Open Enrollment 2020: A Complicated Shot at Reinvention

Open enrollment is a complex process under even the best of circumstances. In a pandemic year, it’s causing employees and employers alike massive headaches — but it’s also offering us a shot at reinvention.

Employees were already big on their benefits before COVID-19 arrived on the scene. A February 2020 survey by Willis Towers Watson found that 37 percent of employees would prefer an improved benefits package over additional salary, and 57 percent said benefits were more important to them than ever. There’s reason to believe benefits packages have only grown even more important to employees in the interim.

“There’s no doubt that employees are looking for more comprehensive coverage, having witnessed the great toll that the pandemic has taken on individuals and families,” says Amy Mosher, chief people officer at human capital management software provider isolved.

The chaos of 2020 has given employers all the more incentive to get open enrollment right this year by offering comprehensive packages and making the benefits selection process as painless as possible. Unfortunately, COVID-19 is throwing a wrench into things.

Being Generous Is Not Without Its Drawbacks

While benefits are more important than ever for employees, many employers now find themselves economically hamstrung when it comes to offering those benefits.

“Everyone is seeing these economic shifts,” says Sushma Tripathi, vice president, strategic advisory services, at human resources management firm ADP. “Certain employers are actually doing okay, or doing better than expected, while others are not doing very well financially. Employers are looking at their pocketbooks to figure out what to offer and what not to offer.”

Tripathi and Mosher both agree employers that can afford to be generous with benefits right now have been doing so, with some organizations extending coverage to employees they may not have been required to cover under the letter of the law. Mosher, for example, notes that some companies are covering longer periods of COBRA premiums.

But there’s a downside to that generosity: Administering these expanded benefits can be a significant logistical challenge. And not every employer can afford to be so generous in the first place. A June 2020 survey from Mercer found that 12 percent of employers were expecting to take moderate cost-saving measures in terms of their benefits this year, while 3 percent expected to take significant measures. Now that we’re in the middle of open enrollment, those numbers may well be higher.

Complicating matters even further, the shift to remote work has made open enrollment administration more difficult, according to Mosher. With employees distributed far and wide, a tech-driven enrollment process is a necessity, not a nice-to-have.

“HR technology is paramount to the open-enrollment process, as is the ability to comprehensively report and seamlessly communicate enrollment changes to providers via a file feed application programming interface,” Mosher says. “Paper open enrollment just isn’t possible anymore.”

What Happens Now Can Affect Employee Coverage Next Year

Tripathi notes that an employee’s reduction in hours or furloughed status in 2020 could affect their eligibility for healthcare in 2021 — and that employers have to be careful about stability periods when they drop employee coverage.

Under the Affordable Care Act (ACA), employers may determine an employee’s eligibility for healthcare coverage using the look-back measurement method. Under this method, an employer determines an employee’s eligibility during an upcoming stability period by looking back at the hours the employee worked during the previous measurement period. Employees who worked an average of 130 hours per month during the measurement period are eligible, regardless of how many hours they end up working during the stability period.

“The calculation for the ACA is complex, with several factors involved,” Tripathi says. “It remains important to follow the eligibility definition under your plan eligibility rules as well as the ACA to avoid the shared responsibility penalty. Under the ACA, full-time employees who work 30 hours per week or 130 hours per month must be offered affordable, minimum essential coverage.”

For example, if an employer is using a 12-month measurement period and an employee’s reduction of hours or furloughed status drops them below the 130-hours-per-month average for 2020, then the employee may not be eligible for 2021 coverage. By a similar principle, employees who are currently in their stability periods cannot be dropped from coverage until the stability period ends, even if their hours have dipped below 130 per month on average.

“In a nutshell, it’s the employer’s plan rules that basically are going to cover whether a reduction in hours or a furlough event will result in loss of coverage,” Tripathi says. “And employers should really make sure that they send out those COBRA notices if there is a loss of coverage.”

Employees Are Reevaluating What Benefits Are Important to Them

Employers are trying to be as generous as they can while running up against very real financial and legal limitations. At the same time, employees are being driven by their “newfound awareness” around the importance of health benefits to offer “criticism regarding benefits that aren’t working for them or that they don’t understand the value of,” Mosher says.

Mosher has noticed more and more employees asking for ancillary benefits like pet insurance, critical illness insurance, cancer coverage, and voluntary life insurance.

“They are contributing more to their FSA and HSA accounts to save for possible future out-of-pocket medical expenses and are more interested in income replacement plans,” she adds.

Financially stressed employers may not be able to meet all of their employees’ demands, but there are plenty of desirable voluntary benefits they could offer at no cost to themselves. Importantly — however employers choose to proceed — both Tripathi and Mosher stress the importance of proactivity and communication.

“Employees are especially sensitive that the cost of COVID to major health and welfare providers will negatively impact their coverage and rates for 2021,” Mosher says. “HR leaders should consider the added anxiety of employees in this uncertain time, and the impact even small changes have on their well-being, and plan for change accordingly.”

“We’ve seen employers acting judiciously,” Tripathi says. “Group health plans are complex when it comes to eligibility and enrollment. Therefore, you’ll need to review your plan documents and insurance contracts to assess all options for furlough benefits. There may be financial implications as well, so this requires careful consideration to ensure written documents outline the rules for your group health plan, including a definition for eligible employees.”

Whenever an employer has to make a change — whether out of generosity or necessity — communication is key. Times are turbulent enough. Sudden or unexplained alterations of benefits offerings will only add to the chaos.

“[Employers] should plan to answer the why on any changes the company decides to make,” Mosher says. “Weighing the cultural impact with the financial impact across the business is a smart move at a time when culture is more important than it has ever been. Decisions must be made to improve service levels and offerings that imply stability.”