Employers Are Focused on Remodeling Workplace Benefits

Among large employers that responded to a Mercer survey, 11% offer free employee-only coverage in at least one medical plan option and another 11% are considering it.

Employers are focused on enhancing health and benefits packages to recruit and retain workers, according to “Health & Benefit Strategies for 2023,” a Mercer survey report.

The survey, which examined how companies are reworking benefit programs as they engage in a battle for talent exacerbated by the current tight labor market and volatile economic conditions, found that 65% of all employers that responded to the survey plan to make benefit enhancements for 2023.

“Employers are grappling with finding a delicate balance between what they need to do for talent attraction and retention in tight labor markets versus the challenges of the current economic environment,” Tracy Watts, senior partner and national leader for U.S. health policy at Mercer, stated in a release. “Employers need to be really thoughtful and specific about their benefits enhancements to ensure they will get a return on their investment. This requires an understanding of the values and needs of their unique workforce.”

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The survey separated results by employer size instead of reporting aggregated results that combined all sizes. Small employers, or those with fewer than 500 employees, constituted 36% of the survey respondents; large employers, with 500 to 4,999 employees, 46%; and very large employers, with 5,000 or more workers, 18%. 

The survey found that 70% of all large employers plan to enhance benefits for 2023, while 65% are planning some enhancements and 5% plan significant enhancements. Very large employers were the most likely to say they are planning significant enhancements at 7%. And, among large employers, 16% reported that enhanced benefits were introduced in 2022 and that additional changes are not planned in 2023, and 14% are not planning to enhance benefits, Mercer found. Meanwhile, among small employers, 53% are planning enhancements.

As employers focus on their strategic planning needs for 2023 and beyond, the need to attract and retain employees in the current tight labor market is a big concern, according to the survey.

“Compensation alone doesn’t build the kind of engagement and sense of belonging that a well-designed benefit program can,” the report states.  

Health care plan sponsors are shortening retirement plan vesting periods to attract and retain talent. This comes at a time when a 65-year-old couple retiring this year can expect to spend an average of $315,000 on health care costs throughout retirement, according to Fidelity’s estimate.  

Lowering the cost of health care is a top concern for workers, and some employers have responded by considering plan design changes, the Mercer survey found.

High-deductible plans have grown in recent years, and, when paired with a health savings account, they can be used to invest for future health care expenses and lower future costs. However, as the report notes, “While high-deductible health plans have grown rapidly over the past decade, employers have recognized that these plans aren’t a good fit for some employees.”

The survey found that among large employers, 41% will provide a medical plan option with a low deductible or even no deductible, such as a copay-based plan, in 2023, and 11% are considering it.

Mercer also found that among large employers, 11% offer free employee-only coverage with no paycheck deductions for at least one medical plan option and that 11% are considering it.

“While free employee-only coverage historically has been relatively common among small employers–29% currently offering—it is a newer strategy for large employers,” the report states. “Employers in high-tech industries were early adopters, but more recently we’ve seen employers advertising free coverage for high demand/low supply jobs such as truck drivers.”

The data show that for large employers there is a special focus on enhancing benefits for hourly and low-wage workers.

“In today’s competitive labor market, employees are able to leave jobs for others offering only slightly higher pay,” Watts said. “Employers are looking to create a stronger bond with this workforce by offering health and well-being benefits and resources that their employees will value.”

Among large employers, 20% have prioritized hourly employees as an employee group targeted for benefit enhancements, while 15% have targeted low-wage workers, 14% highly skilled workers and 13% workers at the entry level, Mercer found.

“While hourly workers are the group most likely to be singled out for special attention across all industries, highly skilled workers are the priority for large health care employers (24%),” the report states.

The survey found that 65% of large employers are not prioritizing any group for benefit enhancements.

The survey was conducted this year from April 26 to May 13. It comprises responses from 708 employers.