According to a survey, Mercer employee benefits costs are expected to rise by an average of 4.4% in 2021, though projections vary widely due to numerous unknowns. This summer survey coincided with a gradual rise in healthcare utilization following a dramatic spring slowdown, further highlighting the challenge. Also, self-funded employers faced the difficult task of estimating their 2020 costs against budgets, making 2021 cost projections even more complex. With assumptions about next year’s utilization rates and COVID-related expenses, such as a potential new vaccine, varying significantly, cost projections were expected to diverge widely.
Interestingly, employers expected a relatively standard increase of 4.4% on average. With data from 1,113 surveys received by the end of August, this projection is just slightly above the moderate cost growth observed in the last six years. The notable distinction is seen in the wider perspective: health benefit cost escalation is notably surpassing the stagnation observed in both the Consumer Price Index and wage growth.
Few Employers Will Cut Benefits to Control Cost Growth Next Year
During a year marked by economic hardship, a relatively small portion (18%) of surveyed employers planned to implement cost-saving measures, shifting healthcare expenses to employees through higher deductibles or copays in 2021, contrary to expectations. In fact, a majority (57%) reported no changes to their medical plan costs for the upcoming year, compared to a steady increase in this trend over the past few years (47% in 2020 and 44% in 2018). This shift, along with feedback from Mercer colleagues regarding employee well-being, suggests employers are prioritizing support for their workforce during these ongoing challenges.
Leading the way in supporting their workforce during the COVID era are new employer-provided resources. These resources focus on digital healthcare options, with over a quarter of respondents (27%) and more than a third of large employers (37% of those with 5,000+ employees) enhancing or adding services like telemedicine, AI-based symptom triage, ‘text a doctor’ apps, and virtual visits with patients’ primary care doctors. The pandemic has demonstrated that virtual care is essential and widely accepted by providers and patients.
In 2021, employers are rolling out various benefit enhancements. This includes offering voluntary benefits like critical illness insurance or hospital indemnity plans (22%), and improving access to behavioral healthcare resources (20%). Recognizing the ongoing impact of the pandemic, over half of employers (59%) have provided or plan to provide managers with training on supporting employee emotional and mental well-being.
To help working parents navigate childcare disruptions caused by school and daycare closures, 45% of employers are allowing flexible work schedules. However, employer-provided childcare assistance remains limited. Even among the largest employers (those with 5,000+ employees), only 16% offer financial subsidies for in-home childcare, and just 12% provide backup childcare benefits.
Takeaways
- Prioritizing Employee Well-being: Many employers are focusing on supporting their workforce through the pandemic challenges by refraining from cost-saving changes to health plans.
- Rise of Digital Health: Employers are increasingly adopting digital health resources for their convenience, safety, and efficiency.
- Uncertain Cost Projections: The outlook for 2021 cost projections is uncertain, influenced by potential demand for healthcare systems aiming to recover lost revenue. Employers must strike a balance between economic factors and empathetic considerations, which remain pivotal in their decision-making processes.
Health On Demand
Mercer’s “Health on Demand” survey reveals crucial insights into employee benefit trends for 2021. The findings highlight the growing importance of comprehensive, accessible, and digitally integrated benefits in fostering employee well-being, satisfaction, and retention.
- Comprehensive Benefits for a Positive Pandemic Experience: Employees with comprehensive benefits were significantly more likely to view their pandemic experience positively. Only 11% of those without such benefits felt the same way, compared to 25% who had access to comprehensive options.
- Digital Healthcare in Demand: The desire for digital healthcare solutions is clear. 80% of employees want access to features like video consultations and wellness apps.
- Equitable Benefits for All: A significant concern remains: 24% of employees are unsure about affording necessary healthcare. This underscores the need for equitable benefit delivery.
- Varied Benefits Drive Loyalty: Employees with access to diverse well-being resources are demonstrably more engaged and loyal. They are 35% less likely to consider leaving their jobs, feel 27% more confident in accessing healthcare, and report 11% higher energy levels.
- Mental Health Matters: Half of all employees prioritize investment in mental health benefits, highlighting its growing importance.
- Digital Here to Stay: The Future of Healthcare Access is Digital: 80% of employees plan to continue using telemedicine and over half value apps for managing their health.
- Retention Through Benefits: The connection between benefits and employee loyalty is clear. Companies offering extensive health benefits see a significant decrease in employee turnover, with 59% of those employees less likely to consider leaving compared to 24% with limited benefits.
Conclusion
Looking ahead, uncertainties in cost projections underscore the need for employers to balance economic considerations with empathetic support for their workforce. By leveraging digital innovation and strategic benefit design, employers can navigate these challenges effectively, ensuring continued resilience and support for employee well-being in the post-pandemic era. For more information, check out Wellness360.
