How to Help Employees Squeeze the Most Value from Their Health Benefits

Rising Insurance Costs Are Hurting Everyone

Research published in JAMA Network found that health insurance premiums for U.S. families with employer-sponsored insurance increased from 7.9% of compensation in 1988 to 17.7% in 2019. In other words, health insurance is claiming a bigger chunk of wages. This is leading to wage stagnation. Over the same 32-year period, the increase in health insurance premiums resulted in cumulative lost earnings of $125,340 per family on average.

The average premium cost rose by 7% in between January and July of 2023, according to KFF. In comparison, wages increased by 5.2% and inflation by 5.8% in the same time period. However, it’s not just workers who are feeling the pressure of rising prices – employers are paying more, too. Between 2018 and 2023, average employer contributions increased from $14,069 to $17,393.

Higher health insurance costs are hurting employers and workers alike. According to a survey from BrightPlan, 92% of employees are stressed about finances. The impact this has on productivity may cost U.S. employers nearly $200 billion each year.

Helping Workers Obtain Value from Their Plans

With health insurance costs rising, employers are looking for new strategies to keep expenses under control, such as value-based care, telemedicine benefits, wellness programs, pharmacy benefit managers, and tax-advantaged accounts for healthcare expenses.

Although these strategies are important, they may not be enough on their own. Once employees enroll in coverage, how much value they obtain from their plans largely depends on how well they understand their benefits. Employers can help by offering guidance and education even after open enrollment ends.

The cost savings could be substantial. According to the Employee Benefit Research Institute (EBRI), 20% to 30% of healthcare spending may be wasteful. When employers and employees work together to reduce wasteful spending, they can save money.

There are five main ways employers can help their workers obtain value from their plans:

1. Provide information about how coverage works.

Imagine an employee selects a high-deductible health plan over other options because the premium is much more affordable. However, the employee doesn’t understand that the deductible needs to be paid out of pocket before the plan covers certain services. Over the course of the year, the employee ends up paying far more out of pocket than they would have with a different plan, all because they didn’t understand how deductibles work.

According to Becker’s Payer Issues, a survey from Forbes Advisor found that 77% of respondents could not define “coinsurance,” 46% could not define “copayment,” and 45% could not define “deductible.” For many employees, health insurance lingo might as well be a foreign language.

Unfortunately, a lack of knowledge regarding health plan terms can have real-world financial consequences. When employees don’t understand key terms, deductibles, co-insurance and out-of-network costs can catch them by surprise, leading to dissatisfaction and financial stress.

Employers can help by increasing health insurance literacy to ensure employees use their plans effectively and avoid unexpected costs. For example, you can provide simple definitions for key terms. It may also be helpful to provide examples of how these elements work in real-life situations by breaking down the costs that people can expect to pay in different plans.

2. Showcase no-cost benefits.

According to Gallup, 38% of American families postponed medical treatment in 2022 because of the cost. Delayed care can put people’s health at risk and lead to larger costs down the road.

However, most health plans must cover certain preventive services with no out-of-pocket costs. According to Healthcare.gov, this means that enrollees can obtain these preventive services without paying any copayment or coinsurance, even if they haven’t met their annual deductible yet. These preventative services include a wide range of screenings, such as blood pressure screening, depression screening and type 2 diabetes screening for adults between the ages of 40 and 70 who are overweight or obese. Preventive services also include recommended vaccines, including the annual flu shot.

If employees don’t realize that these benefits are available without any additional costs, they may avoid care. Employers can highlight these benefits and make sure employees know they are available without any out-of-pocket costs.

3. Help employees embrace comparison shopping.

Where employees receive care matters. EBRI says that care received at hospital outpatient departments tends to be more expensive than the same care received at other locations, such as physician’s offices. If employers and employees eliminated these cost differences, they could save $11.2 billion.

Since prices for healthcare services and prescriptions vary depending on the provider, comparison shopping is critical. However, even though most people engage in comparison shopping when buying computers, cars, or other items, they often fail to do so when obtaining medical tests and procedures.

This may be changing, and employers can help accelerate the change. A new federal rule requires hospitals to publish their prices. Patient Rights Advocate has created a tool that aggregates the price data from 6,000 hospitals to make it easier for people to compare costs. There are also other price comparison tools that employers can offer – any will help workers find the best deals on healthcare and prescriptions.

4. Educate employees on their tax-advantaged funds.

According to SHRM, most HSA holders aren’t taking full advantage of their accounts. In many cases, this may be because workers don’t understand how the accounts work or why making contributions is a smart financial strategy.

If your employees have FSAs, HSAs, or other tax-advantaged funds to help with healthcare costs, they may need some guidance on how to use them. You can help by showing them the advantages of making contributions, and how they can reduce their tax bill by using accounts that are funded with pre-tax dollars.

5. Remind employees to use expiring funds.

According to Money, FSA holders lost approximately $7.2 billion in 2019 and 2020 due to expired funds. More than 40% of workers with FSAs lost at least some of their contributions, with an average loss of between $339 and $408 a year.

Although employers may pocket the expired funds, this defeats the purpose of giving employers tax-advantaged accounts in the first place. Even worse, employees may become resentful. Employers can help by reminding workers about their FSA funds throughout the year (and especially before funds are set to expire) and by providing examples of how to use extra funds. Experian has a list of ways to use FSA funds that includes metal health, nonprescription reading glasses, acupuncture and other goods and services that people might not realize are eligible.

Selecting a cost-effective plan is the first step toward lowering costs. Altura Benefits can help you secure the best rates. Learn more.