The Pandemic Effect on Employer Sponsored Benefits: Lessons and trends employers should consider as they move forward
Prior to the pandemic, newer generations entering the workforce already understood the financial security available to the previous generations likely wouldn’t be there for them. Add in a pandemic like the one we’ve experienced for the last 15 months and all employees are now turning to and measuring their employers based on what they’re willing to do to address these concerns within their employer-sponsored benefit package.
Here are three immediate employee benefit trends all employers should keep an eye on.
- Employer Group Disability Insurance
Despite seven out of ten employers currently offering a group sponsored disability insurance plan, historically these benefits have gone largely unnoticed and undervalued by employees, with exception of those who had planned or predicted life events such as pregnancy or surgery. However, after 15 months of consistent reminders of a life-threatening virus like COVID-19, employees now more than ever expect their employer to provide comprehensive disability coverage.
According to the U.S. Bureau of Labor Statistics (BLS), the cost of providing both short- and long-term disability insurance is approximately one percent of total compensation costs for employers. Throughout the pandemic, disability insurance allowed employees diagnosed with COVID-19 to file a claim and if approved, receive a percentage of their income while on leave. Although disability claims have been approved for COVID-19 diagnoses, the criteria for disability related to this diagnosis remains undetermined and therefore each claim is closely reviewed to determine if it matches the definition of disability outlined in an employer’s specific policy.
Many previously infected COVID patients claim COVID symptoms are continuing long after the virus has left their system, impacting long-term disability claims. Currently, the CDC estimates up to one-third of COVID survivors have lasting symptoms resulting in a new chronic condition, informally referred to by researchers as Long COVID. Some of the common symptoms include fatigue, brain fog, difficulty breathing, rapid heart rate and headaches. In late July, new guidance from HHS and DOJ confirms that Long COVID can be considered a qualifying disability under the ADA, Affordable Care Act and Rehabilitation Act “if it substantially limits one or more major life activities.”
These limits may be due to physical or mental impairments, the guidance notes. The guidance also clarifies, however, a Long COVID diagnosis does not automatically qualify as a disability. Even if someone does not qualify for disability leave under this condition, they could be entitled to workplace accommodations under the Americans with Disabilities Act. Long-term disability benefits could become a more common expectation if researchers determine Long COVID to be a largely disabling condition.
- Employer Group Life Insurance
For the most part, consumers always knew they needed life insurance. However, once life insurance companies confirmed COVID-19 diagnoses would be covered the same as any other illness, many consumers were motivated to finally purchase. According to a JD Power study, life insurance applications rose 4% in the last 12 months, the largest increase in the last decade. Employers who offer a group life insurance policy provide employees a guaranteed issue amount paid to an employee’s designated beneficiary in a death event without any medical underwriting. For many employees these group policies secure coverage they otherwise may not qualify for under an individual plan with medical underwriting, and have become more valuable to employees considering an employment decision.
A Deliotte consumer survey also found 40% of interviewed, underinsured buyers are now considering increasing their coverage because of the pandemic. This also should signal employers who already offer a group sponsored life insurance plan to consider adding a supplemental plan option for employees to increase coverage beyond the employer-sponsored benefit and extend coverage to dependents as well. As of print, insurance carriers are not taking COVID-19 vaccination status into consideration when underwriting voluntary life insurance plans. If Long COVID is determined to be a formal condition, there’s potential for insurers to use this diagnosis in their underwriting considerations as a pre-existing condition.
- Taking control by self-funding
Many employers saw insurance companies step up to cover COVID-19-related testing and treatment 100% for patients during the pandemic’s state of emergency. As vaccination rates continue to rise, most of those coverage exceptions are set to expire by 4th quarter 2021 and return to out-of-pocket expenses for employees. Increased regulatory requirements on healthcare price transparency and the recent taste of benefit flexibility have motivated employers to seriously consider self-funding their claims and benefit plans, and rightfully so. As a self-funded group health plan, the employer pays their administrative and covered claim expenses directly and purchases stop-loss insurance to cover catastrophic claims. In exchange, they receive increased transparency into their claims experience, further benefit design flexibility, tax and fee savings, among many others.
Historically, self-funding was an option for companies with large cash reserves and 300 or more employees. However, new products, programs and health management and analytics technology allow smaller employers to take advantage of the significant flexibility and cost-effectiveness of self-funding. Because of the long-term commitment required to be successful, working with a consultant experienced in self-funding is key in helping an organization determine if self-funding is right for them.
Who will be the winners?
Although COVID has thrown many aspects of our companies and lives out of balance, employers can use ongoing best practices like benchmarking and surveying employees to ensure their benefit package fulfills and anticipates employee needs. Compensation is important; however, a thoughtfully designed benefits package will help an employee solve problems and fill coverage gaps for their family they may not otherwise be able to solve for themselves. The employers who take action and leverage post-COVID trends will be the winners in recruiting and retaining top talent.
Lauren Harris is an Employee Benefits Consultant with Advantage Benefits Group.