Employers adapting benefits design strategies as COVID-19 drags on
Designing a benefit plan for 2021 seems like flying an airplane while building it.
Mark Fendrick has a simple message for employers as they grapple with providing affordable health coverage: “Americans and employees don’t care about health-care costs,” said Fendrick, director of the Center for Value-Based Insurance Design at the University of Michigan “They care about what it costs them.”
Fendrick participated in a breakout session on “Adapting Design Strategies During the COVID-19 Era” as part of the National Alliance of Healthcare Purchaser Coalitions’ virtual 2020 Annual Forum. Speakers agreed that many employers and benefits providers are navigating uncharted waters.
Related: Employers to experience lingering impact of COVID on benefits costs
“We need to remind folks as we roll into November, December and January that three-quarters of Americans have taken a financial hit,” Fendrick said. “Half of Americans have postponed high-value care. More than two-thirds already have told us that out-of-pocket costs are important to their decision to seek testing and treatment. If you are unfortunate enough to be hospitalized with COVID-19, your out-of-pocket responsibility averages over $1,000.”
Although nearly every employee has been affected to some degree by the fallout from COVID-19, the impact is not the same for everyone.
“We were generally aware of inequities in benefit design pre-COVID,” said Bruce Sherman, medical director for the National Alliance. “It’s pretty clear that COVID has raised our awareness of inequities in access to use of health care, both from a socioeconomic status and more importantly from a systemic racism perspective as well. We don’t appreciate the ways in which health care is being used among individuals in different socioeconomic categories.”
For example, only 10% or fewer of employers provide any type of subsidy for lower-wage workers from a benefits design standpoint. “Whether you are earning $250,000 or $30,000, 90% of employers essentially are paying the same for their health benefits,” he said. “A one-size-fits-all solution doesn’t necessarily get people to where they need to go.”
Tom Ferraro, vice president of HR benefits for MetLife, said many people have foregone or postponed testing or treatment because of COVID-19.
“If we go back to March, industry experts initially projected an additional 8% increase related to COVID, on top of typical trends,” he said. “What we have seen at MetLife is a 4 to 5% decrease. Why is that?
“The key driver has been the volume of avoided or delayed medical claims. Fewer people are driving, so there were fewer accidents. Kids weren’t playing sports, so there were fewer sports injuries. Those delayed claims just have not been offset by the costs associated with COVID. We are concerned. because people are just not getting the treatments and screenings that they need.”
Costs have plummeted for Johnson & Johnson and its large international workforce, said Rosa Sexton, head of global health and welfare benefits.
“We have seen a decrease in costs over 2019,” she said. “We were trending 8% below costs up until August. As of September, we are trending about 6%. While we are down in many of the major categories in terms of medical care, our mental health spending is up.”
Regular feedback from employees is more important now than ever, she said.
“Our employees are our greatest asset, and it’s very important that we meet their needs and that we hear them,” Sexton said. “It’s really important as a company to ensure that our employees have affordable access and choice so they can get the care they need. We very much support people getting the right care and high-quality care.”
As 2021 approaches, there are no simple answers for employers. Designing a benefits plan at times may seem like flying an airplane while building it.
“We’re in a new normal, and we have to figure out what the future looks like,” Fendrick said. “Here is my call to action for employers. Go further and go faster on expanding access and affordability to high-value services. Reduce deductibles for those services. Identify and measure low-value care to pay for the costs of the generosity. Implement clinically driven payment models and benefit designs that will allow you to reallocate your funds to things that make your employees healthier.”
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