Benefits cost pressures are rising - here's how you can handle it

Economic pressures from COVID-19 have made managing benefits costs a greater challenge than ever before. Fortunately, there's a lot employers can do to help their organizations build resistance to cost increases.

In this post:

• Healthcare costs are projected to rise at a higher-than-normal rate due to increased activity related to COVID-19.
• Organizational wellbeing needs are significant, including greater demand for mental health support. Meeting these needs could be key to staving off oncoming cost increases.
• Supporting employees through data-based benefits decisions could yield higher satisfaction and more efficient use of benefits.
• Implementing one or more of six cost-saving strategies outlined by HealthEquity could help your organization realize more immediate results.

Benefits costs are always a challenge to manage. Since 2010, the average premium for family health coverage has risen more than 50 percent, finally topping $20,500 in 2019.

This year, however, cost pressures are particularly acute. The COVID-19 pandemic promises to constrain budgets while driving healthcare costs even higher. Although firm data has yet to be established, an analysis from Willis Towers Watson projects that rising healthcare claims could drive benefits cost increases as high as 7 percent - outpacing the 5 percent increase previously anticipated for the year.

Organizations aren't helpless in the face of cost increases, though. There are plenty of actions you can take to promote organizational wellbeing, stave off steep cost increases and realize meaningful savings.

Create a culture of wellbeing

The COVID-19 pandemic has had serious implications for personal wellness. Physically, individuals are eating more and moving less. Researchers from the University of Copenhagen and Aarhus University have warned that the prolonged COVID-19 lockdowns could cause a rise in obesity, which is associated with a higher risk of heart disease, diabetes and cancer.

Mental health issues are also on the rise. A poll from the Kaiser Family Foundation earlier this year found that nearly half of adults (45 percent) reported their mental health has been negatively impacted due to the virus. Social isolation and loneliness contribute to poor mental health, particularly for individuals who are sheltering in place or working from home. Anxiety over job or income loss is also serious, particularly among those with lower incomes. The same KFF poll found that 35 percent of those making less than $40,000 reported experiencing a major negative mental health impact, compared to just 20 percent of those making $90,000 or more.

Both physical and mental health reinforce each other. Mental health disorders are common comorbidities among patients with serious physical health conditions, and mental health issues often have physical implications that can harm overall health. Substance abuse is also a possibility.

These conditions can combine to disrupt workplace productivity, lead to higher healthcare claims and ultimately cause increased benefits costs.

Reinforcing your organization's wellbeing or wellness program can help ease or even prevent these negative outcomes. They have been shown to reduce absenteeism and medical costs in excess of what they cost to run. At the same time, the 2018 MetLife U.S. Employee Benefit Trends Study shows that employees are increasingly looking to their organization for wellbeing assistance.

To reinforce and tailor your wellbeing program to meet the needs of the pandemic, consider making services available via video and on-demand resources. Many exercise programs have started streaming courses rather than promote gym memberships, and simple workout equipment like weights and resistance bands can be sent to your people to help with at-home fitness. As back pain is a top complaint among individuals working from home, subsidies or reimbursements for standing desks and ergonomic furniture are also helpful.

Organizations can also promote the availability of telemedicine services for both physical and mental health treatment. The reach of telemedicine has been elevated by the COVID-19 pandemic, receiving increased attention and even an injection of $425 million through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to expand availability for substance abuse and mental health services. The CARES Act also increased telemedicine accessibility to individuals covered by a health savings account (HSA)-qualified health plan. Now, HSA-qualified health plans have the option of covering telemedicine before the deductible without compromising policyholders' ability to contribute to their HSAs. Publicizing the availability of these services and illustrating how your benefits plan can support them will help your people gain access to critical healthcare management.

By taking steps like these, your organization could head off potential problems and dramatically reduce future benefits costs.

Help your people make better benefits decisions

Organizations can also decrease healthcare spending - and ultimately benefits cost increases - by helping their people choose and enroll in the best benefits programs.

According to Willis Towers Watson's Best Practices in Health Care Employer Survey, top-performing organizations spend $3,548 less per employee annually by offering meaningful and significant choice in their benefits programs (among other strategies).

Offering a number of health benefits options, as well as voluntary benefits like critical-illness insurance, long-term care insurance and student loan refinancing and consolidation allows your people to choose a benefits package that is tailored to their needs. When benefits are personalized, there is less waste in benefits spending because people have chosen benefits they value and will use.

This is particularly true now. As a result of the COVID-19 pandemic, the way people think about and use benefits has likely changed. Your organization may want to organize employee surveys and focus groups to determine how employees view their wants and needs, and how they expect benefits to play a role in answering them. You may be able to reduce waste by culling less popular options and introducing cost-saving options like HSA-qualified health plans, which allow your people to start building personal health savings.

Your people will also need support in making benefits decisions. Benefits - particularly health benefits - can be difficult to understand. Though organizations should not assume the role of recommending one benefit over the other, you can provide your employees with tools that promote personalized enrollment decisions. According to the Willis Towers Watson survey, nearly 60 percent of top performers provide these tools compared to just 45 percent of similarly sized organizations with higher benefits costs.

Detailed webinars with question-and-answer sessions can give employees a good overview of their options. You can also facilitate open hours between your people and your benefits team. Be sure to include non-employee household members in your outreach efforts as well, as these individuals play a meaningful role in benefits decisions.

You should also consider tailoring your usual practices to fit the current work-from-home environment. Remote employees have different needs, and your email campaigns and enrollment materials should reflect that. Greater detail and as much face-to-face interaction as possible can help smooth the transition.

Evaluate your programs with data

Organizations need data-driven insights into how employees are using their benefits and interacting with wellbeing initiatives. Tracking this data will help you evaluate your offerings against industry peers and identify opportunities for improvement.

Yet less than half (46 percent) of employers use analytics to evaluate their benefits strategy and only 11 percent use artificial intelligence and machine learning. Without this data, these organizations are at least partially blind as to their program's effectiveness. They may continue with wasteful benefits choices or implement new programs that don't fit their employee base.

Data-based evaluation can help your organization avoid these pitfalls and potentially uncover benefits cost savings. By performing a regular evaluation of your program, you can monitor use and evaluate effectiveness.

You can also use data to tailor wellbeing initiatives to the specific demographics in your workforce. By segmenting your people by different health markers, you can deliver targeted messages or programs to specific subgroups. You can also gauge the degree to which your employees engage with their benefits or your wellbeing program, identifying areas for improvement or elimination.

Over time, you can realize significant savings as your benefits package becomes more efficient and relevant for your people.

Implement cost-saving strategies in your benefits program

If your organization needs immediate benefit cost savings, there are several strategies you can implement to find relief:

• Offer an FSA carryover. For organizations offering high-deductible health plan (HDHP) with a flexible spending account (FSA), offering an FSA carryover is a great way to realize cost savings for your team. An FSA carryover allows employees to roll over up to $500 into the next plan year ($550 into 2021, with new IRS relief). This increases the amount of tax-advantaged funds to employees and encourages more enrollment in cost-saving FSA benefits.
• Go full replacement HSA. Replacing your traditional health plan with an HSA-qualified HDHP saves a significant amount of money. In 2019, family HSA plan premiums were more than 13 percent lower than those of preferred provider organization plans (PPOs).
• Implement an HSA match. Matching HSA funds to employee contributions cuts costs and helps employees build savings. According to HealthEquity data, 79 percent of organizations using a match had lower HSA contributions than organizations using a seed-only contribution strategy.
• Execute active open enrollment. The upcoming open enrollment season is a great time to leverage the value of active open enrollment. A HealthEquity analysis of 700 employers showed that active open enrollment yielded a 39 percent increase in HSA adoption over seven years, leading to savings in overall monthly premiums.

For more detail on these and other cost-saving strategies, check out the HealthEquity whitepaper Six Strategies to Drive Down Benefits Costs in 2021.

Let HealthEquity help you manage benefits costs

Partner with HealthEquity and let us help you unlock immediate cost savings during this challenging time. While you work to transform your organization and take back power over budgets, we streamline benefits processes, create greater efficiency and lower total costs.

More than 100,000 organizations use our scale to tap into bundled pricing and treat their people to a seamless benefits experience that’s perfect for 2020 and beyond.

HealthEquity does not provide legal, tax or financial advice. Always consult a professional when making life changing decisions.

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