5 Predictions For Employee Benefits In 2022 And Beyond

5 predictions for employee benefits in 2022 and beyond | BenefitsPRO

Source: BenefitsPRO, by Becky Seefeldt

The pandemic and the Great Resignation have created a perfect storm for employers. Employers need to be forward-thinking regarding employee benefits because this crucial feature can make or break a company. As people are less likely to stay at their current positions, they’re also much less interested in applying with any company that doesn’t offer them benefits such as health care or vacation time.

Related: 10 recruiting trends for the years ahead

The future of benefits is uncertain, but there are five predictions for where they’re headed in the next few years that could help employers adjust their current package.

1. A push to improve HSAs

There’s a chance that some common-sense changes could be made to health savings accounts (HSAs). These adjustments will allow those who are eligible for Medicare or Tricare benefits the ability to contribute towards their own HSAs. There’s also interest in revisiting how we define what a “qualified high-deductible plan” entails so as not only to accommodate more Americans but also do away with any unnecessary restrictions altogether.

The solution to this problem is not one-size-fits-all. Some would like the requirement taken away altogether, while others are open to compromise. This may include modifying how high-deductible plans should work so that anyone, even those with limited benefits, can contribute towards an HSA. With these changes, individuals will be able to prepare themselves better because they can use their HSA as needed now or put money away for the future.

2. A convergence of health plan options

For roughly the past 20 years, premiums have been increasing. The average premiums for family coverage have increased from $7,000 in 2001 to more than $22,000 by 2021. Deductibles have also risen, with the average deductible for a PPO rising from $201 in 2001 to nearly $1,700 in 2021. The average deductible is so high that it’s beginning to meet the criteria for a high-deductible health plan. PPOs (and all plans) have been increasing their deductibles, which may indicate convergence between health care and savings options.

The best option for employees can be to utilize these new and improved tools. Some people hesitate to move into a high-deductible health plan because of the name: “high-deductibles.” But, this is an excellent option for certain employees who want more control over their expenses and savings rates if something happens unexpectedly. The contribution and eligibility for an HSA can be adjusted by making a few changes to the PPO design. This way, employees will save more money since they’ll have access to managing their medical expenses, which benefits employers, too!

3. Increased or improved price transparency

Increased or improved price transparency has been on the table for about two decades; however, there is more reason than ever to expect forward progress in this area. First is the No Surprises Act, which protects consumers from being surprised by unexpectedly high bills. This includes air ambulance claims, emergency services, and even non-emergency medical treatments that are billed as out-of-network when performed at an in-network facility. This act establishes limits on what can reasonably be charged and provides dispute resolution between plans and out-of-network providers.

Next, the Transparency in Coverage Act requires plan providers, including employers with group coverage or individuals purchasing their own plan to be transparent about prices and out-of-pocket costs. The start date for this act has been pushed back to July 1, 2022.

4. A move to strengthen health and wellness

When it comes to health and wellness, there are several options available. Help employees identify and address health risks before they result in costly medical procedures. As an employer, you can provide them with more comprehensive management and assistance using digital programs, online counseling services, etc.

Another option is utilizing a “specialty account” that caters to unique needs. This type of pre-tax savings plan has been gaining traction with employers who want to help their employees save money on afterschool programs, fitness classes, or even scooters for commuting purposes.

5. An increase in targeted benefits communications

The final prediction is regarding an increase in targeted benefits communications. With targeted communications on the rise, this trend is just getting started. We live in a world where personalization is everything, and benefits should be no exception. Benefits have traditionally been a data dump that occurs every few weeks in which employees are overwhelmed by the sheer volume of information. As employees continue to demand more from their employers both digitally and physically, companies must find ways to elevate their offerings. Consumers want personalized everything — from meals at home or takeout to how much information is given about them when they buy something. Why should employee benefit plans be any different?

While the future of benefits is uncertain, employers should be proactive in preparing for changes. Employers need to be forward-thinking regarding employee benefits and stay up-to-date on the latest industry trends. These five predictions offer a glimpse into what could be ahead, so it’s essential to start thinking about how they may impact your organization and employees.

Becky Seefeldt is vice president of strategy at Benefit Resource LLC (BRI), a leading provider of dedicated pre-tax account administration and COBRA services nationwide.

Consumer-Driven Health Plans Gain Ground

Thirteen percent of the privately insured U.S. population was enrolled in a consumer-driven health plan (CDHP) in 2015, according to a report by the Employee Benefits Research Institute. Sixty-three percent of those enrolled in CDHPs had an HSA; 13% had an HRA, and 24% had the option of an HSA-eligible health plan, but had not opened an HSA.

Manufacturing Leads Adoption of High-Deductible Health Plans

Manufacturing

A survey by Benefitfocus reveals distinct differences in benefit offerings among manufacturing, education, and health care industries. Manufacturing leads the adoption of high-deductible health plans (HDHPs), education favors traditional plans (PPOs, HMOs, etc.) and the health care industry offers the most voluntary benefits. Manufacturing is the only industry of the three, in which more companies offer a combination of HDHPs with traditional plans than traditional plans only (48% to 46%). Manufacturing employees selected an HDHP over a traditional plan 46% of the time. The findings suggest that manufacturing employers have an opportunity to encourage employees to participate in health savings accounts (HSAs) or flexible spending accounts (FSAs) to cover higher out-of-pocket costs associated with HDHPs. Only 23% of education employers offer at least one HDHP. Traditional health plans dominate the mix of benefits. HMOs made up 44% of employee enrollments, which suggests an opportunity to offer a wider range of lower cost benefit options for a multi-generational workforce.

Employees in the health care industry face high deductibles regardless of plan selection, but are better equipped to cover unexpected medical costs with voluntary benefits (including critical illness, accident, and hospital-indemnity insurance). Health care employers offered gap products at the highest rate of the three industries at 12 percentage points above the average. Nearly half of health care workers selected a voluntary plan when given the choice.

HSAs can offer serious tax benefits

The tax advantages of health savings accounts can trump those of individual retirement accounts or 401(k)s without matching because those who make an HSA withdrawal to pay qualified medical expenses can avoid income tax on the withdrawal as well as the initial contribution. At age 65, HSA holders can withdraw without penalty to cover other expenses, as well, although those withdrawals are taxed. There’s also no minimum distribution at age 70-1/2 as with 401(k) plans and deductible IRAs. CBS MoneyWatch (3/24)

HSAs top employers’ lists of tax-exempt benefits

Employers responding to a recent survey said offering a consumer-directed health plan is the best way to control health care costs, and employees benefit because contributions to CDHP-linked health savings accounts are tax-deductible, as is interest accrued in the accounts. Other popular tax-deductible benefits include education assistance, commuting benefits and achievement awards. Entrepreneur online (2/24)

HSAs and HRAs

In 2014, there was $22.1 billion in health savings accounts (HSAs) and health reimbursement arrangements(HRAs), spread across 10.6 million accounts, according to data from the
2014 EBRI/Greenwald & Associates. In 2008, there were only 4.2 million accounts with
$5.7 billion in assets. The average account balance was $2,077 in 2014, up from $1,356 in 2008.
An increasing number of people have held their account for three or more years. Twenty-seven percent had held their account for three to four years, up from 19% in 2008. Thirteen percent had held their account five or more years, up from 4% in 2008. Accounts with an employer contribution had an average balance of $2,403 while those without an employer contribution had an average balance of $2,056.

People who had held an HRA or HSA for five years or more had $3,092 in their account. Those who had held an account for less than a year had less than $1,500 in their account. In general, average account balances have grown over the longer term regardless of how long the account had been open. The report also found the following:

• Average rollover amounts increased from $1,165 in 2013 to $1,244 in 2014.
• $8.9 billion was rolled over in 2014, down from $9.4 billion in 2013.
• 11% of people had held an account for more than a year without a rollover in 2014.
• Rollover amounts increased with the length of time an individual had held an account. In 2014, those who had held an account one to two years rolled over an average of $982; those who had held an account three to four years rolled over an average of $1,421; and those who had held an account five or more years rolled over an average of $1,428.
• Accounts with an employer contribution had a higher amount rolled over than those without an employer contribution.
• Accounts with an employer contribution had an average rollover of $1,280 while those without an employer contribution had an average rollover of $1,069.

How HSAs Could Beat 401(k)s For Savings

For some employees, using an HSA for health care expenses in retirement may be better than saving in a 401(k) plan, according to a report by the Employee Benefit Research Institute (EBRI). Contributions to an HSA reduce taxable income; earnings on the assets in the HSA build up tax free; and distributions from the HSA for qualified expenses are not subject to taxation. “Depending on the rate of return in an HSA, these accounts could generate significant assets,” said Paul Fronstin of EBRI. If you contribute the maximum allowable amounts for 40 years to an HSA without making withdrawals, you could accumulate up to $360,000 if the rate of return is 2.5%, $600,000 if the rate of return is 5%, and nearly $1.1 million if the rate of return is 7.5%. However, he added that many people aren’t able to save in an HSA and pay their out-of-pocket health care expenses. Also, HSA balances may not be enough to pay all medical expenses in retirement even if maximum contributions are made for 40 years. For more information, visitwww.ebri.org.

HSAs Provide Financial Flexibility

Fifty-two percent of HSA account holders spent more than 80% of their HSA funds for health care expenses during 2012, according to a survey by America’s Health Insurance Plans (AHIP) and the American Bankers Assn. Since Congress authorized HSA plans in 2004, AHIP has conducted three surveys on HSA banking activity. This latest report measuring the financial activity of more than 1.4 million HSAs, shows consumers taking an active role in managing their health care dollars. Fifty-five percent of HSAs received personal contributions during 2012. While end of the year account balances varied, roughly 80% of accounts had a positive balance that could be carried over to the next year to help pay for future expenses. Fifty-eight percent of accounts had withdrawals during the year. Of those accounts, the average withdrawal during 2012 was $2,081. For more information, visit http://www.hsaalliance.org.

Expert predicts combined retirement, health accounts are coming

Retirement products that offer combined retirement and health payroll savings plan deductions are on the way. “That is the frontier for the next two or three years,” says Fidelity Investments Retirement Policy Development chief Doug Fisher. Such accounts will help workers reach higher levels of retirement security, he adds. Financial Advisor online (5/15)

Americans Don’t Understand HSAs

With the advent of Obamacare, more Americans are eligible for a health-savings account (HSA), but most don’t have the information they need to take advantage of them, according to a survey by insuranceQuotes.com. In fact, 86% say they don’t understand HSAs. Fifty percent of Americans say they are somewhat or very likely to use an HSA to cut their taxes. But only 8% have an HSA.

Many Americans are confused about eligibility and benefits. For example, only 14% know that an HSA has to be paired with a high-deductible health insurance plan. Many Americans are confused about which medical expenses HSAs can be used for; 52% think they can use HSAs to pay for over-the-counter medications, and 51% think they can use HSAs to pay health insurance premiums, both of which are untrue. Popular expenses that HSAs can be used for include prescription medications, doctor visits, dentist visits and eyeglasses.

People who buy coverage on the public health insurance exchanges are especially good candidates for HSAs, since most of the purchased plans under Obamacare are high-deductible plans including Silver and Bronze plans.  For more information, visit http://www.insurancequotes.com/health/HSA-and-high-deductible-health-plans.

Last Updated 05/25/2022

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