COVID may force employers to adjust 2021 benefit offerings
COVID-19 and the subsequent economic downturn have forced U.S. employers to examine cuts and benefits they considered unthinkable at the beginning of the year, new data finds.
Gallagher’s 2020 Benefits Strategy & Benchmarking Survey–which gathered data from 3,921 employers from December 2019 to May 2020, as well as a series of employer pulse surveys conducted between April and July—finds that the pandemic, coupled with concerns over rising costs of specialty drugs and medical services, may force many organizations to adjust their 2021 benefits and compensation offerings. Employee cost sharing for medical benefits—which has remained relatively flat in recent years—may include unavoidable increases for many employers in 2021, the brokerage firm reports. Likely these would be in the form of increased premiums or greater implementation of high-deductible health plans.
“Over the last decade, a tightening labor market led employers to offer a robust holistic rewards strategy to win the war for talent, but the pandemic has forced decision-makers to closely examine their benefits and compensation strategies,” says William Ziebell, CEO of Gallagher’s benefits & HR consulting division. “Employers are reviewing their benefit offerings to make sure they address employees’ evolving needs and, at the same time, fit within their organizations’ budgets.”
Employers may reevaluate less commonly used healthcare tactics in an effort to reduce unnecessary costs, including audits of plan eligibility (cited by 18% of employers) and claims (15%), and those that deliver greater value, such as narrow provider networks (14%), designated centers of excellence (10%) and integrated health and disability management programs (9%).
Gallagher’s research also found a significant number of employers are planning salary freezes for management and executives (43%) and non-management personnel (42%) to preserve jobs in 2021.
However, there is some good news: COVID-19 did not force employers to make mid-year adjustments on their coverage. In June 2020, most employers (86%) had not reduced health plan benefits and didn’t intend to during the pandemic. Additionally, following the viral outbreak, 83% have more strongly emphasized the role of specific benefits within total wellbeing, including emotional wellbeing (65%), leave policies (47%), medical benefits (39%) and physical wellbeing (36%).
Gallagher says adding and evaluating benefit strategies to better fit employees’ needs will be even more significant with open enrollment coming up this fall. Adjusting leave policies, adding voluntary or life insurance options, and emphasizing wellbeing benefits will continue to give employers latitude to more easily update their compensation and benefits strategy for a custom fit with shifting workforce preferences. Communication is also vital, Ziebell says.
“Employers of choice that partner with their employees to overcome today’s challenges will make the organization stronger and stand out better when compared to other organizations when the labor market heats back up.”