As open enrollment season nears, many plan sponsors are considering costs and employee needs before renewing contracts with health and voluntary benefit providers.
During last year’s open enrollment window, many employers leaned into remote-friendly benefits and virtual care as employees worked from home. Although offices across the United States are reopening or making plans to reopen, plan sponsors and providers alike are still more accepting of virtual care, experts say.
“We’re seeing a significant increase in telemedicine and telehealth, both in [self-funded] plans that are offered by employers and with most health providers embedding telehealth in,” says David Reid, CEO and cofounder of Ease, a human resource (HR) and benefits software solution.
Reid notes that virtual care and telehealth address employee needs and reduce costs. When virtual care took off during the height of the COVID-19 pandemic, many in the benefits industry realized its potential, Reid says.
“There are so many illnesses that can be diagnosed this way. A lot of the drivers of cost, including time, can also be handled much more differently in this environment,” he says, adding that “these factors have been impetuses to adopt this kind of change.”
The pandemic has also highlighted the need for flexibility, whether that’s flexibility in where employees are working, their choice of benefits or where they can receive care, says Kim Buckey, vice president of client services at DirectPath, a benefits education, enrollment and health care transparency firm. She relates this newfound desire for pliability to a potential expansion in voluntary benefits.
“We are going to see more interest in voluntary benefits than we ever saw before,” Buckey says. “Employees are going to be looking for how their employers are supporting them, whether it’s with mental health benefits, additional resources for child care and elder care support, hybrid work situations, or even full-time remote work.”
Consider an Array of Benefits
Among the voluntary benefits Buckey anticipates seeing in 2022 are contagious disease riders, critical illness plans, hospital indemnity plans, expanded employee assistance programs (EAPs) and increased mental health support.
Reid expects employers will transition away from trying to simplify or personalize the benefits menu with what they think their workforce needs to offering a wider array of voluntary benefits. Due to the combination of varying employee needs and an evolved marketplace with a wider range of products, not every employee will use or even need the same benefits, he says. Coming out of a pandemic, employees are more conscious of their health care needs, especially when making decisions that significantly weigh on their health. They’re going to be picky when it comes to the benefits they want, he says.
“It’s becoming more challenging for an employer to pick five or six benefits and expect that to meet all of the potential employee needs,” Reid explains. “Instead, [employers] need to pick core benefits, then include a very broad selection of additional offerings for employees that cover a range of different things.”
Such benefits can range from accidental policies and critical illness plans to pet insurance. Reid says employers should consider not only what benefits to offer but also the level of affordability of those benefits for their workforces.
Overwhelmed with more than a year’s worth of dodging competing hurdles, employees are physically, emotionally, mentally and financially drained. They want holistic well-being programs, Reid says. “They’re more tuned in to what offerings are going to be of interest and value to their family.”
Cost Considerations When Negotiating Contracts
In terms of negotiating health insurance contracts with providers, a new transparency law that went into effect on January 1 now requires hospitals and health care systems to publicly display charge-master pricing and negotiated pricing. This may cause some shifts in carriers and could raise negotiating pressures as contracts are renewed for the year, Buckey says.
Leah Vetter, area assistant vice president of the Iowa, Nebraska and South Dakota regions of Gallagher, encourages plan sponsors to focus on data and transparency with regard to medical and pharmaceutical benefits. Vetter argues that because health care services and procedures were likely delayed or skipped throughout 2020, a number of employers likely paid more in premiums than in actual claims.
Because of this, Vetter recommends employers review their claims utilization data for 24 ongoing months or more, and estimate potential target loss ratios, which she says are typically 80% to 85% for fully insured plans.
“If your plan ran below the target loss ratio, these unused funds should be applied and rolled forward and future premium rates should be set accordingly,” Vetter says. “If your loss ratio is at 80% or higher, it is important to understand where the cost is coming from.”
Vetter urges plan sponsors to ask questions such as: Were there a handful of or even one or two high-cost claimants? Was it pharmacy cost, and specifically specialty pharmacy cost that led to a discrepancy? In this case, it’s essential to know the pooling point or specific/individual stop-loss level being applied to your plan and if that level is appropriate for your plan size, she says. This data can be crucial in ensuring the plan is priced appropriately.
Buckey also says the impending Supreme Court ruling on the Patient Protection and Affordable Care Act (ACA) could impact employers and employees. Depending on the outcome, this could shift employers’ priorities in the next year, as the court has until June 30 to determine its ruling. “The potential impact of reversing the health care marketplace can cause a huge ripple effect with more members of the workforce uninsured or underinsured, which can in turn drive up prices and ripple down to employers,” she says.
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