7 challenges benefits pros face

Financial challenges are forcing some employers to pare back on benefits, now being referred to as a "perk-cession," before resorting to layoffs and terminations.
Surging health care inflation will force most employers and employees to pay more in 2023. The average increase in 2023 in the cost of health coverage was 6.5% — now more than $13,800 per employee, according to professional services firm Aon. Higher insurance premiums are only part of the picture. Americans are paying more out of pocket (in nominal dollars) than ever before.
Medical providers are increasing their fees in response to inflation, labor shortages, and changes in the coverage of their patient population. More patients than ever before are covered under Medicare and Medicaid, where the government applies stringent caps on provider reimbursements. So, expect providers to shift the burden from inflation to employer-sponsored plans.
Because inflation is widespread, many Americans workers have become "financially fragile" – unprepared for regular, periodic expenses, let alone unanticipated out-of-pocket medical costs. Benefit professionals should take strategic action to ensure that their clients incorporate the most effective strategies for addressing today's economic challenges to the "health and wealth" of their participants.
Smaller employers and those with narrower profit margins may be forced to adjust their total rewards or employment. Larger employers, and those who have products and services with inelastic demand, may be able to maintain margins despite inflation and a looming recession.
With a new wave of layoffs, health plan loss ratios may worsen by operation of the Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation of coverage — where claims loss ratios often exceed 175% of premiums.
The expiration of the American Rescue Plan (ARPA) enhanced premium subsidies for marketplace coverage coupled with Medicaid eligibility redeterminations will likely cause a shift to increase enrollment in employer-sponsored plans and a higher risk pool, leading to increased rates, enrollment and expense.

Migration to employer-sponsored, self-insured health plan

A significant number of companies are choosing to work with their advisors and explore self-funding their benefits in response to significant increases in insurance premiums. Employers who choose self-funded coverage are attracted to unique cost management opportunities when compared to the premiums, taxes, state mandated benefits, profit margins and other requirements of traditional, fully insured plans.

Instant Insights /

The future of employer-sponsored health care: strategic responses and cost containment opportunities

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