How COVID-19 may significantly impact employers' benefits plans

The COVID-19 outbreak has severely disrupted the U.S. business market, and in turn, has the potential to significantly impact the workplace benefits industry. Nearly two-thirds of employers that offer insurance benefits were either temporarily closed or operating at reduced capacity in late May, and more than half either had made or were considering making staffing changes such as furloughs or hiring freezes.

These operational changes could make it difficult for businesses to continue administering their benefit plans and reduce the number of employees who have access to workplace coverages. At the same time, the pandemic is bringing the importance of various insurance protections into sharper focus. To learn more about how COVID-19 will influence employers’ plans for their benefits, LIMRA surveyed over 1,000 U.S. employers that offer benefits in late May 2020.

Although revising their insurance benefit programs is unlikely to be employers’ highest priority in the midst of a pandemic, this crisis is likely to prompt longer-term changes for some businesses. Approximately one quarter of employers say the coronavirus outbreak has made them more interested in making changes to their insurance benefit programs within the next 18 months, with large employers and those that have been disrupted by the pandemic more interested in making changes.

Some of these changes may not be for the better. Four percent of employers have already dropped an insurance benefit as a result of COVID-19 and 16% are considering doing so. Employers are most likely to consider dropping dental or vision coverages, in part because these are among the most frequently offered benefits in the first place.

On a more positive note, 40% of employers say the pandemic has altered their views of the importance of the benefits they currently offer, and these are almost universally shifts towards viewing benefits as more important now. Benefits that are closely associated with health care, such as hospital indemnity, critical illness, and major medical plans, are the most likely to have undergone a boost in perceived importance (despite the fact that most critical illness plans are unable to cover coronavirus-related claims). These shifting perceptions may discourage employers from dropping benefits in response to other financial challenges.

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In addition, most employers are unlikely to switch benefit carriers in response to the pandemic. More than two-thirds of employers say the pandemic has had no impact on their likelihood of switching any insurance benefits to a different carrier within the next 18 months. Only 11% say they are more likely to switch carriers because of COVID-19, while 13% are less likely to switch. This is probably due to the fact that employers are generally pleased with how their carriers have responded to the COVID-19 crisis — 65% say they are highly satisfied with the support they’ve received from their carriers in response to the pandemic, while only 2% say they are actively dissatisfied.

To keep satisfaction high, carriers and brokers should continue looking for ways to assist their customers throughout this crisis. Employers are most interested in receiving help communicating with their employees about the pandemic, staying informed of relevant COVID-19 legislation, and having better online self-service options for their employees.

In addition, the large number of companies that have shifted employees to remote work will create an increased need for electronic benefit enrollment and communication options during the next open enrollment period. By continuing to proactively support employers though the pandemic, carriers and brokers can help to ensure that any benefit changes employers choose to make will be for the better.

Kimberly Landry is assistant research director of workplace benefits research at LIMRA.