Employers re-examining benefits when planning for post-pandemic realities
Employers will be taking a closer look at tools to hold down costs, such as eligibility and claims audits and narrowing provider networks.
The economic downturn that accompanied the COVID-19 pandemic is causing companies to take a new look at their benefit packages, a new study from Gallagher’s concludes. The “seller’s market” of employee benefits—which led U.S. employers to compete for talent by offering generous benefit packages, is changing rapidly, the report suggest, as companies balance the demand for benefits with new budgetary realities.
The Gallagher’s 2020 Benefits Strategy and Benchmarking Survey Report gathered data from 3,921 employers from December 2019 to May 2020, and also used data from “pulse” surveys in April and July 2020. The researchers found that companies are responding to economic stress with a range of strategies. The first reaction was to cut payroll, the data suggests, but the survey found companies are also re-examining their approach to benefits.
Related: Infographic: Pandemic has employees rethinking the value of benefits
“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,” said William F. Ziebell, CEO, 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.”
A period of reassessment
The analysis found that employers turned first to payroll as a way to cut costs, as the economy cratered during shutdowns due to the pandemic.
Among these steps were salary freezes for executives and management (43% of respondents) and pay freezes for non-management employees (42%). In addition, by July of this year, a majority of employers (58%) had furloughed (29%) or laid off (29%) at least some of their workforce.
The next step, the survey suggests, could be a re-examination of benefits packages. Although most of the employers surveyed (79%) said they planned to offer the same health care benefits in 2021 as they had this year, the full impact of the pandemic is not yet known, including how much insurers may adjust premiums to cover the costs created by the pandemic. And other areas such remote working and paid time off policies could see adjustments as companies continue to respond to the pandemic.
The survey showed that employers had concerns about the high costs of health care services (67%) and specialty drugs (41%). “These challenges along with COVID-19 related concerns about increased operating costs and lower revenues, may force many organizations to adjust their 2021 benefits and compensation offerings,” the report said. “Employee cost sharing for medical benefits — which has remained relatively flat in recent years — may include unavoidable increases for many employers in 2021. Likely these would be in the form of increased premiums or greater implementation of high deductible health plans.”
The researchers also suggested that employers may take a closer look at tools to hold down costs, such as eligibility and claims audits; narrowing provider networks; and using designated centers of excellence. The study said that in 2020, the overall use of these types of value-based strategies was reported by 31% of employers—but for large employers, the rate was 58%.
Changes in technology, communication, and remote work expected
Even before the pandemic emerged, the survey found strong majority of employers (69%) said they were planning on investing in technology platforms by 2022. That trend may be spurred on by the new emphasis on working remotely.
Early in the pandemic, as states implemented stay-at-home orders, many employers were able to provide more flexible work arrangement. The study found 77% of companies implemented extensive work-from-home arrangements, and 42 provided flex-scheduling options. The report found that nearly 86% of companies said some form of working from home would continue after the pandemic, and 59% said flex scheduling would remain an option as well.
“This wave of remote working began as a forced experiment, and the majority employers found the practice works,” the report said. “However, it’s important to note managers need to pay close attention to employee engagement and workplace culture to ensure employees’ career wellbeing is still being supported and teams remain connected, efficient and productive. This may require virtual development, training, and mentoring.”
One technology that became widely used was telemedicine. According to the survey, telemedicine was the top health care cost-control tactic in 2020, with 59% of employers providing employees with a telehealth option. “COVID-19 has accelerated telemedicine adoption rates, providing employees with a socially distanced care option that is on-demand and less costly than standard office visits or trips to emergency rooms and urgent care facilities,” the report said.
With many workers no longer at the workplace itself, communications between employers and workers will be more important than ever, the report noted. Although many companies use traditional measurements to measure communication success, tactics such as employee-initiated feedback (used by 63% of employers) and satisfaction and engagement surveys (used by 45%) may not be adequate, the study said. Such measures may not offer useful data on what is and isn’t working—data analytics such as measurements of portal visits may offer more helpful insights into employee needs, the study said.
“Whether working from home or in the workplace, employees continue to bring their whole selves to work. That’s especially true in today’s climate where workers can easily become overwhelmed by personal and professional challenges,” Ziebell said. “More than anything, employees want stability and a work culture that prioritizes respect, equity and workforce well-being and provides a foundation for trust, commitment and attachment to their organization. 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.”
Read more: