Increased spending and COVID-19 impact 2020 benefits landscape
The benefits challenges employers face may not be changing much, but COVID-19 will affect how employers tackle them.
The outbreak of the COVID-19 pandemic that swept across the US mid-March has influenced many aspects of the benefits landscape in 2020, as we witness overall increased spending, particularly in terms of mental healthcare costs, according to the “US Benefits Trend Report 2020,” recently released by insurance broker and consultant NFP.
Containing the costs of medical and prescription plans, helping employees manage financial stress, ensuring employees are protected, and supporting a healthy and engaged workforce are not new objectives, but COVID-19 will affect how employers work to achieve them, according to the report.
Related: 7 best employee benefits to provide in a recession
The pandemic is also accelerating a digital transformation in how employee benefits are accessed and managed, as more services are moving to a virtual platform. And, “companies that prioritize employee well-being will rise out of this pandemic stronger,” said the report.
NFP projects that health care spending will increase by an average of 5.4% annually over the next decade to nearly $6.2 trillion by 2028 and will also comprise 19.7% of GDP in 2028, compared to just 17.7% in 2018.
Mental health is becoming more significant as nearly half of Americans report an adverse impact on their mental health due to the COVID-19 crisis. Employer mental health offerings have increased from 34% in 2014 to 75% in 2018, and trend NFP expects will continue.
Compliance with the Families First Coronavirus Response Act (FFCRA), signed into law in March, will be key in 2020, said the report. The Act encompasses emergency paid sick leave rules and emergency paid FMLA expansion for employees absent from work for COVID-19 related reasons. The CARES Act further guaranteed plan coverage of COVID-19 testing and vaccines, and expanded telehealth coverage on a temporary basis.
Changes to the Affordable Care Act through the legislative process and in the courts may also have an impact in 2020.
“This fall, the US Supreme Court will hear the latest challenge to the ACA in Texas v. the US, which challenges the ACA’s individual mandate on constitutional grounds following the elimination of its penalty tax,” said the report.
Health care delivery models are also shifting in 2020, as direct primary care and virtual care have become more prevalent, according to the report.
Direct primary care, which is relatively new, is a model for delivering primary care in which the doctor charges each patient a monthly fee, although not all services are covered under the fee. According to the report, over 300,000 American patients are currently receiving care under this model. Meanwhile, the number of employers offering telemedicine has increased from 7% in 2012 to 96% in 2018.
The report advises employers to watch state legislative changes that may affect how their leave plans are administered: “While creating compliant leave policies, employers should look at their practices ‘holistically’ and ensure that any type of employer-paid leave (company-paid parental leave) is offset by state paid family leave benefits whenever possible.”
In order to stay competitive, companies must embrace the digital transformation. “Carriers and brokers are focusing on streamlining procedures, adopting digital processes such as automated underwriting, digital payments, collaborative and connected care delivery, and digital enrollment to improve access to data needed to perform business-critical tasks,” said the report.
Pharmaceutical costs for carriers and patients remain a significant and growing challenge, warned the report, while preserving the quality of care. In fact, specialty pharma is growing particularly quickly, at a rate of 58% versus 42% for traditional. As the report noted, “the global biosimilar market is expected to grow from $5 .95 billion in 2018 to $23 .63 billion in 2023.”
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