As business owners navigate the aftershocks of the COVID-19 pandemic, many are rebuilding with a brand new employee benefits mindset. Business plans have shifted. Strategies have been recalibrated. Best practices have been turned upside down. They’re looking to work smarter and more efficiently. Their employee benefits solutions are no exception. After all, they’re employing a whole new type of workforce.
Business as usual isn’t business as usual anymore.
In fact, it’s a lot more expensive. Employer health costs for 2022 are expected to increase 6.5%, according to a study by PriceWaterhouseCoopers. As the pandemic continues to play out, carriers expect increased utilization and increased healthcare spending. The halt on elective surgeries has lifted and now everyone is playing catch up. Treatment for COVID-19 has burdened the health system, as well as the related mental health care that’s spiked in the last year and a half. All of this contributes to premium hikes but even without a pandemic, group rates have been rising year over year.
This upward trend is nothing new; KFF reports that the average premium for employer-sponsored family health coverage increased 22 percent over the last five years and 54 percent over the last ten years. A recent survey of CEOs by PBGH and Kaiser Family Foundation bore that out. Almost 9 in 10 said the current system will be unsustainable for them within the coming 5 to 10 years.
A NFIB survey found that the cost of healthcare was small business owners’ most severe problem—those survey results have not changed since 2012.
Not only are business owners weary of spending more and more on rising health insurance premiums, employees are burdened with increasingly unaffordable out-of-pocket expense requirements from insurers. While group plans used to be touted as the gold standard for health insurance, this simply isn’t the case anymore for a number of reasons. For starters, only 54% of employers actually offer benefits, and that number is decreasing. But group plans fall short in other ways. For example, employee shares of premium payments taken out of their own paychecks continue to increase year over year as companies grapple with their budgets.
The Employer Health Benefits 2019 Summary of Findings reported that 31% of covered small business employees had their employer pay their entire premium while 35% were enrolled in a plan where more than half of the premium for family coverage came out of their paychecks. Not only are they an expense saddled on the employees, those paying a lion-share of their own premiums are given very little choice in the matter. 74% of the time, employees are limited to one plan choice within their group plan. Most of the time, when you’re footing the bill, you get to choose what to buy.
If workers change or lose their jobs, they’re left scrambling to find coverage, settling for pricey COBRA, or having to switch from plans that include the doctors they trust.
This is hardly the consumer-friendly solution we all hope for, and it’s never been called out so clearly as it has in the past couple of years.
The pandemic has fundamentally changed the way we work.
Most notably, the wave of newly remote workers will certainly shape the future of benefits. The percentage of workers working full-time remote is expected to double this year, according to a study by Enterprise Technology Research.
Remote work has changed the dynamics of the workforce in more ways than one.
Another survey noted that over 74% of businesses plan to permanently shift employees to remote work after the COVID-19 pandemic ends. For those employers administering group plans, having workers in more than one location can be quite the challenge; traditionally, it’s very difficult to keep part-time and remote workers on group plans.
This is a big shift that business owners need to prepare for and, you guessed it, ICHRA can help deliver benefits to these types of employees more seamlessly than a group plan ever could.
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