As we approach the end of the year, employees and employers are both wrestling with changes to employee benefits for 2021.
While every year always brings about changes, this year seems especially daunting given that the COVID-19 pandemic has dramatically altered the employee benefits world this year and increased uncertainty going into 2021.
So, as employees decide on which benefits are most appropriate for them, it might be helpful to understand the perspective of employers – for context.
The Good News/Bad News
It might be surprising to know that many employers will experience short-term gains in their health plans this year. The reason? Because so many employees deferred or cancelled elective care during 2020 due to COVID. That’s the good news.
The bad news? As COVID-vaccines are distributed throughout the U.S., expectations are that those delayed procedures and routine care appointments will see a spike, thereby likely driving health care costs higher in 2021? How much higher is hard to say. Especially with the continued uncertainty surrounding COVID.
Core Health Insurance Costs Rising
For most of us, the biggest concern is simply core health insurance. And while we might intuitively know that health costs continue to rise, when it comes to health benefits, the rise in costs is pretty significant. In fact, according to the nonprofit Business Group on Health, large employers expect that their health benefits costs will rise 5.3% next year, which is higher than what was projected in each of the last five years.
Take a look at the “2021 Large Employers' Health Care Strategy and Plan Design Survey” conducted this summer, at a time when there we so many more uncertainties with respect to COVID-19. The survey captured responses from companies representing almost 10 million employees and dependents.
Average Cost of Health Care
Further, according to that same Business Group on Health’s survey, the average total health care spending in 2020 – and that includes premiums and out-of-pockets – is expected to come in at $14,769 per employee. That’s up almost $200 from 2019.
But for 2021, total costs are expected to rise at more than 3x the most recent rate, to over $15,500 per employee.
Depending on how much of these costs your employer covers will dictate just how much your coverage will be. If, for example, you work for a large employer that covers 70% of the total costs, then your annual increase will be over $200.
Contemplated Changes to Benefits for 2021
Earlier this year, consulting firm Mercer surveyed companies and asked how benefits might change. And while a high percentage (20%) expected to increase cost-sharing for plan expenses, there are two areas that companies are looking to expand directly as a result of COVID: telehealth and mental health support.
Yet while 52% consider expanding telehealth services to be a top priority and 36% consider expanding mental health services to be a top priority, that doesn’t mean that they will actually implement. In fact, Mercer found that:
- 32% are expanding telehealth programs and
- 25% are expanding mental health support programs (like Employee Assistance Programs)
Making these two changes will be well received by employees and their families of course, as COVID has introduced new stresses and anxieties. But unfortunately the majority of large employers don’t expect to be able to expand their telehealth and mental health services next year.
Your Financial Professional
There is no doubt that 2021 will be a very different year when it comes to employee benefits. Layer on top of that the need to save more, manage our money better and ensure our financial plan is personalized to our risk tolerance, and it’s easy to become overwhelmed.
Your financial professional can help you consider all your needs and make decisions tailored to your hopes and dreams.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by FMeX.
LPL Tracking # 1-05089812