2021 Health and Well-being Touchstone Survey

Latest findings from PwC’s Health and Well-being Touchstone survey

Employers face mounting challenges in today’s employee-centric job market 

As the US workforce begins to return to the office, employers are faced with a major challenge: how to support employees in a radically changed work environment. The pandemic has had a profound impact on employees. In March 2020, many transitioned from working from the office to working from home, and, as a result, employees’ priorities and work preferences have changed. 

High rates of burnout, increased interest in flexible schedules and remote work and a renewed focus on diversity and inclusion (D&I) are putting increased pressure on employers to address these priorities. To add to these challenges, Labor Department statistics show that employees are looking for new jobs in record numbers. To support current employees and compete for new talent in this evolving market, employers need to reimagine how benefits and rewards can help them meet their recruiting and retention goals.

To address D&I, 85% of employers said they are assessing—or have assessed in the past year—their policies regarding bias and inclusive language.

Employers recognize the challenges they face regarding people strategies and talent acquisition

Employers cited diversity and inclusion (D&I), benefits and perquisites and work/life flexibility as the top areas of focus for their talent strategy. While similar to 2020, D&I became the top focus area in 2021 and work/life flexibility entered the top three—mirroring employees’ key considerations when selecting an employer.

To address D&I, most employers (85%) indicated that they are assessing—or have assessed in the past year—their policies and programs to look for bias and inclusive language. However, this may not be enough to help employers appeal to diverse candidates and employees, which is a top challenge for employers’ people strategies.

Nearly one in five (19%) employees responding to PwC's Employee Financial Wellness Survey said that "flexibility and/or work-life options" have the most impact on their satisfaction at work, but employers continue to struggle with how to address work/life flexibility and returning to the office in ways that can limit employee turnover. Employers need to address flexibility through benefits or work policies that better support employeesin managing stress and preventing burnout, while limiting their own turnover. 

As employers look toward the future, their key focus should be on understanding employee needs and preferences

Top five areas of focus for attracting and retaining talent

Source: PwC, Touchstone Survey 2021

Employers added certain benefits as a result of the pandemic, but will need to reimagine how rewards can help to win the war for talent

When asked which benefits they added or removed in light of COVID-19, most employers said they had added flexible work arrangements (91%) and mental health programs (53%). These responses were not surprising, given that many employees continue to work remotely and mental health remains a priority for employers, employees and their families. In addition, 44% of employers added or increased time off (PTO and/or sick time) and wellness programs, emphasizing the importance of these benefits, particularly in light of the pandemic. 

Despite these initiatives, many employers did not make changes to plan designs, employee contributions or financial wellness programs. Employers also made few changes to compensation based on home-office locations (7%). This could be the result of employers having to manage other priorities, or could signify a reluctance to make significant changes in a period of uncertainty.

As employers look toward the future, a key focus will need to be on benefits and compensation issues, as employees continue to consider remote work or flexible work arrangements. Understanding employee needs and preferences will help employers make investments that can achieve a better balance between benefits, compensation and flexibility (total rewards), enabling them to support employees and attract talent in a new work environment. 

To manage rising medical costs, employers should consider implementing strategies that can have long-term impacts, such as direct contracting, performance-based networks or value-based design.

Percent of respondents changing benefits due to COVID-19

Source: PwC, Touchstone Survey 2021

Costs remain top of mind as employers consider enhancing benefits

PwC’s Behind the Numbers predicts healthcare cost trend in 2022 will be 6.5%. This will result from increased utilization as a result of deferred care and additional use of mental health and substance abuse services, combined with the worsening health of the population. These potential cost inflators will directly impact employer costs.

Employer strategies for savings 

To manage rising medical costs, employers should consider implementing strategies that have long-term impacts, such as direct contracting, performance-based networks or value-based design. However, the number of employers implementing or considering these strategies decreased or remained flat from 2020 to 2021:

  • Direct contracting fell from 30% to 26% 

  • Performance-based networks fell from 48% in 2020 to 35% 

  • Value-based plan design consideration remained high, but decreased from 55% to 51% 

  • Interest in private exchanges remained flat at 8% year over year

Instead of focusing on long-term strategies, employers have continued to focus on near-term cost savings, such as shifting costs to employees by increasing cost sharing (49%) or premium contributions (54%).

Prescription drug costs continue to be a challenge. Annual drug cost trend reports show ongoing increases year over year, and pharmacy spend can represent over 20% of overall medical costs for many employers. Although new specialty drugs tend to make the headlines, increased utilization of certain existing drugs is driving the trend toward higher costs. To help manage overall drug cost trends, over 80% of employers told us that they continue to look to their pharmacy benefits manager (PBM) for solutions, supported by traditional management strategies such as: 

  • Prior authorization rules (81%)

  • Quantity limits (79%)

  • Step therapy rules (78%)

Given that specialty drug costs can represent over 50% of the total pharmacy spend, an increasing number of employers are “carving out” the administration of specialty drugs and clinical management to alternative vendors. This trend is partially due to concerns regarding possible PBM conflicts of interest, as these administrators are both processing the prior authorization (e.g, determining who is eligible to receive the drugs), and dispensing the drugs, many of which have high rebates. 

In 2021, fewer employers (26%) said they implemented limited or exclusive pharmacy networks strategies compared to 2020 (38%). However, employer participation (and consideration) is increasing in the following alternative strategies for controlling drug costs:

  • Three-tier specialty drug copay designs: Sixty percent of employers have implemented this, compared to 48% in 2020, with an additional 13% considering it.

  • Specialty carve-out: Almost half (45%) of employers have implemented this strategy, compared to 39% in 2020, with an additional 21% considering it.

Emerging vendors that focus on member consumerism are gaining traction as they can offer prescription drug prices that are frequently lower than those available through employer-supported benefits. However, integrating these vendors into benefit plans remains a challenge, leaving employees seeing lower costs at point of sale but making payments that don’t count toward deductibles.

With costs continuing to rise, employers should continue to evaluate strategies to limit year-over-year increases. Focusing on opportunities to control costs in the long term—for both medical and pharmacy—can provide room for employers to invest in benefits that are meaningful to employees.

Wellness is still prioritized for physical health, but there is a shift toward a more holistic look at well-being that has employers expanding programs.

Employer strategies for savings

Source: PwC, Touchstone Survey 2021

Well-being remains a priority among employers, and expanding programs beyond physical health can offer powerful tools for addressing employees’ holistic needs

Almost half (44%) of employers added or improved wellness programs as a result of COVID-19. Employee Assistance Programs (EAPs) remain the most offered wellness program (98%), followed by physical activity programs or fitness challenges (76%). When looking at programs that employers ranked as “most valuable,” biometric screening (51%) and EAPs (42%) were most commonly ranked first. These programs align with the primary outcomes employers are looking for in a wellness program, which are to improve employee health (54%) and control medical costs (40%). 

However, priorities are shifting. Reducing presenteeism (70%), reinforcing culture (63%), improving employees' financial wellness (40%) and enhancing employee engagement (32%) were frequently cited as priorities for wellness programs.

These priorities are reflected in some of the programs being offered by employers and used by employees. Financial literacy (32%) and community service programs (36%) were most commonly selected as the second-most valuable programs by employers. The number of employers offering financial literacy increased (71% in 2021 compared to 66% in 2020). PwC’s Employee Financial Wellness survey noted that one-third of employees ranked a financial wellness benefit with access to unbiased coaches as the employer benefit they’d most like to see added by their organization. Community service programs were more often cited as “highly used” (36%), suggesting greater participation than in the most commonly offered programs: EAPs (17%) and physical activity or fitness challenges (33%).

Additionally, employers have expanded their offerings to include nutrition education and resources (40%), mentoring programs (36%) and on-site counseling (33%). These programs were cited as third-most valuable, offering employees the flexibility to address their individual well-being priorities. Employers said these programs have over 85% participation (“some participation” or “highly used”), which suggests that they are valued by employees.

While wellness is still prioritized for physical health, there is a shift toward a more holistic look at well-being that has employers expanding programs. This shift may be in response to COVID-19 and the impacts it has had on individuals and communities, but some employers have seen long-term benefits by focusing on well-being, such as more engaged employees and better business outcomes. Ultimately, building a culture of well-being can be a critical tool to attract and retain talent.

As new options become available, employers are considering alternatives to help employees prepare for retirement, while managing company risk and improving employee savings.

Wellness programs that ranked highest among employers

Source: PwC, Touchstone Survey 2021

Wellness programs offered by employers

Source: PwC, Touchstone Survey 2021

Employers are looking to balance their own risk while helping employees prepare for retirement 

Employers continue to offer retirement programs to employees, and over half (57%) agree or strongly agree (up from 50% in 2020) that their employees are financially prepared to retire when they want to. Employer confidence in employees' readiness appears to be supported by increasing participation in 401(k) or 403(b) plans, despite the pandemic. More than three quarters (79%) of employers reported participation by the majority (over 80%) of their employees, up from 71% last year, while 6% remains the most common deferral rate.

A rising number of employers also believe that their employees understand how to manage savings—up to 43% from 38% in 2020. However, according to the employees that responded to PwC’s Financial Wellness survey, many do not feel ready for retirement. Just 47% indicated that they are confident that they will be able to retire when they want to, and only 40% believe their current retirement plans and social security will be sufficient to support their retirement.

To help employees prepare for retirement, employers are considering alternatives to manage company risk and improve employee saving. For example, the signing of the SECURE Act in late 2019 contained a fiduciary safe harbor provision for the selection of lifetime income providers, making it easier for employers to introduce these options into 401(k) plans. Over the last year, the number of employers offering annuity investments has doubled, from 3% to 6% of respondents. These offerings allow employees to turn retirement savings (deferrals and employer match) into a more steady stream of retirement income.

In addition, more employers are looking to reduce pension plan risk: the number of employers planning to de-risk their plans in the next 12 months has increased by five percentage points compared to 2020. Over the past 12 months, 12% of employers completed an annuity purchase with an insurance company (up from 6% in 2020). Full-plan terminations have decreased from 6% considering a plan termination in the following year in 2020 to 2% in 2021. The low-interest-rate environment is making it more cost-effective for employers to use other de-risking activities until full-plan terminations become a more viable option. 

Employers continue to look for ways to balance their risk while still supporting employees' retirement readiness. Although employees are not as confident as employers think they are, continued investment in retirement programs can close the gap and be a key part of an organization’s overall rewards strategy when competing for talent in the workforce. 

Employers perspective on retirement readiness

Source: PwC, Touchstone Survey 2021

Employers that have completed—or plan to complete—de-risking activities

Source: PwC, Touchstone Survey 2021

About the survey

The Touchstone survey is the study of what US-based employers are doing, and thinking of doing with their benefit programs, strategy and administration. Our latest survey, fielded from February 24 to April 9, 2021, surveyed 368 companies.

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In Sung Yuh

Principal, PwC US

Cornell Staeger

Principal, PwC US

Christine Randazzo

Principal, Workforce Transformation, PwC US

Connie Perry

National Employer Pharmacy Benefits Practice Leader, PwC US

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