Benefits Turning Point

Employers are being faced with a choice: redesign their benefits around the changing needs of their workforce or risk losing top talent.

A record 4.3 million U.S. workers quit their jobs in August. Add that to the 20 million people who voluntarily left their jobs since April, and it’s clear that the U.S. workforce is experiencing a giant shift, which has dominated headlines and left many organizations scrambling to adjust to the unprecedented levels of turnover. 

New Focus on Benefits

Earlier this year, employers refocused on progressive cost management strategies and population health improvement after emerging from the crisis conditions of 2020. What has emerged in 2021 is not just a “candidate’s job market,” it’s the start of new way to distribute competitive benefits and encourage productivity.

Over the course of 2021, employers have balanced the economics of their businesses with retention efforts to meet workers where they are. They are exploring new ways to deliver new benefits. According to a recent MercerMarsh Benefits survey on employee benefits and technology trends, more than 7 in 10 employers increased their benefits spend as a result of the pandemic. Seventy-six (76%) percent of organizations spent more on HR tech during the pandemic. In addition, 84% of organizations saw changes in the benefits employees are using.

The underlying driver is employees questioning whether the companies they work for are aligned with their personal values and provide them with support. Many employees are leaving for better pay, higher titles, and more flexibility. Some are facing increased workloads and more responsibilities at home as a direct result of COVID. And others are looking to take back control of their lives in an increasingly uncertain world. Encouraged to embrace the “new normal,” new types of jobs have become an inevitable part of the equation.

Historically, companies have offered benefits that provided the same level of support to all of their employees. This strategy is proving to be less feasible as the nation’s workforce continues to grow in diversity. Different races, ethnicities, and age groups are experiencing disproportionate impacts to their wellbeing. According to MetLife’s 2021 U.S. Employee Benefits Trends Study, 73% of Gen Z workers (ages 21-24) have been worried about their mental health, compared to 50% of Millennials (25-39) and Gen X (40-54), and just 37% of Baby Boomers (55+). Black and LatinX employees have borne significantly more stress across all categories of holistic health—mental, financial, social, and physical health—compared to White and Asian employees, according to the study.

The intersection of pandemic-induced stress and the widening spectrum of ages, identities and circumstances among employees is forcing the door open for employers to invest in more flexible benefits design and delivery. MetLife’s study found that at least 70% of employers are offering more value-added services (e.g., mental health programs, caregiver benefits), enabling employees to have greater customization of benefits and investing in new emerging benefits. Non-traditional perks and benefits include increased paid leave or paid time off (80% of employees are interested), retiree benefits (79%), remote work or flex schedules (76%), professional development credits (66%) and caregiver benefits (62%). The emerging benefits in which interest has spiked most since 2020 include legal services (17% to 31%), cancer insurance (21% to 35%) and pet insurance (10% to 15%).

The role employers play in providing more than just a paycheck is a trend that is likely to continue. Increased visibility and investment in benefits and total rewards has boosted HR and benefits teams up the corporate agenda and increased pressure to spend wisely and deliver data-backed results. Eighty-eight (88%) percent of HR and benefits teams have seen more involvement in benefits decisions from the c-suite, according to Mercer’s study.

To Mandate or Not to Mandate?

The federal vaccine mandate is leaving employers to face numerous challenges regarding compliance of both OSHA and accommodation laws as well as potential divisiveness of an already wavering workforce. The mandate would require employees of mid-size and large private-sector companies to be fully vaccinated by January 4, 2022, or succumb to weekly COVID-19 testing. Although the announcement served as a catalyst for businesses that were seeking legal backing to implement vaccine requirements, others voiced concerns that the mandate will exacerbate current workforce issues.

Despite uncertainty on the status of OSHA vaccine mandate, many employers are preparing by drafting or implementing policies and procedures for tracking employee vaccination status, COVID-19 testing, addressing non-compliance, handling accommodation requests, and preparing for OSHA complaints and inspections. Some of the biggest players in HR tech and new entrants alike, who have developed surveying and tracking solutions, could help employers comply with the rule.

The solutions are also designed to take the burden off of HR teams to keep track of employees who are either vaccinated or require testing. ADP’s return-to-the-workplace tool, which was first launched in 2020, now includes vaccine status surveys, health attestation and contact-tracing capabilities as well as sentiment surveys to help employers get a sense of employees’ thoughts on vaccination. Newer vendors, such as ReturnSafe, are seeing an uptick in usage of their tracking solutions. ReturnSafe’s software manages vaccine-status tracking, testing results, health screenings, contact tracing capabilities and case management for employees who test positive. The company has seen a 141% increase in inbound inquiries primarily from companies with over 1,000 employees since the announcement of the vaccine mandate.

The latest poll from Willis Towers Watson shows that over half of U.S. employers will require employee vaccines. That includes 18% that currently require vaccinations, 32% that plan to require vaccinations only if the federal mandate takes effect and 7% that plan to mandate the vaccinations regardless.

The Private Insurance Market Remained Relatively Stable in 2021

It will also likely remain stable in 2022 despite ongoing uncertainties due to the pandemic, according to KFF’s 2021 Employer Health Benefits Survey. Nearly all firms (99%) with 200 or more workers offer health benefits to at least some workers, whereas only 58% of firms with less than 200 employees offer health benefits.

However, there is a significant difference in coverage across small firms. Ninety-three (93%) percent of firms with 50-199 workers offered coverage, compared to 74% of firms with 25-49 employees, 65% of firms with 10-24 employees, and only 49% of firms with 3-9 workers. The overall percentage of firms offering health benefits in 2021 (59%) is similar to last year (56%) and has remained relatively steady—flexing between 56% and 61%—over the past 10 years. Covered workers in small firms are much more likely to participate in a plan where the employer pays the entire premium for single coverage compared to those in large firms (29% vs. 5%).

Employers continue to look for ways to adapt their benefits to contain the costs of their medical plans and meet the changing needs of employees, but those efforts did not impact overall market characteristics. Premiums continued on a similar growth trend as they have over the past decade, and average deductibles and the share of employees whose firms offered coverage remained unchanged.

The most notable shifts in health coverage this year stemmed from new benefit program offerings and new ways to deliver those benefits. Unsurprisingly, more employers added a telemedicine benefit in 2021 but they also improved the benefit by expanding provider networks and eligible locations, supporting additional modes of communication or waiving cost sharing for telemedicine services. Mental health was in the spotlight this year as workers experienced unprecedented stress due to the economic and social challenged spawned by the ongoing pandemic. Thirty-one percent of employers with at least 50 employees expanded mental health or substance use services and access through modes such as telemedicine and employee assistance programs.

Looking to 2022

The biggest growth opportunities in employment and health benefits next year and beyond will be the development of strategies and techniques to help employers adapt their benefits programs to an increasingly diverse workforce. Look for a particular focus on the part of employers to help underserved segments of their employee population. For example, this month Aon unveiled an interactive model that quantifies the impact of social determinants of health on employees and how they utilize health services like ER visits and preventive care. Aon designed the Health Disparity Assessment to help employers identify employees at risk, measure health disparity within their workforce, and recommend solutions to improve the health of employees who live in disadvantaged communities. Also on the horizon is a more consistent push to allow employers to access certain claims and clinical data given the reliance on technology to deliver physical, social, financial and mental wellbeing benefits.