By Ryan Glushkoff
It’s the start of a new year and that means it’s time to talk about the trends that are going to affect the employee benefits market this year. As you’ve surely noticed, changes are afoot in health care, so forecasting what’s going to happen is tougher than usual. That’s why we titled our most recent webinar “Seeing Through The Fog: The Top Trends in Employee Benefits in 2017.”
You can listen to a recording of the webinar here, but we’re also going to be publishing our thoughts in a series of blog posts over the next few weeks. We’re going to start off by doing a level-set on the state of the employee benefits market today. That will help us give some perspective to what is trending on the regulatory front. Then we’ll jump into what’s trending on the benefits front. And finally, we’ll finish off with what’s trending on the technology front (weather puns intended!)
Let’s start with the current state of the employee benefits market. As you know, that’s how the majority of Americans get health care, and to understand where it’s going, it’s good to start off by checking in on the state of the labor market.
Long-term trend: as participation rates
declines, the labor market tightens
The state of the labor market, particularly the labor force participation rate, is a good indicator of the health of employers. Between now and 2022, the Bureau of Labor Statistics is forecasting the labor participation rate to decline. Fewer young people will enter the workforce and fewer older people will stay in the workforce. The net effect is a decline in the participation rate and a tightening of the labor market. A more competitive labor market means good things for the em
ployee benefits market because employers will need to offer competitive benefits (among other tools) to find, hire and keep the best talent.
While labor force participation rate is more of a long-term trend, the monthly job openings and turnover data — otherwise know as the Job Openings and Labor Turnover survey, or JOLTS report from the Bureau of Labor Statistics — shows a shorter term view. According to the latest data from November 2017, U.S. employers posted more jobs in November and quitting also increased — signs that job gains and wages may increase in the months ahead. With the unemployment rate at 4.7 percent (which is near a nine-year low) and the number of available jobs high, employers are facing pressure to raise compensation in order to keep the workers they have and attract new workers. Again, benefits come into play here as an integral part of total compensation.
The employee benefits market is steady
Now let’s take a look at state of the employee benefits market. The Congressional Budget Office forecasts that the number of people getting coverage through employers remaining consistent at 55%. While there is not much growth here as you can see, there is not much churn either – which means the market is stable.
Now, one thing to keep in mind here is that the
latest survey was done in March 2016. The forecasts tend to slightly decrease from 155 million people to 152 million people. One can assume that this slight decrease was predicting the movement of some folks getting their health coverage from their employers to the public markets. Since the future of the ACA is now in question, I think it is safe to assume that instead of a decrease, it will remain flat and may even see a slight increase. That is because at a high level, the approach of Republicans to health care is to put less control in the hands of the government and more in the hands of the private sector. Plus, if the ACA is repealed, those employers that did direct their employees to the public markets instead of offering them employer-subsidized coverage may bring them back onto their company’s plans.
So, in summary, the labor market is strong and it’s tight. Employers need to focus on getting the talent they need and keeping the talent that they have. Providing the right employee benefits offering will be critical to achieving that. The health of the employee benefits market is directly dependent on the number of employees receiving health coverage from their employer. And since employers are continuing to hire, the state of the employee benefits market is strong.