2023 benefits outlook: Building a stable, engaged workforce with an eye on costs
Economic volatility and rising inflation are top concerns for U.S. businesses in 2023, placing increased pressure on human resource professionals to design cost-effective benefit plans while meeting the changing benefit expectations of a multigenerational workforce. Employers have faced similar economic challenges in the past but are now confronted with the lingering impact of the COVID-19 pandemic, which has forever altered the workforce.
Alera Group’s 2023 Employee Benefits Market Outlook provides insight into the current trends influencing employee benefit offerings, and offers strategies and approaches employers can use to address challenges in positioning their organization for future success. In today’s labor market, it’s essential for employers to pay close attention to what their employees need and build benefit plans accordingly – or risk losing out on top talent.
Top trends influencing employer-sponsored benefits
Costs associated with health care and pharmacy benefits continue to rise, placing significant pressures on employers. In 2023, medical plan costs are expected to increase by about 7% and pharmacy costs by 9%, according to the Market Outlook. The use of specialty drugs and obesity medications are major cost drivers, and employers need to find ways to get ahead of this trend.
Some employers are placing stricter preauthorization requirements on certain medications, including diabetes drugs, to combat off-label usage. Tiered pharmacy formularies, which divide medications into groups based mainly on cost, are gaining popularity. About 47% of employers offered tiered pharmacy formularies in 2022, up from 22% in 2020. Employers also continue to make changes in medical plan design to offset cost increases. Common tactics include offering high-deductible health plans with health savings accounts and increasing deductibles and out-of-pocket maximums.
- The lingering impact of COVID-19
The fallout from the pandemic is associated with an increase in mental health concerns, leading to higher levels of stress and feelings of burnout that can result in reduced productivity and high turnover. At the same time, access to mental health treatment is constricted, as the number of qualified mental health providers continues to decline. To fill the gap, employers are increasingly leveraging teletherapy. In addition to securing access to much-needed services, telehealth consults are often less expensive than in-person visits or calls and can reduce overall costs.
- The regulatory landscape
The regulatory landscape continues to pose a challenge for employers who have faced unexpected compliance-related fees over the last few years. Ongoing variations in state laws and regulations are also adding pressure to employers, particularly those who operate in multiple states.
Several states have paid family and medical leave legislation going into effect in 2023, while others have laws under consideration. Some employers are exploring integrating Disability Insurance with family and medical leave to boost FMLA compliance. Employers can anticipate fee hikes from third party vendors that support regulatory compliance, including COBRA administrators.
Creating individualized benefit offerings
Employers are taking a holistic approach to benefits to meet the demands of today’s workforce. Although health and wellness benefits remain a top priority, employees expect more individualized offerings.
To address the unique needs of each generation in the workforce, some employers are getting creative by offering new options such as lifestyle spending accounts to meet employees where they are in their lives. LSAs are employer-funded accounts that allow employees to use after-tax funds on expenses not covered by traditional benefits, such as gym memberships, financial planning, and elder care and child care expenses.
Voluntary benefits are another way employers can meet the needs of the workforce without increasing overall costs. Through expanded voluntary benefits, employees can create individualized benefit packages to support their health, well-being and financial needs. Millennials and Gen Z workers, in particular, seek benefits that support work-life balance and align with their life stage, such as student loan repayment, infertility treatments and professional development.
Forward-thinking organizations view today’s challenges as an opportunity to evaluate and build a competitive benefits program that will support a stable, engaged workforce. The focus should be on building flexible, cost-effective programs that can be tailored to the individual needs of each employee.
Education remains a critical success factor. Through education, employers can ensure employees feel valued and supported by the organization, and empowered to make the best choices to meet their needs.
Employers will be faced with some difficult decisions in the year ahead as they navigate through the current economic uncertainty. Keeping abreast of benefit trends and understanding the needs of the workforce will enhance recruitment and retention, and help position the organization for the future.
Sally Prather is executive vice president and employee benefits practice leader at Alera Group. She may be contacted at [email protected].
© Entire contents copyright 2023 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.
Author: financial services often ‘a barbaric culture’ that worships money
Despite a rough economy, setting financial goals a game-changer for some consumers
Health/Employee Benefits News
Life Insurance News