6 Key Trends Influence Employee Benefits in 2023
The employee benefits landscape has undergone rapid and dramatic changes in recent years. 2022 was marked by continued challenges, which influenced how businesses built their total rewards packages. Ways of working shifted, attrition climbed, employee expectations expanded, and rising health care costs drove medical plan rates higher.
Heading into 2023, employers will have to adapt to economic and social pressures. For many, this will require a reevaluation and restructuring of employee benefits programs, implementing new solutions that manage costs while providing meaningful value to employees.
Six key trends shaped the employee benefits space in 2022 and will guide employer decision-making in 2023:
1. Rising rates and premiums for medial plans
Driven by a combination of factors — including inflation, the labor shortage, and the ongoing impact of delayed care during the pandemic — the unit cost for care is rising, leading to overall health insurance cost increases.
In many cases, the size of a business’s employee base determines the renewal rate increase of employer medical plans. Employers with fewer than 100 employees (i.e., small group, Community Rated) are experiencing renewal rates increasing at or above trend, 9%+ on average. Medical plan increases may approach double digits in the mid-market segment (i.e., typically employers with 250 – 3,000 employees). Employers with more than 3,000 employees are projected to see rate increases between 7% and 8% by Q1 2023.
Short-term and long-term disability rates are also rising, due to extended COVID-related illness/recovery periods. Additionally, stop-loss premiums are on the rise, increasing by 10% in 2022 on average due to large losses growing in severity and complexity. In Q4 2022 and Q1 2023, stop-loss premiums are expected to increase more significantly, by 15%-20%.
2. Employee attrition, “The Great Resignation”
Throughout 2022, The Great Resignation affected businesses across the country. Employees at all levels — including C-Suite executives — quit their jobs, and employers have struggled to fill the gaps. The talent shortage will continue in 2023. Employers will need to implement creative retention strategies and expanded benefits packages to combat attrition.
In addition to increasing compensation packages, many businesses have improved corporate culture and introduced voluntary benefits. Additionally, more employers are offering employee recognition platforms, health and productivity programs, and organized “special events” like food truck days or scavenger hunts. To attract and retain top talent, employers will continue to innovate differentiating programs.
That said, the potential recession in 2023 will influence offerings. If the number of jobs available shrinks, as we have seen in recent technology company layoffs, employees will demand fewer perks, and employers will likely cut fringe benefits to save money.
3. Behavioral health concerns grow
Behavioral health continues to be a crisis that employers must address. The pandemic both exacerbated and shined a spotlight on the pressing behavioral and mental health needs of employees across the country. Many businesses are now committed to providing employees and their dependents with quality behavioral health care.
The need for mental health care will continue in 2023. Employers of all sizes should strongly consider incorporating improved behavioral health care coverage into their benefits packages.
4. Telehealth utilization drops
Telehealth options significantly expanded during the pandemic, representing a substantial change in the health care delivery system. Though telehealth utilization is here to stay, it dropped slightly in 2022 as the pandemic waned and health care providers returned to full operations.
In 2023, telehealth utilization may decrease further, but will remain the predominant delivery system for mental and behavioral health treatment. As telehealth services become a ‘norm’, related regulations may continue to evolve.
5. Costly new technologies and treatments
New technologies and treatments have caused the cost of large claims to rise. Simultaneously, the development of effective new gene-specific therapies has significantly increased Specialty Rx costs. For example, drugs like Skysona, a gene therapy medication used to slow the progression of neurologic dysfunction in boys 4-17 years of age with early, active cerebral adrenoleukodystrophy (CALD), cost over $3 million dollars per treatment, and health plans are under pressure to cover these costs. This becomes an enormous expense for employers to bear.
These costs will continue to trend in the double digits. In Q4 2022, into Q1 2023, trend rates for specialty prescription drugs are projected to increase by 10% to 12%.
6. Remote work presents regulatory concerns
Remote work presents new complexities for HR departments. Employers may now have employees located across multiple states where they had not been previously established. This new environment has come with increasingly complicated regulatory requirements. For example, benefits staff need to stay abreast of varying regulations and evolving leave laws at the federal, state, and city levels. To successfully navigate these changes in 2022 and 2023, employers must consult with experts and consistently research compliance resources.
Navigating 2023 costs and challenges
With health care costs and employee needs continually increasing, employers will need to decide how to manage rising costs without impacting their talent strategy or employee wellbeing.
Employer-sponsored health care premium increases are anticipated to be larger than usual in 2023. According to the Society for Human Resource Management (SHRM), medical plan costs per employee are expected to rise by an average of 5.6%, reflecting inflationary pressures.
Due to these cost increases, in 2023, employers will explore all possible funding options, seeking solutions that will finance their health care spend. Potential alternative arrangements include self-funding, level-funding, captive arrangements, and others.
Employers may also look to negotiate with health care providers to help lower costs, exploring cost-shifting models such as direct contract or reference-based pricing. However, significant changes to medical plans, especially those that transfer large costs back to employees, can have negative backlash within the workforce. Business leaders should understand all implications of new models, working closely with consultative advisors to make sure they’re taking the right approach. Above all, quality of care should not be sacrificed in order to better balance costs.
In 2023, business and employees will thrive through adaptability. More companies will think beyond traditional employee benefits approaches. The most successful companies will be those that evolve to respond to issues while accommodating the holistic needs of the workforce.
Source – PropertyCasualty360.com
