Navigating the future of benefits 

Young businesswoman working with laptop in a business area outdoors.

Soaring healthcare premiums, changing workforce demographics and the rise of AI are all set to play a role in the future of employee benefits.

“Employers that had a five-year benefits strategy in place are revisiting that now,” said Drini Zerka, benefits strategy practice leader for Mercer Marsh Benefits (MMB), during Mercer’s latest webinar on navigating the future of benefits. “They’re looking at all the changes happening and want help to plan and make better decisions.”

“One of the biggest challenges has been the soaring cost of private healthcare”, explained Jax Thomson, a senior health and protection consultant for MMB. “In the third quarter of 2023, we provided clients with an early indication that healthcare premiums were anticipated to rise by 30-40% due to medical inflation and NHS delays driving up the average number of claims. Despite giving our clients time to prepare for the potential increases and proactively explore options to contain costs, the significant increases are putting a strain on our clients budgets.”

“Smaller businesses are also seeing the same challenges around increasing claims having a knock-on effect on premiums,” added Nikki Tigwell, wellness specialist, MMB. “A lot of customers are asking us to help them consider cost savings at renewal, but ultimately most are deciding to maintain, or even increase, their current benefits. Instead of only offering a comprehensive benefits package to their senior employees, companies are also looking to offer more to their traditionally uninsured workforce.”

Increasing cover in cost-effective ways

“There’s a recognition that people are being taken out of the workforce because they can’t get access to their GP and potentially obtain the referrals they require for ongoing care” observed Neil Atkinson, innovation leader for MMB in the UK. “There are great swathes of the workforce which don’t benefit from any health coverage in place. In response, we’re looking at how employers can provide something meaningful to those employees to address some of the deficiencies we’re seeing in the NHS at the moment.”

He adds, “Cash plans, virtual GPs, at-home testing and offerings like community rated healthcare schemes can help get people onto the pathway they need. We’re also doing some work in the care concierge space to help people going through cancer journeys, for example, navigate what’s on offer through the NHS, based on where there might be capacity. That’s helping them to take control of their own healthcare journey where they don’t have something that’s 100% private in place.”

We’re also helping clients explore alternative funding mechanisms, added Jax, “Employers currently spending eight to nine hundred thousand pounds a year can expect that figure to exceed one million pounds in the coming years. Before they get to that point, we can help them explore alternatives to the traditional insurance route, such as a healthcare trust. This allows for greater cost and tax efficiencies, as well as more flexibility in terms of benefit design.”

The scope of PMI is also increasing, “Traditionally PMI was a true insurance product that assessed risk and paid out to fund treatment. Now it’s being used for end-to-end care, like menopause support to retain female talent and frontline care, like access to GPs,” said Neil. “But virtual GPs refer more, which drives up cost, so there’s a balance to be had.”

Helping people to stay healthy

Another big trend for navigating the future of benefits is helping people to stay healthy. “a vast majority of our workforce population is well right now,” said Nikki. “So, it’s important to look at offering benefits that are going to help people stay that way. If you can boost employee wellbeing and reduce the risk of people becoming ill and claiming that will have a positive effect on premiums and increase productivity.”

Neil agreed saying, “It’s about making an investment in your workforce that will pay off. We’re seeing more health screening and home testing and there’s a solid argument to be made for helping individuals with simple and non-invasive tests to enable early detection of conditions. If you can reduce the risk of high-cost medical interventions, that will have a positive knock-on effect on premiums and also reduce absenteeism.”

We’re also seeing some very different demographics across the workforce now added Drini, “Younger employees are bringing a different set of expectations and have a different set of priorities and motivations. They value overall wellbeing, mental health support and personal development. Older generations are interested in retirement support and financial planning but also want help to stay healthy more than the younger generation. Sandwich generation employees, with responsibility for children and eldercare, value flexibility and established benefits with lots of options.”

He added, “There’s a big trend around personalisation. We have so many requests from clients wanting to do something unique that stands out because it’s personal. That can also reduce costs. Instead of adding another twenty benefits, you make conscious decisions about relevant options to give employees the power to choose what they need.”

Using data to inform decisions

When it comes to creating the right healthcare proposition, Guy Clarkson, head of digital growth for MMB says the thirst and hunger for data to inform decision-making is set to amplify. “Employers want tools and platforms that let them access their data to get insights. Whether that’s why people aren’t engaging with a certain benefit, or the answer to ‘what if?’ scenarios, like how much it would cost if they were to increase headcount by 10% in a certain location.”

He adds, “That thirst for data is also changing how employers buy employee benefits software. Employers no longer just care about the employee experience. Of course, they still want employees to be able to easily make a claim or leverage a total reward statement, but they also want to know how the software works under the bonnet. Does it integrate with other HR systems? Is it cyber secure? Will it be able to utilise AI to make predictive suggestions about what benefits may be relevant to an individual?”

“Data can help you inform decision making if you’re clear about what you want to get out of the corporate lens,” said Drini. “We’re helping some clients to understand how their benefits benchmark against their competitors and where the gaps are so they can retain talent. We’re helping others to take a step back and pull in demographic data to look at specific employment issues and understand the rational for making change.”

With the employee benefits space developing so rapidly, the closing thoughts were on how not to get overwhelmed. “Whether you’re pushing boundaries or just trying to stay in line with the market, it’s about recognising that every employer is on a different journey and providing the employee with genuine support,” said Drini.

“The more employees you can reach with your benefits strategy, the more it will foster a positive and inclusive environment and the better the outcomes for the business,” concluded Nikki.

Related solutions
Related insights
Related products for purchase
Related Case Studies