Popularity
To hold down costs for themselves while appealing to employees, a growing number of employers will likely turn to voluntary benefits, such as life insurance and supplemental health coverage.
“These programs can provide valuable supplemental coverage to employees at a relatively low cost, borne by the employee,” Buckey said.
Voluntary benefits also are of growing interest to employees: Research from financial services firm Voya Financial last fall found that 63 percent of employees indicate they are likely to participate in voluntary benefits offered by their employers, such as critical illness coverage, hospital indemnity, disability income and accident insurance. That’s up from the previous year, when 45 percent said they were interested.
Prather said voluntary benefits may help curb quiet quitting by “helping to improve people’s sense of financial well-being, which research shows is meaningful for employees.
“Products such as life and long-term-care insurance can assist in providing financial security. Health products can also help to fill in the financial gaps that may be left by core health plans, especially in the event of an unexpected life event or a medical emergency,” she added. “These solutions provide employers with alternate platforms for engaging with their employees, and, in turn, making [employees] feel as if their companies care about their financial wellness.”
Mental Health Gets Attention Amid Increased Stress
The ongoing pandemic, high inflation and other factors are contributing to higher levels of stress and feelings of burnout. That is is drawing attention to mental health in the workforce and how employers address it.
“Mental health will remain a top priority as inflation adds financial strains to a workforce already grappling with a tripledemic, caregiving concerns and hybrid work arrangements,” Buckey said. “As talking about mental health and treatment becomes more normalized and convenient, I think we will see more individuals make use of those services.”