By Mike Barone
The backdrop for employee benefits continues to be marked by unrelenting pressures. Rising health benefits costs. Jumbo claims. Skyrocketing costs for specialty drugs. Heavy competition for fewer available employees. Workers who are plagued by financial stress. The environment has made the search for solutions an ongoing priority, and it is driving the momentum of some notable trends as we move into 2020. Here are some to stay on top of.
- Employers flip on contributions and different plan options emerge. Today’s workforce is financially stressed, and healthcare costs are one reason why. Since 2009, average family premiums have grown by 54% with workers paying 71% of the increases – a big squeeze against wage and inflation growth of 26% and 20%, respectively. But moving into 2020, more employers are shouldering that share of premium increases, partly to relieve the pressure on their people but also as a recruitment necessity, despite the bottom-line impact.
The environment is also pushing employers to explore plan options that deliver health and financial benefits for everyone involved. Consumer-directed account-based health plans like Individual Coverage Health Reimbursement Arrangements (ICHRAs), for example, should gain traction among small and mid-sized employers, thanks to this year’s expanded government rules on their use. And while larger employers have the clout and are increasingly using it to go self-funded and contract directly with healthcare providers, look for small and mid-sized firms to borrow from a similar playbook with reference-based pricing strategies when their markets make it feasible.
- Specialty drug costs make pharmacy strategies critical, but there’s some push back. Another major headache for everyone but the manufacturers is prescription drug prices, driven by specialty drugs. They’re far more expensive than non-specialty drugs, and by 2016 accounted for 42% of the drugs we pay for (double 2010 levels). By 2021, according to some estimates, almost two-thirds of the drugs launched will be specialty. It will keep prescription carve-out programs a go-to strategy into 2020 and beyond. If you haven’t employed one already, though, you’d better hurry. There’s so much money in pharmacy that carriers are increasingly rewriting their contracts to keep carve-outs from happening
- Now more than ever, one size doesn’t fit all. If the trend toward personalization in benefits sounds familiar, that’s because it is. But the trend is deepening. Those new government rules on health reimbursement accounts, for example, enable individual employees to buy the benefits they find most valuable, outside of traditional groups. There continues to be an explosion in the variety of benefits available that respond to hot buttons among particular employee demographics – like student debt remediation programs. And technology has been the big facilitator in making mass personalization possible in benefits.
Consider LeggUP, a digital platform for delivering personalized development programs. (It’s one of the new voluntary benefits HUB will be telling clients about in 2020.) It uses predictive personality analysis and algorithms to match employees to potential training tracks (like career empowerment, building high performance or leadership development), and coaches who create action plans tailored to the individual, accompanied by private video coaching calls.
- Data is increasingly driving benefits decisions, and the future’s in predictive analytics. For all the advances in data science, predictive analytics, especially when the scale and depth of the analysis is boosted by AI machine learning, has been the province of big business. That door is opening, though, with some vendors specifically targeting self-funded middle-market organizations, to show them how to use predictive analytics to unlock the power of their benefits data.
For example, predictive analytics enable benefits management to put a finger on current benefits costs, what’s driving them and, more importantly, whether the trends will continue given changing demographics of the workforce. That helps on cost management, but also on identifying employee needs and the appropriate product mix moving forward. The future is now, and predictive analytics is a leading way that employers can take firmer control of their employee benefits destinies moving forward.
The way forward in 2020
Despite the pressures that continue to mark the employee benefits environment, many interesting opportunities are arising that have potential to offer relief. In particular, employers that are able to harness the power of their benefits data to better understand where they have been with them will be much better situated for the way forward.