Pub 20-2021-2022 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E 1 | 2 0 2 1 22 new jersey auto retailer The Pandemic’s Impact on the Workplace and Employee Benefits BY BRUCE MAZZARELLI This past year was like no other in recent history. The worldwide pandemic hit the U.S. in early 2020 and our daily lives were changed in unprecedented ways. COVID-19 resulted in significant illness, hospitalizations, and heartbreak- ing death tolls. Enjoying activities often taken for granted, such as going out to dinner, visiting retail stores, and having family gatherings, were very difficult — if even possible. Masks, social distancing, nonessential closures, reduced gathering capacity, and quarantines became the new norm to minimize the spread. Running a successful business faced unforeseen threats in 2020. Dealerships struggled early in the pandemic with reduced con- sumer demand, maintaining staff, and the fight to be considered an essential business. The cost of providing employee benefits also came under pressure in 2020. This was particularly true early on when many employers furloughed employees, in effect paying for benefits coverage without a return on that investment. Added to that, new rules around mask mandates, workplace disinfecting, and employee monitoring had to be implemented. Many of these challenges are expected to persist deep into 2021. We expect new challenges to emerge, such as an em- ployer’s development of an effective vaccine policy that aligns with one’s corporate culture. This article focuses on discussing the impact of COVID-19 on the workplace, employee benefits programs in 2020 and what the future holds as we continue to battle the pandemic. Early in the pandemic, many dealerships furloughed employees, intending to bring them back swiftly. This was particularly true for salespeople, when just service was deemed “essential” and demand was limited. As time passed, all functions ( including sales ) were back up and running. However, many operating rules changed regarding client interaction, mask mandates, social distancing, workplace precautions, and employee safety. Though vehicle demand gradually returned, these changes came at a cost, adding to dealerships’ financial pressures. Many dealer principals wisely looked at these pressures as an opportunity to evaluate business practices; in particular, the effectiveness of current pay policies, staffing, and benefits. For example, some recognized a need for better alignment of sales commissions to deal profitability, along with “right-sizing” the salesforce. Others implemented cost-cutting strategies such as of- fering High Deductible Health Plans ( HDHPs ) for the first time. Employee benefits programs were impacted significantly in 2020. Rules were modified to allow non-active ( furloughed ) employees to remain on active coverage outside of traditional COBRA. Accommodations were made with a loosening of payment terms and grace periods. Along with Paycheck Protec- tion Plan ( PPP ) loans, these changes assisted many in weather- ing the storm. Specific health insurance coverage terms were also impacted, with new requirements that the costs associated with COVID-19 be covered at no expense to the insured party, regardless of plan design. Testing, treatment, and even hospital- izations are covered 100% by fully-insured plans, with self-in- sured plans generally following suit. We also saw significant telemedicine utilization increases, often with $0 cost-sharing and virtual doctor’s visits. An exemption was made that allowed those patients in an HDHP to have virtual visits at little or no cost, without violating the tax rules inherent to HDHPs. Health insurance renewal premiums faced upward pressure in 2020, with carriers often adding a “COVID-19 rate load” to their renewal calculations. This resulted in premiums being increased by 3%-11%, depending on the carrier and specific circumstances. We expect to see this trend continue with 2021 renewals. Unfortunately, the market still faces uncertainty, with insurers generally taking a very conservative stance on rates. This was proven in the most recent NJ CAR Benefits Survey,