The change & disruption of 2022, as opportunities grow heading into 2023
The benefits industry catches its breath after a year filled with change and disruption, as opportunities abound heading into 2023.
“Our clients, like all companies, are getting hit from all directions with skyrocketing costs, from materials to wages,” says Suzy Alberts, account director for Comprehensive Benefits Inc. in Southfield, Michigan. “When you pile on often double-digit increases to their health insurance plans, this only exacerbates the issues. However, benefits are vital to attracting and retaining employees. Our challenge is to bring solutions that manage the cost without stripping the benefits. Adding enhanced benefits that support the core benefit plans can make all the difference in employee satisfaction.”
As the year winds down, industry leaders are looking back on recent developments and ahead to the challenges and opportunities of the coming year. Even by the standards of the fast-changing benefits industry, 2022 has been eventful, with the economy becoming top of mind for most employers.
“I think the greatest challenge facing the benefits industry will be how employers respond to new economic and labor market pressures in 2023,” says Monica Martin, senior director, integrated and global total rewards leader, at Willis Towers Watson. “For example, how will the industry respond to cost pressures that may come from rising health care costs or from recession fears? How will the industry respond to continued pressures for attraction and retention of talent, assuming the labor markets don’t soften? And how will they do all of these things without backsliding on the progress they’ve made around diversity, equity and inclusion, wellbeing, and becoming a source of security and stability for their employees?”
Meanwhile, many employers continue to struggle to recruit, retain and reward a talented workforce.
“It is no secret that many businesses have experienced tremendous turnover, and not only is that costly for the business, it also weighs on overall morale,” says Chelsea Ryckis, president of Ethos Benefits in Orlando. “We see employers wanting to dramatically improve their benefit offerings, and most of them are fueled by one of two things. They are exhausted with the turnover and want to not only attract better talent but also improve morale and increase retention of the current workforce. They see their employees struggling with the impacts of inflation and want to offset their out-of-pocket costs, both by implementing richer plans and increasing employer contributions, if possible.”
Rulings and regulations
The U.S. Supreme Court threw employers a curveball with its Dobbs v. Jackson Women’s Health decision, which returned the issue of abortion to the states.
“This legislation had the most significant impact on our business, as many of our clients are in the states where this ruling took effect,” Ryckis says. “We had many calls with clients, attorneys and vendors to understand what options, if any, employers had. As we provide enhanced communication tools for our employer clients, it was natural that many of them inquired about the type of messaging to send their employees regarding the legislation.“
This kind of communication is especially challenging for companies that do business in multiple states. Regardless of the issue, dealing with a patchwork of regulations can be both costly and time-consuming, says Linda Keller, national COO and employee benefits practice leader for HUB International.
“Another thing that has really affected clients this year is the movement toward regulation at the state level rather than the federal level,” she says. “For multi-state clients, that is becoming more and more challenging. Eight states have a paid family leave plan in place, and another three have a 2023 start date, so you are going to have 11 states with their own PFL requirements, and 26 more have proposed legislation.
“So if you are a multistate employer, especially if you are smaller and don’t have the staff, your ability to figure out how to manage federal, state and even local laws, is becoming much more challenging. How do you treat each employee as an individual and manage their needs as they need to be managed?”
Meanwhile, The Consolidated Appropriations Act tops the list of significant new regulations for most benefits advisors.
“We have disclosed compensation since we started our agency in 2017,” Ryckis says. “Now with the CAA, all advisors are required to do so. It has been interesting to see the ways in which some agencies have creatively chosen to disclose or not disclose at all. The topics of transparency in compensation, drug coverage, and quality of care have been discussed more this year than ever before.”
Mental health parity, already an important issue for many employers, has also taken on added importance.
“CAA requires health plans to document how they comply with the non-quantitative treatment limitation rules of the Mental Health Parity and Addiction Equity Act,” says Jennifer Spiegel Berman, CEO of MZQ Consulting LLC in Pikesville, Maryland. “Merely documenting this is a huge lift for plan sponsors and their vendors. In the process, many are finding significant gaps in compliance. Paired with active Department of Labor and state enforcement activity, Mental Health Parity rules are making a bigger impact today than they did when they initially passed over a decade ago.”
New regulations on transparency and surprise billings will also be felt in the coming year and beyond.
“The rollout of the transparency in coverage rules began in 2022 with the release of machine-readable files, including all negotiated rates,” Berman says. “These rules will have an even bigger impact as consumer-facing advanced EOB tools go live in 2023.”
A less tangible but equally important development is the ongoing shift in power dynamics between employers and workers. “A benefits program in 2023 not only needs to be more robust than ever before, but it also needs to communicate the company culture and values to attract and retain employees,” Ryckis says.
Looking ahead
Cost management will likely be the overarching theme for employers and advisors in 2023. Several issues now on the radar screen could also have major impacts.
• “SECURE Act 2.0, if and when passed, could be a significant event for plan sponsors looking to increase the utility and flexibility of their retirement programs,” Martin says. “We are also watching closely for new legislation on Mental Health Parity and Addiction Equity Act changes commensurate with the administration’s stated priorities.”
• “The rollout of the new rules from the CAA will continue into 2023 and beyond,” Berman says. “The challenges these rules present also create big opportunities for solution providers. Change can be intimidating, but it also creates a tremendous catalyst for improvement.”
• “One of the biggest legislative threats to our industry is the potential of losing the employer tax exclusion for the cost of benefits,” Alberts says. “Congress is always looking for money to pay for programs and many see the tax deduction received by employers as a tempting target for reallocation. This would be devastating to our clients, so we must stay vigilant in this fight. We must also continue to work on relief from employer reporting requirements for other governmental programs that cause hardships for our clients.”
• “The most obvious challenge, because it is a recurring one, is the rising cost of employer-sponsored plans,” Ryckis says. “The second, less-obvious challenge will be employers and advisors taking the necessary steps to create inclusive benefits.”
The good news for benefits advisors is that every unmet client need is an opportunity to provide solutions and solidify relationships.
Related: Bracing for impact: New regulations, record inflation and a possible recession
“Creative efforts go a long way in helping clients maintain the health of their workforce and create an environment where employees want to work and thrive,” Alberts says. “We have to stay open to new products and ideas, and not be afraid to embrace change.”
“Personally, I am most excited to see how artificial intelligence with claims analysis and prediction modeling grows in 2023,” Ryckis says. “Our industry is ripe with opportunity in 2023. Mediocrity is becoming less and less accepted by employers, and it is forcing the caliber of advisors to rise. Advisors need to have the financial and human impact of a benefits package down to a science and continue to innovate on efficiency to stay relevant.”