Considerations for Benefit Offerings and Open Enrollment for 2021

Employers must balance costs with increased employee needs, and benefits leaders predict employees will be looking at benefit offerings more closely this year.

As employers are evaluating their health and voluntary benefits, the COVID-19 pandemic may have changed considerations relating to renewals, additions or costs.

During a recent webinar, Peter Kilmartin Jr., a partner and U.S. consultant activation leader, Health & Benefits, at Mercer in Boston, said Mercer is seeing two-thirds of employers making or strongly considering changes. About 25% of employers are making or strongly considering changes to traditional plan designs or their contributions. Other changes being considered include expanding digital wellness programs to include mental wellness options and reconstituting voluntary benefits offerings, particularly for health care and security, such as identity theft protection.

Tracy Watts, a senior consultant at Mercer in Washington, D.C., tells PLANSPONSOR that any potential changes depend on what employers are experiencing. “For any organization that has been hit hard financially because of the pandemic, they are likely focused on cutting costs. They may decide to change plan designs to less rich ones, may go out to bid to get a better contract or they may implement other types of programs like specialty pharmacy to mitigate costs,” she says. “On the other hand, I’m aware of companies that had to furlough people, so they are minimizing changes to benefits. They don’t want to shift more cost to employees.”

When it comes to health benefit renewals, Todd Renner, partner, U.S. health and benefits midmarket leader, at Mercer, in Charlotte, North Carolina, noted during the webcast there is still a lot of uncertainty as it relates to health care claims, so employers might want to wait as long as possible to lock in their rates. He said some experts are using an underlying assumption that health care costs are trending 3% to 7% higher, but most are leaning toward 5% to 7%. However, it is questionable whether that will materialize because employees are not getting the same amount of care as usual.

“Our actuarial team is not seeing a dramatic increase in trends, but clinicians think care will come back and put pressure on 2021 costs,” he said. Renner suggested that employers will want two models for health care costs, the usual one and a COVID-19 modeler running through various scenarios and applying that to the traditional trend model.

During a webinar poll, one-third of attendees indicated that they don’t foresee changing their spending on health benefits this year.

Steve Wojcik, vice president, public policy, at Business Group on Health (BGH) in Washington, D.C., tells PLANSPONSOR that employers are definitely factoring in the effect of the pandemic as they plan for benefits in 2021. But 2020 doesn’t represent normal trends, so many companies are looking at prior years.

Most of BGH’s membership is large, self-funded employers. But Wojcik says he would expect fully insured employers are also ignoring 2020 and looking at prior years to get a representation of overall trends. “If an employer is shopping for health care, it should focus on how health insurers are considering the costs of COVID-19 given that there are still so many uncertainties,” he says.

Wojcik points out that the risk premium is higher for health plans when uncertainty is built in, and employers may see this, especially if they are in an area that was hard hit by the pandemic. But, he says, insurers really don’t know what will happen or whether delayed procedures will come back. “When shopping around, employers should do what they’ve always been doing—factor in costs, quality and network access. Most of insurers’ models have quite a range from low to high built into costs,” Wojcik says.

Keith Lemer, chief executive officer of WellNet, a privately held, independent third-party administrator (TPA) for health care plans, located in Bethesda, Maryland, warns that insurers are laying the groundwork for premium increases for fully insured plans. “Claims for elective care have been off, so they say they expect a wild swing in claims and that will ding you on renewal, but a lot of that is just posturing,” he tells PLANSPONSOR.

“When you think about what drives premiums, the more claims you have, the higher premiums are. If you can control the number and cost of claims, you can drive premiums, but insurers won’t tell you that,” Lemer explains.

Lemer says in every state except Maryland, each doctor in the same network may charge a different price for the same procedure. “If there is a mechanism to tell employees that if they get a procedure at a lower-cost provider then the employer will waive their deductible, employees will get good health care but costs will be lower,” he says. “An employer can only do that if it is self-insured.”

Larger insurance companies are contractually obligated not to share cost factors, Lemer says. To help fill that gap, WellNet has built a database of what providers charge and their ratings that can guide care for employees.

Lemer says the pandemic has highlighted the benefits of self-funding. “It opens the door to what employees need and want. Employers have more data and can offer options for health care that are free to employees,” he says. “When employers have data, they can offer a plan design that keeps members healthy and gives them and their families the care they need that is right for them.”

As an example of what Lemer means by options that are free for employees, he says an employee may need wrist surgery and the cost is $10,000 at one hospital and only $3,500 at another that may do more of this type surgery and is better rated. A health care concierge can talk to the employee and say, “If you use the higher cost hospital, you will have to pay your deductible, but if you select the better-rated, lower-cost hospital, the employer with waive the deductible.”

“There will be no out-of-pocket cost for the employee,” Lemer says. “Self-insured employers can do that with about 60% to 70% of high-cost claims, which is 10% to 40% of total plan spend. If the employee asks an insurer which is the best, highly rated, lower-cost provider, it is contractually obligated not to tell him.”

Lemer notes that some employees will want to use the higher cost provider, but the employer is not taking away that option—it is offering choice and flexibility, which is what employees want.

Lemer’s recommendation for employers: “Make sure those giving you advice are not motivated by the money they’ll make.”

Most of the large, self-funded employer members of the BGH are well into their planning strategy, Wojcik says. He is seeing that virtual health care solutions will be a big part of offerings in 2021. “It’s been a high priority for employers to increase telehealth offerings and the pandemic gave more exposure to it to providers and employees. It will be a win-win; providers can offer care in a more convenient, efficient way,” he says.

With the high unemployment rate and economic losses, employers have boosted resources and access to mental health and well-being opportunities. Wojcik says this will continue in 2021.

“There are many opportunities created by the pandemic to evaluate what can be done in a lower-cost setting—whether care can be done on an outpatient basis or while employees are at home—and hospitals have realized that many things they are doing in the hospital don’t necessarily need to be done there. There will be more focus on lower-cost sites of care,” Wojcik says. He notes that employers have long been trying to help employees decide when it is appropriate to go to the emergency room versus when to go to a lower-cost care setting. The pandemic has helped to educate them.

Another area of focus for 2021, according to Wojcik, is offering robust primary care services as well as chronic care management because of the decline in care that may have been needed during the pandemic. Employers should stress the need to get necessary preventive and chronic care management, he says.

Watts says Mercer has seen employers offer more health benefit choices. “For the longest time, the average number of plan options was two, then it went to three because of the ACA [Patient Protection and Affordable Care Act] to satisfy the plan affordability requirement,” she explains. “Now we’re seeing an average of four options to give people a choice for how much care they want to buy—whether they want to pay more now or later.”

Renewed Interest in Voluntary Benefits

Lemer says he has seen more requests by employers for voluntary benefits. “They are looking for different ways to improve or enhance their benefits offerings. And since health costs have been down, they are redirecting dollars to improve benefits,” he says.

Harry Cain, east market voluntary benefits consultant at Mercer in Atlanta, tells PLANSPONSOR that voluntary benefits are generally put in place to not only help fill the gaps in high-deductible health plan (HDHP) coverage and protect against financial risk, but also to improve employees’ financial wellness. They are also used for building flexibility in benefits programs, he adds.

Interest is extremely high, Cain says. He notes that hospital indemnity plans have probably had the biggest surge in adoption—they directly benefit anyone hospitalized for any reason. Cain says critical illness, accident and hospital indemnity plans have been rarely selected by younger generations, but that is changing. Employers are going out to bid to see if it is reasonable, from a cost perspective, to add these benefits.

During open enrollment, employers should include more communications about tying voluntary benefits with health benefits, Watts suggests. She says voluntary benefits are a great way to bridge gaps in benefits for all generations in the workplace.

A Different Open Enrollment Experience

During the webcast, Rhonda Newman, senior partner, Communications, Mercer, in Dallas, Texas, said employees will be thinking about benefits differently this year. They have different concerns and are more focused on affordability. She predicted there will be more thoughtful deliberation of coverage needs, and more participants are likely to actively enroll.

Cain points out that past studies have shown employees spend very little time evaluating their benefits. “We expect it to increase substantially, so timely communication is important,” he says.

David Slavney, partner, Communications Consulting, Career, at Mercer, in St. Louis, said during the webcast that employees having to embrace new digital tools is a good thing because plan sponsors can use digital media to track usage and get feedback from employees.

If employees are furloughed or still working from home, reaching them with benefits information may be a challenge, Newman noted. Plan sponsors should consider all channels for communicating, as well as the correct timing. Plan sponsors should start early planning for a virtual benefits fair to have the right content and provider information, she suggested.

Slavney suggested employers find ways to organize content around “employees like me,” such as for those whose partner has lost his job. This will increase employee engagement, as, he said, “we all are drawn to content that is interesting and the most relevant to us.” He noted that during the pandemic, managers have become big influencers as they have more interaction with employees, and employees are leaning on them more for information. Slavney didn’t suggest managers take on benefits education, but they can reinforce what resources are available and what deadlines employees have to meet.

Communications about open enrollment should balance empathy and economics to make sure people feel safe and cared for, he said. “The tone of messaging should reflect the different circumstances of employees and help them think through their circumstances,” Slavney said.

In addition, he said, being honest about uncertainties and telling employees the employer will keep them informed is key to building trust. “Other than required communications, consider separate communication without jargon to clearly explain to employees how benefits decisions were made—what was considered and that you know how it will affect employees,” Slavney said.

“Even if an employer is not making big benefit changes, considerations for which benefits to choose may be different for employees,” said Elizabeth Moberg, principal, Communications, Career, at Mercer, in Seattle, during the webcast. “Use personas to identify different employees’ needs. And think about questions people in different situations may have to help target education.”

Moberg said one client filters information on its benefits website. For example, if someone who has children logs in, it will first bring up information related to family issues and benefits. She said another client is thinking about doing benefit webinars segmenting different populations rather than a big open enrollment meeting. Each session will have general open enrollment information but also target different groups, such as people with children, people new to benefits or people who have been furloughed.

This year, a decision guide and splash webpage or microsite will be especially important, Moberg said. “Do some spotlight education on benefits employees are specifically talking and asking about,” she suggested.

Moberg showed an example of a virtual benefits fair Mercer made available. It is a self-paced gamified type site. Employees can log in any time from any place and find an information booth. They can view quick information, watch videos and chat with a person via a chatbox. If they click on the information booth, they get a ticket to enter a raffle.

Newman said employers should prepare for a lot of questions from employees and make sure human resources (HR) staff, call centers and managers are ready.

During the webcast, Renner said one client learned that the call center should be in sync with all other communication options, like the benefits website. The call center representatives should be trained and prepared for all the potential COVID-19-related questions and benefits questions.

Plan sponsors should make sure the call center will have enough bandwidth to handle the volume of calls. Renner said employees should be encouraged to use additional communications options to try to decrease the demand on call centers. If an employer hasn’t engaged a call center yet, now is the time, he said, as they will be very popular this year and need to be prepared.