Rethinking Benefits in the Age of COVID-19 and Beyond

Challenges lie ahead, but there are a number of bright spots for employers developing new benefits strategies. Learn more about the key findings from Aon's latest Rapid Response Survey below.

The COVID-19 pandemic has touched every aspect of our lives, including how and where we work. Private- and public-sector organizations have experienced seismic shifts in revenues, business models, workforces, and workplace norms.

Against this backdrop, Canadian employers that were already reevaluating benefits strategies to address cost challenges and changing employee expectations were forced to step back and recalibrate once again. Competitive benefits packages remain a proven method of attracting and retaining talent, but a number of external variables and financial pressures cloud the picture. To better understand what’s ahead, Aon's Rapid Response Survey asked employers to consider their benefits costs, priorities, and offerings in the context of the COVID-19 pandemic.

The results tell us that plan sponsors have begun to weigh the impact of COVID-19 on benefits and the challenges to come. And they indicate that while COVID-19 has been influential in some areas, it has been less important in others. A majority of respondents do not intend to alter the cost-sharing arrangements associated with benefits plans, for instance. While certain priorities for plan sponsors are shifting to favor employees, other concerns — including long- and short-term disability costs — remain unchanged.

The results also indicate renewed urgency around employee wellbeing and mental health, in particular.

As we navigate the uncertainty of the COVID-19 pandemic, leadership will have a unique opportunity to reflect and make changes for the better based on lessons learned. In retrospect, COVID-19 may be the disruptive force that encourages organizations to rethink strategic priorities, embrace new practices, eradicate inefficiencies, and break down barriers. As they reflect, employers may find that applying a holistic lens and remaining mindful of the five pillars of benefits strategy — employer view, employee view, competitive view, financial view, and environmental landscape view — will ensure they continue to achieve core business objectives and advance the employee relationship (Figure 1).  

^{Figure 1: Five Pillars of Benefits Strategy}

Shifting Priorities

Taken as a whole, survey results indicate that when it comes to benefits, plan sponsors are focused on strategy and employee experience while considering costs. Most Canadian employers (81%) report that they are not thinking about making changes to their cost-sharing strategies, possibly feeling that now is not the time. Cost-sharing is a critical part of budgeting and can often mean the difference between enhancing or reducing a plan. While most organizations don’t plan to make changes to their cost-sharing strategies, 62% of respondents identify budgetary constraints as a factor in benefits decision-making. Of the very few organizations that report cost-sharing changes taking effect in 2021, most have increased employee contributions for some or all employee groups.

Similarly, a majority of plan sponsors (95%) are not considering changes to their underlying financial arrangements.

For many plan sponsors — regardless of whether they are fully insured or administrative services only — the pandemic had a positive impact on their premiums and claims. With employers seeing savings, the motivation for making financial changes may have waned. However, it’s worth noting that their perspectives may shift as claims pick up again post-pandemic.

When asked whether they are considering benefits changes because of either lessons learned or new priorities that emerged during the COVID-19 pandemic, 47% of employers report that they are not thinking about changes. Plan sponsors that are considering changes are overwhelmingly focused on positive ones, including enhancing benefits (36%), adding flexibility (24%), and rebalancing current benefits to better reflect new priorities (19%). Only 5% report considering reducing benefits in the face of cost pressures (Figure 2).

^{Figure 2: Benefits Changes}

Further evidence of a positive shift can be seen in the factors that influence benefits priorities. Not surprisingly, recruitment and retention (64%), budgetary constraints (62%), and employee engagement (61%) remain top of mind for employers. But in a powerful commitment to fostering a more inclusive workplace, nearly 25% of respondents identify diversity and inclusion as an influential factor. While mergers and acquisitions and global mandates play a role in benefits strategies for some respondents, they have less influence than other more critical factors (Figure 3).

Figure 3: Influential Factors

Renewed Focus on Employee Wellbeing

In a similarly positive shift, survey results suggest organizations are renewing their focus on employee wellbeing. Nearly 60% of respondents express a need to evaluate and improve mental health offerings. Results show that 11% of plan sponsors indicate a need to rethink coverage from the ground up, while approximately 47% foresee a need to close gaps in coverage and delivery.

Telemedicine and virtual care visits, which have been available in varying degrees over the years, have been embraced swiftly by patients during the COVID-19 pandemic. Survey results indicate approximately one-third of responding Canadian organizations offer virtual healthcare benefits, and only about half of those organizations offered the benefit before the pandemic. Of those organizations that have implemented virtual care during the pandemic, the majority intend to make it a permanent offering. In addition, 27% of respondents are considering adding the benefit.

Those organizations that intend to add telemedicine will find it beneficial to detail their objectives and understand the virtual care options in the public health system and through private providers, along with the implications and context of virtual care for benefits, accessibility, and quality of care.

Optional benefits also garner more attention in the COVID-19 world. Not only do wellness and lifestyle benefits help retain talent, but they can also have a preventive impact on long-term disability costs. About two-thirds of respondents believe the pandemic has increased employee interest in select lifestyle benefits, such as stress management and counseling, financial planning, nutrition programs, virtual fitness memberships, and fitness equipment purchase/rental (Figure 4).

^{Figure 4: Optional Benefits}

Ongoing Concerns

Although employers have shifted some of their strategic priorities, survey results suggest they remain focused on certain issues from years past. Short- and long-term disabilities continue to stand out, with nearly 75% of respondents indicating they are “very” or “somewhat concerned” about these costs (Figure 5). Canadian employers also express concern over cost factors directly influenced by COVID-19, including the availability of services (83%), possible increases to reasonable and customary limits (79%), and possible increases in dental costs (64%).

Collectively, cost factors related to COVID-19 seemed to fall into respondents’ “somewhat concerned” category, which leads us to believe that employers view these as short-term concerns. In contrast, as disability costs continue to rise, they remain an important consideration in employers’ long-term benefits strategies — not only in terms of what coverage to provide but also in terms of what preventive benefits to offer.

Figure 5: Industry Trend Concerns

When asked about employee perception of benefits in the context of COVID-19, employer response was overwhelmingly positive. Few employees expressed dissatisfaction with either the design or administration of the plan. Their response demonstrates the value of a thoughtful benefits program that takes into account all five pillars: employer view, employee view, competitive view, financial view, and environmental view.

While COVID-19 may have revealed some flaws and gaps in benefits, it has also driven largely positive shifts in priorities. Above all, it has pushed employers to respond to the needs of their employees and afforded them an opportunity to step back and think strategically about their business objectives and employee relationships. Taken together, those changes are likely to provide long-term value for organizations.