This open enrollment season may be more stressful for your workers than in the past. Nearly half of U.S. workers report that inflation is making it difficult for them to pay for their health insurance benefits, while 4 in 10 have said inflation will make them scale back on the benefits they choose during open enrollment for 2023.
How can employers and/or HR departments decide whether their benefits packages should change this year or if they are on par with today’s economic climate? Knowing the answer to this question may help with recruiting and retention.
Inflation’s Impact on Employee Benefits Selection
New research from The Hartford shows that 40% of American workers intend on scaling back on benefits this year thanks to inflation fears. The survey showed that 51% of workers ages 18-34 are likely to scale back during the open enrollment period and 41% of the 35-54 crowd will do the same.
Voya recently conducted a similar survey that found the majority of employed individuals (70%) will spend more time evaluating their options during open enrollment with the goal of maximizing their benefit dollars.
“With inflation at record levels not experienced in decades, the financial stress caused by increasing prices is taking a toll on American workers,” explained Rob Grubka, CEO of Health Solutions, Voya Financial. “Voya’s new survey reveals that 74% of Americans agree that inflation has made them more stressed about their personal financial situation, which is up from 66% in March of this year.”
Many individuals are walking a fine line between balancing the rising cost of short-term needs and being proactive about things like health insurance. When Voya asked about what concerned them the most right now, they pointed to food and groceries (38%), rising gas prices (15%), the rising cost of housing (15%), and health care (9%).
“Voya’s latest survey highlights the impact of daily pressures and competing financial priorities that many are trying to navigate in today’s high-inflation environment,” notes Andrew Frend, SVP of Strategy and Product, Voya Health Solutions.
At Least the “Family Glitch” Has a Fix
Most employers subsidize the cost of their employees’ health insurance premiums to stay competitive and sweeten the benefits package they offer. However, when it comes to covering dependents, it’s not uncommon to see a large contribution needed from the employee. The IRS estimates that 12% of workers pay more than $10,000 per year in premiums for dependents.
An IRS loophole called the “family glitch” didn’t help. The glitch in IRS regulations existing through 2022 prevented families from receiving financial assistance if they wanted to buy their own insurance instead through the government marketplace. Known as the “family glitch” rule, premium subsidy eligibility for a family was based on whether available employer-sponsored insurance is affordable for the employee only, even if it’s not affordable for the whole family.
However, the IRS corrected the glitch just in time for the 2023 open enrollment period. This means that if a family must pay more than 9.12% of household income in 2023 for an employer-sponsored plan, they could be eligible for premium tax credits in the marketplace. The same would also be true if the coverage offered to the family does not provide minimum value (covers at least 60% of average costs for a standard population and “substantial coverage” for inpatient care and physician services).
What Can Employers Do to Help
We asked Troy Ahrens, Managing Director at Higginbotham, how the Hartford study may affect employers. What he’s seeing may surprise you. Instead of also wheeling back benefits to keep in lock-step, many employers are increasing their commitments—and their budgets.
“This is the first time in my 25 years in employee benefits that employers are insisting on stronger benefits and finding ways to cover more of those benefits for their employees,” he told us. “They see the struggle, and they know that the employers who do the best job at meeting workers where they’re at will be the most successful when it comes to recruitment and retention.”
Then, helping your employees—and future employees—understand the value of what you are offering has become critical. More than half of U.S. workers admitted that they should know more about their employee benefits—especially beyond the traditional medical, dental and vision. There are a few things employers can do to help, according to The Hartford:
- Start communicating with employees early, so they are better prepared at decision time. Many choose to enroll in benefits as soon as the open enrollment window opens, so the more information you can give them early in the process, the better.
- Offer a variety of ways to reach out for help, including emails, webinars, access to benefits counselors, educational videos, and interactive tools. Social media cannot be ignored either. Hartford’s study found that 48% of U.S. workers have turned to social media platforms such as Facebook and YouTube to learn about benefits options.
- Stay clear of jargon that’s confusing or hard for the average person to understand. Instead, use plain language and personalized messaging to show how the products relate to their lifestyle versus supplying a list of benefits offered.
- Highlight the supplemental services that may come with their chosen insurance coverage to increase the perceived value of your benefits packages. These may include items such as an employee assistance program (EAP) or access to legal advice.
We know that understanding the ins and outs of benefits packages can be confusing for both employers and employees. With open enrollment right around the corner, find an advisor who can help if needed, and turn your sights onto meeting employees where they are the in the current economy and communicating those efforts early and often.