Employee Benefits in 2023 to be Marked by Shifting Models and Makeup

With 2023 around the corner, U.S. employers continued to grapple with the unprecedented challenge of finding enough workers to fill open jobs. Keeping those they do have both on the job and happy enough to stay is just as difficult.

And even if widespread expectations of a recession in 2023 are met, it’s unlikely to cool the job market off to any significant extent.

Employers in search of a solution will find a big part of it in strengthened employee benefits and employment policies that do a better job in meeting people where they are. But the inflationary environment will make it harder to beef up total rewards while achieving cost efficiencies, too.

Here’s what employers can look for on the employee benefits front in 2023.

Rising costs prompt shifts in benefits program management
The old strategy of offloading a share of the benefits cost burden to employees doesn’t cut it in today’s environment. Though it might be tempting when healthcare costs are projected to be 6.5% ahead of 2022 levels in 2023, reaching over $13,800 per employee, with a 10% rise in pharmaceuticals.

But it costs more to recruit people than it does to retain them. To meet them in the middle, big shifts in health plan models are gaining momentum. The savings benefit everyone.

These include:
Zero-deductible health plans. These may require higher premiums but can save on total annual expenses even as they help people avoid some out-of-pocket expenses. Over 40% of large employers intend to offer low- or no-deductible plans in 2023; another 11% are considering them.

Self-funded plans. Self-funding has gotten considerable traction among many employers as a way to spread the risk of claims among workers and their dependents. Stop-loss coverage limits their liabilities. In 2022, 65% of covered workers were in self-funded plans, a trend that will continue in 2023. Self-funding can save as much as 25% on non-claims expenses.

Employee benefits captives. There’s been an explosion in captives, which are now widely open to mid-sized and smaller businesses as a way for members to spread the financial risk of outsized claims. Gaining access requires plans to be self-funded, another contributor to the accelerating self-funding trend.

New strategies reinvent benefit designs
More thoughtful approaches to benefits and policies are taking hold, in no small part due to the widespread disengagement of U.S. workers. More than half are disengaged, costing employers 34% of what they earn annually. An improved employee experience has a role in fixing that.

Benefits that are more personalized to individual needs are increasingly necessary to delivering an optimal employee experience. That starts with honing in on the differing priorities among employee groups, not just by their age segment, but by where they are in their work and personal lives.

For example, financial planning services are a “must have” condition of employment among half of Gen Z and Millennial employees, but are less important to older workers. And Gen Z workers may be less interested in health benefits. That’s partially due to being younger, healthier, and often still on their parents’ plans. Understanding the nuances comes with data analytics. Using tools like workforce persona analysis will help employers focus in on what specific benefits matter to their employees.

It will take embracing such trends in 2023 for employers to come out ahead with their recruitment and retention strategies. And by allocating their resources more effectively to benefits that really matter, they will be managing those costs more effectively in the long term.

About the author


Scott Millson is the President, Employee Benefits for HUB Florida. He is a leading expert in employee benefits, HR technology, and emerging employee engagement trends.

With over 30 years of experience in employee benefits and HR technology, Scott oversees the strategic planning, organizational design, resource investment and alignment for the HUB Florida EB team. Prior to joining HUB International, Scott founded and led MillsonJames, LLC a Benefits and HR Technology Advisory Firm which was acquired by HUB International in July 2017.

He is a nationally recognized speaker and author, having presented at countless national conferences with several articles published in industry publications.

Scott is also very active in his local community. He is the Founder and Chairman of Fast Start Management, a local non-profit organization that promotes healthy lifestyles and fitness to elementary-aged children. He also serves on several boards throughout the community, is a trustee at his children’s secondary school, and is a former vestry member at his church.

Scott earned his Bachelor of Science degree from the University of Florida and is a veteran in the United States Navy.