Is Your Health Plan Damaging Your Workers' Financial Health & Undermining Your Wellness Efforts?

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Posted by: CMR June 29, 2022 No Comments

Other than wages, an employer’s largest human capital expense is typically its healthcare plan.  As the costs of healthcare continue to rise, employers consistently look to and implement a number of different plan design and cost shifting options, including High Deductible Health Plans (HDHPs).  At the same time, and in part responsive to the rising cost of healthcare, employers have sought to implement holistic wellness programs that seek to engage workers in programming and solutions across a range of wellbeing areas, including financial health.

One of the big challenges of these wellness programs is understanding how each of an employer’s different pillars of wellbeing interact with each other.  Put another way, if an employer pulls a lever on its healthcare plan, what impact does that have on the other areas of wellbeing?

In a recent report from the Financial Health Network looking at the impact of medical debt, we explored aspects of this very question.  While most employers seek affordable health insurance options for their employees, health insurance does not always provide employees with adequate protection against medical debt and its devastating effects.  The reasons for this are fairly straightforward:

  • Medical debt is pervasive and unplanned:  Medical debt is the nation’s most common form of debt, impacting more than 1 in 5 adults, and it is the leading cause of bankruptcy in the United States.  Unlike many other forms of debt, medical bills are often unexpected.
  • Health insurance costs outpace wage growth: Employee deductibles and premium contributions are rising faster than earnings. In 2010, approximately 6% of individuals with employer sponsored health insurance saw their deductibles account for 5% or more of their total income. A decade later, in 2020, that number more than doubled with 14% of individuals covered by employer plans now facing deductibles that consume a substantial portion of their income (5% or more).  
  • More than 1 in 4 individuals with employer insurance are underinsured: 26% of adults with employer-sponsored coverage are now considered underinsured due to rising deductibles and other out of pocket healthcare costs.  The impact of being underinsured is more than just financial, it creates incentives to avoid care in the short term resulting in more costly care down the road.  About a quarter of underinsured adults do not visit a doctor when they have a medical issue, they skip recommended testing or treatment, and do not fill necessary prescriptions.  For these reasons, nearly 40% of US adults worry about being able to afford needed care in the next year.

Affordable healthcare + financial health

Almost every employer (93%) share that their top priority is making healthcare affordable, while controlling costs for their organization.  While this may seem like diametrically opposed goals, there are some emerging best practices that can help employers meet this goal while also advancing the financial and overall health of their workforce.

First, employers have a wealth of data that can be leveraged in simple ways to assess the affordability of health insurance for all employees.  One example is the healthcare social equity audit.  Under this analysis employers take the plan selected by the employee, add the in-network deductible and out-of-pocket maximum, and then divide the sum by the employee’s annual income.   Employers can further stratify this analysis by looking at the number of dependents, Zip Code, income levels, job category, or any other relevant data points to identify where inequities in the health plan are most acute.

Second, starting July 2022 the federal government will begin implementing new health plan price transparency rules.  This movement toward greater transparency is a keen opportunity for employers to educate employees about the basics of health insurance and how to navigate care options based on cost and health needs.  Employers should take this moment to highlight the existence of new price transparency information and how employees can lower their out of pocket costs, thus helping employees pursue the types of preventive care that can be a bulwark against rising costs for employees and employers.

Third, employers can pull different levers to reduce the financial burden of healthcare costs, especially for lower income workers who often bear the brunt of financial hardship under employer-sponsored plans.  For example, making employer contributions to health savings or health reimbursement accounts can help offset upfront financial costs for employees covered by a HDHP, and incentivize employees to proactively pursue necessary medical care. Additionally, varying premium contribution by annual pay level, and providing larger subsidies for those earning less can also help mitigate the financial health consequences of employer health plans.  This is precisely the approach Bank of America has taken.  Since 2012 the company has not raised medical premiums for employees earning less than $50,000 a year.  

PayPal has likewise taken a similar approach.  Following an employee survey in 2018 the company learned that even though it paid wages at or above market, many of its hourly and entry level employees were struggling financially.  A key contributor to that struggle was the cost of healthcare.  Amid a number of changes designed to improve the financial health of its workforce, PayPal lowered the cost of healthcare benefits in the U.S. by nearly 60% for employees facing high-cost burdens.  Since making these (and other) changes, PayPal has seen several positive indicators of  impact, including increased enrollment in healthcare benefits and upgrades of healthcare plans.  

Last, there is tremendous opportunity for employers to offer and design insurance plans that align with the financial and healthcare needs of employees.  HDHPs are unlikely to vanish, and can seem attractive to employees because of their low upfront premium.  But as we have seen, simply offering an HDHP without any additional financial contribution to, say, an HSA could be financially ruinous for employees, especially lower wage workers.  This is yet another reason why employers should vary employer contributions to premium based on income level.  Under this approach, lower wage employees pay less compared to higher wage employees through a tiered, and ultimately more financially fair, structure – one that has the added benefit of being cost neutral to the employer.  This is the exact approach JPMorgan Chase has taken.

Medical debt is pernicious, costly, and damaging to both the employee’s and employer’s wellbeing efforts.  Recognizing the intersections and interactions between different wellness pillars, especially the health and financial wellness programs, can help an employer maximize its investment in worker wellbeing, while also building a more sustainable program that drives meaningful and long lasting positive outcomes.

Source – BenefitsPros.com

CMR Wellness Program

Author: CMR

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