With the rise of global medical trend back to pre-pandemic levels, a cost-of-living crisis, and increasing global economic turmoil, it is critical that companies ensure their benefits strategy is keeping up with their needs.
The COVID-19 pandemic has shown employers that the success of a business is dependent on the health of its workforce, with benefits programs gaining more attention from the C-suite. While this renewed focus is good news for employees, HR and benefits teams need to be laser-focused to ensure plans deliver the right value for money, as well as supporting wider business objectives.
Our MMB Health Trends 20231 research highlights three actions benefits professionals can take to step up their game and achieve their goals:
The current climate is challenging for employers, but there is significant opportunity for benefits managers to get ahead of the curve.
1. Move from passive to active plan management
Around one in five insurers have made changes to their underwriting requirements due to the pandemic, and other changes may be on the horizon, according to our survey. Employers should be prepared for more complex underwriting and plan design decisions in the market. It is important that businesses not only monitor these changes, but consider “pushing their insurers” to adopt more progressive provisions such as waiving pre-existing exclusions for Covid-19 or elimination of HIV exclusions.
Understanding claims cost drivers is also critical for containing costs over the long term. Our research indicates that in 2022, more than half of insurers experienced changes in claims patterns due to deferred care during the pandemic, with a similar number of insurers citing deferred care and higher costs due to advanced treatments as a key driver in their claims pattern differences this year.
Despite this, insurers are reluctant to make changes to plan designs across their book of business. Employers need to take an active role in monitoring plan experience, including high-cost claims, to help ensure there are smaller chances for surprises when it comes to budgeting. Additionally, by targeting a plan’s cost drivers and implementing policies to support prevention, employers can help to mitigate claims risk over the long term.
Another area of focus should be safeguarding that benefits are equitable, rather than geared towards senior management. Inflation and the cost-of-living crisis have placed pressure on the cost of benefit programs for both employers and employees. Design elements, such as expense sub-limits and annual/lifetime maximums, can unintentionally shift costs onto employees, making care unaffordable. Employers should consistently review cost sharing areas to ensure that help is offered to those employees who need it the most.
2. Develop a multi-year strategy
Our People Risk 20222 research indicated administration and fiduciary risks have risen to the number two spot out of 25 people risks globally, putting not just insured benefits but retirement, executive compensation, and investment funds under more scrutiny. As benefits increase in strategic importance and the C-suite becomes more involved in plan design, delivery, and financing, we expect a greater need for benefits plan managers to create well-articulated multi-year benefits strategies linked to business objectives.
The first step for an employer is to focus on developing a clear governance model for its benefit plans globally. This includes developing a benefits philosophy, articulated through a list of guiding principles/objectives which help guide benefit design decisions. This work sets out the structure necessary to execute on plan changes needed in response to business initiatives such as diversity, ESG, or changing legislation globally.
Preparing for these benefit plan changes is key to success. Focusing on incremental changes each year creates space to allow for adjustment and feedback as needed to achieve goals. This helps stakeholders, including employees, unions, management, providers, and investors, understand where you are going and engage with the process.
Incrementally planned changes also support cost containment, allowing the focus to be on improving value rather than slashing benefits. Going beyond just the next renewal cycle while planning for long-term changes, can help benefits professionals balance economics with empathy.
3. Engage stakeholders early and often
Early engagement is the cornerstone of successful benefits plan redesign. As costs increase, budgets are likely to come under greater scrutiny. Ensuring senior stakeholders have a solid understanding of what you want to accomplish will allow them to engage and get on board. They need to hear the same messages repeatedly and consistently, tying those messages to the wider business objectives.
Consider having a benefits strategy steering committee to provide transparency, and address any challenges faced. Ideally this committee would be multi-disciplinary, bringing together areas such as health and safety, risk management, and finance. Including wider functions such as talent acquisition, ESG, and DEI too can bring a wider audience into the discussion. Make sure unions and works councils have an opportunity to engage on what is important to employees. They need to understand and share information about any challenges to keeping plans sustainable.
Focusing on employee communications is crucial, highlighting that benefits are part of a mutual responsibility for advancing personal health. Our research3 shows that one in three employees would forgo a pay rises for additional well-being benefits. Creating a culture of health through benefits branding and influencer strategies can help your business and your employees.
Employers are facing a difficult environment, with competing needs pushing the boundaries of what have been typical practice for benefits. Employers need to balance economics and empathy when reviewing plan design, keeping in mind the hardship felt by many employees in the face of inflation. On the other hand, they should acknowledge that a recession is likely on the horizon or underway already in many countries and perhaps globally. Retaining and attracting talent in a global market that is only seeing costs increase requires careful management and planning.
Benefits professionals can remain focused by actively managing their plans, planning for the long-term changes needed, and bringing all stakeholders into the process. These actions could be the critical to your success.
For more information, contact your Mercer Marsh Benefits client executive or local office.
If you would like one of our consultants to discuss the implications for your business, and opportunities to better support your employees, please check the box to request a consultation.