As 2015 comes to a close, it is time to look ahead to the future of employee benefits for the new year. It promises to be a busy year for healthcare and a time of change for employers. Here are our top 10 employee benefits predictions for 2016:
1) Insurance rates will continue to rise.
PwC’s “Behind the Numbers 2016” report states that high-cost specialty drugs entering the market will likely cause spending to intensify. Another factor is the projected increased spending on cyber security as healthcare technologies continue to evolve. After the Anthem hack earlier this year, that spending is certainly warranted.
While PwC notes that the rate of cost growth has slowed, that’s mostly due to cost shifting onto the consumer. The report also lists virtual care and employer response to the looming Cadillac Tax to be mitigating factors working against rising costs, but most experts agree that these will not play a very significant role in cost reduction.
2) ACA compliance issues will cause administrative costs to rise dramatically.
A recent survey by the International Foundation of Employee Benefit Plans notes that 33 percent of employers expect the greatest cost increase from ACA implementation to take place in 2016, as new reporting, disclosure, and notification requirements take effect.
When asked what they think the top compliance-related cost drivers will be going forward, 19 percent of survey participants named general administrative costs, while 13 percent said costs associated with reporting, disclosure and notification requirements would be the most impactful.
On a brighter note, a full 96 percent of employers anticipate that they will continue to offer healthcare coverage five years from now. Employers understand the importance of offering solid healthcare plans to their workers, but will need to get more and more creative over the coming years to keep costs at reasonable levels.
3) Wellness programs will expand into more than the traditional offerings of the past.
While many employers offer such wellness initiatives as onsite flu shots, health fairs, and health risk assessments as part of their total wellness benefit offering, 2016 will likely see an expansion in the types of services offered as part of a comprehensive wellness package.
Focusing on other aspects of employee well-being such as financial security, mental and emotional well-being, and job satisfaction will bring richness to the wellness mix that has been lacking in previous years. With increased emphasis on a healthy work/life balance, wellness programs will expand beyond the limited offerings of the past.
4) Outsourcing of benefits administration will intensify.
According to the 2015 Guardian Workplace Benefits Study, 70 percent of employers expect greater compliance and administrative burdens because of ACA. Sixty percent indicate that they want help in managing the changing ACA landscape.
One in three employers intends to solve this issue by outsourcing at least some aspects of their benefits program. Sixteen percent of employers are already engaged in a high level of outsourcing, and that percentage will likely continue to grow as time goes on. Businesses that take advantage of the expertise of benefits administration professionals will have better luck keeping costs down and meeting the needs of their employees.
5) Self-insurance will continue to rise in popularity.
Large companies are leading the way with self-funded plans, as has been the case for many years. According to an analysis by the Employee Benefit Research Institute, the overall percentage of U.S. workers in self-insured plans has been steadily rising for the last decade.
While large employers have adopted self-insured plans as a way of bending the cost curve, smaller employers have not widely adopted the strategy. As the cost of ACA compliance rises, however, it seems likely that more employers will turn to self-funded plans in the coming year.
6) Customized health plans will take center stage.
A whopping 88 percent of workers report that employment-based health insurance is extremely or very important. However, more and more workers are interested not in the defined benefits offerings of the past, but in a more customized employer package.
The ability to choose which healthcare coverage options apply directly to their own life situations is an increasingly popular benefit with employees. Robust voluntary benefits and choices regarding deductibles, co-pays, and coverage amounts will likely continue to grow in popularity in 2016.
7) Defined contribution health plans will increase.
Overall, defined contribution plans have been gaining in popularity for the last few years, as the popularity and affordability of defined benefits plans have begun to fade. Since defined contribution plans cap employer health costs, this trend is likely to continue.
8) Automated Retirement Benefits will increase.
As automation technology continues to evolve, it seems likely that one of the areas to benefit from automation is retirement contribution plans. Automation of 401(k) administration will bolster enrollment, automatically escalate contribution rates to match salary increases, adjust investments as needed, and potentially even handle rollover automatically when employees leave their jobs. This represents both cost savings for employers and convenience for employees.
9) DOL audits will increase.
ACA reporting requirements have triggered increased scrutiny of employer-sponsored healthcare plans. Experts generally agree that this increased scrutiny will likely result in a sharp upswing in the number of audits performed by the Department of Labor. The scope of such audits is extensive, as the DOL has the authority to audit for compliance with ACA, ERISA, and HIPAA mandates.
10) Consumer-driven plans will influence cost behaviors.
A combination of health coverage with high deductibles and tax-preferred savings or spending accounts, consumer-driven health plans are showing real results in changing cost behaviors among employees. A higher level of engagement in the decision-making process and increased awareness of healthcare costs are reported among participants in CDHPs.
According to a recent ADP study, the number of employers offering health savings accounts has increased by 6 percent since 2013, as has the number of employees electing to contribute to an HSA. This indicates that employees see these kinds of plans as beneficial in lowering their average costs.
As evidence mounts that CDHPs have an effect on the overall cost of employer-sponsored healthcare, it is likely that more companies will turn to this method of bending the cost curve.
The Bottom Line
As the healthcare landscape in America continues to evolve, it falls upon employer benefit offerings to evolve as well. 2016 will likely be a year of change, as employers work to lower overall costs, comply with newly-implemented ACA rules, and offer benefits that attract the best employees and keep their workforces healthy.
If you would like more information about how your benefits offering can more fully meet the needs of your employees while still remaining cost-effective for your company this year, please contact us.