Higher premiums, changing government programs and rules, tips for affordability … here’s what you should know about trends in health benefits for 2022.
When it comes to benefits, healthcare is at frequently the top of the list. Forty percent of employees surveyed chose healthcare benefits over competitive salaries, retirement plans, or bonuses. Nearly 3/4 of the 1,000 workers surveyed listed healthcare in their top 3.
In a competitive job market, health benefits are more important than ever. But, like everything else these days, the cost of providing healthcare insurance is rising. This creates a challenge as businesses deal with higher costs all around.
Let’s take a look at some of the emerging trends and what you need to know about providing competitive healthcare benefits in 2022.
Expect higher costs
Whether you’re renewing your health plans for this year or looking ahead to next year’s plans, expect higher costs. A national survey by Mercer says employers should anticipate an increase of 4.7% in 2022. Analysts caution, though, that some employers may see wide variations in cost. Healthcare is dealing with wage inflation, labor shortages, and COVID after effects. These all contribute to cost increases.
Many people delayed healthcare during the pandemic, which allowed many employers to keep their costs stable. However, spending is expected to reach pre-pandemic levels in 2022. On average, the study shows that most employers will not pass the extra costs to their employees. A third of the largest employers plan to maintain benefits levels while decreasing employee contributions.
Willis Towers Watson puts the figure slightly higher, saying employers should expect a 5.2% increase in premiums. The advisory firm reports the average employer cost in 2021 was $13,360 per employee.
Whether you’re renewing your health plans for this year or looking ahead to next year’s plans, expect higher costs. A national survey by Mercer says employers should anticipate an increase of 4.7% in 2022.
Adjust for changes in government programs
Companies also need to be aware that several government programs have expired. The Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Payroll Protection Program ended in 2022. These programs provided benefits for workers and small businesses, including low-interest loans and payroll tax credits.
At the same time, there are also now new federal transparency rules in place. Any employer-sponsored health plans must now provide greater transparency into pricing information. These rules require the following:
- Effective for plans beginning Jan. 1, 2022: Offer public files that display in-network rates, out-of-network allowed amounts, and prescription drug pricing.
- Effective for plans beginning Jan. 1, 2023: Provide an online self-service tool to estimate out-of-pocket costs for 500 predetermined items and services.
- Effective for plans beginning Jan. 1, 2024: Include all covered items, services, and medication in the self-service tool.
While the burden will be on insurance carriers to provide this information, the new rules require both employers and providers to comply. If you work with an insurance carrier, you must make sure they follow these rules. If you self-insure, you will still be accountable for complying.
Consider expanding health benefits options
Employers that have embraced remote work are considering shifts in their healthcare benefits. As remote employees don’t have access to on-site perks, some employers are expanding their healthcare benefits. They’re adding telehealth, mental health coverage, and off-site perks such as gym memberships or discounts. These types of perks may play a key role in offering competitive benefits packages going forward.
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Target affordability with premiums
At the same time, many employers are also identifying ways to reduce healthcare costs. According to the Willis Towers Watson, this includes considering options such as:
- Onsite health initiatives: More than half of employers offer onsite health and wellness programs.
- Limiting networks: 30% of employers plan to limit in-network doctors and hospitals.
- Surcharges: A quarter of employers are now adding a surcharge for employees whose working spouse could get coverage through another employer. Other companies are adding surcharges for smokers.
- Tiering based on income: Nearly 30% of employers are considering or currently structure employee contributions based on income or pay grades. For example, highly compensated workers may pay a larger portion of the cost of premiums.
Other healthcare trends include more measures to rein in costs, such as:
- Benefits reviews: By looking at the benefits you offer and how employees are utilizing them, you may find areas that no longer justify the cost.
- High-deductible health plan (HDHP) options: Offering HDHP plans can lower premiums for you and your employees. These are especially popular among younger employees who have lower expectations for healthcare needs.
- Cafeteria plans: These are also called Section 125 plans based on that section of the IRS code. This provides tax advantages and can reduce the cost of premiums for employees who pay with pretax dollars.
Are your benefits competitive?
When considering any changes to your benefits plans, one of the key questions is whether you are offering competitive benefits packages. The United States Bureau of Labor Statistics provides some guidance, but it only sorts workers by private, civilian, and government workers.
It’s much better to do competitive benchmarking in your industry and location. A good place to start is with the Zenefits Benefits Benchmark Report. This report breaks down health insurance data on businesses with up to 500 employees.
Do you need to offer healthcare benefits?
Fifty-one percent of HR professionals and recruiters say that offering health benefits to employees is the most effective way to attract new job candidates.
Many small businesses may be wondering whether they can afford to offer healthcare benefits. Small businesses with fewer than 50 FTEs are not required to provide health insurance under the Affordable Care Act (ACA). However, most small businesses do offer some type of health coverage.
According to the Agency for Healthcare Research and Quality (AHRQ), the following percentages of businesses offer health insurance to employees:
- 50.5% of small businesses
- 88.5% of medium-sized businesses
- 98.8% of large businesses
Reviewing your healthcare benefits plan
Reviewing your healthcare plans, benefits, and coverage should be part of an annual process before renewal periods. That way, you can discuss any changes or trends with your insurance provider.
While healthcare benefits are among the top things employees want, it’s just one of the costs employers have to assume in today’s workplace. Organizations should regularly review their whole compensation package to make sure they are providing competitive benefits.