With more than half of all private sector employees enrolled in high-deductible health plans, it’s important that employers have in place certain protocols to ensure that they are a success.
As health insurance costs have risen, more employers have started offering their employees this option as the upfront premiums are often lower than with other plans. The trade-off, however, is that workers have a higher deductible — meaning they have to pay for a set amount of medical care and prescription drugs before the plan’s benefits truly kick in.
The average HDHP deductible for self-only coverage was $2,000 in 2023, while the minimum deductible that a plan must have to qualify as an HDHP is $1,600 ($3,200 for family coverage).
The key to ensuring that the HDHP is a success in part comes down to avoiding four common mistakes.
- Failing to offer a health savings account
The idea behind HDHPs is that the money employees save on premium can be funneled into an attached HSA, which can be used to reimburse out-of-pocket medical expenses.
HSAs are tax-advantaged accounts that allow enrollees to save up to pay qualified medical expenses. They decide how much money they want to transfer to their HSA each pay period — funds that are not subject to taxes. The employer can also contribute to its employees’ HSAs to encourage participation.
- Failing to gauge the employee population
HDHPs are not a good fit for everyone. While they are for those who do not use a great deal of health care services, they can be burdensome to people who use medical services often, have chronic conditions or are middle-aged and older.
With that in mind, before offering an HDHP you need to know it is right for your organization. To do this, you can focus on a number of factors like the average age of your workers, their general health status and understanding of health care and their insurance. Some of this information can be gathered by doing an anonymous survey of your staff.
Knowing this information is crucial to understanding whether an HDHP is the right fit for your crew. For example, if a majority of the employees are older and/or have certain health conditions, pushing an HDHP on them may not be a good move as their out-of-pocket costs may rise significantly and outweigh any savings from lower premiums.
- Failing to educate your staff
Workers may be hesitant to enroll in an HDHP if they don’t understand it, and particularly when they see how high the deductible is.
That’s why training is essential to ensure that your employees understand how these plans work and how to get the most out of them.
One of the focuses should be on how employees can take control of their health expenditures and shop around for certain medical procedures that a doctor may order. Providers in an insurer’s network may charge vastly different rates for the same procedure.
You can also explain that those who rarely use their health insurance can save a bundle on their premiums and use those savings to bolster their HSA.
- Not offering supplementary benefits
Employee behavior and lifestyle are significant factors in health status and can have a huge impact on the cost of health care.
Offering wellness programs can boost employees’ overall health, help them lose weight or quit smoking. Other voluntary benefits like critical illness insurance can fill in the gaps when employees have a high deductible.
For example, if someone with critical illness insurance had a heart attack, the policy would pay for medical expenses and possibly missed time from work. If the employee’s deductible is $5,000 and the heart attack payout from the critical illness policy is $5,000, the enrollee wouldn’t really have to pay anything toward their deductible.
After that, their HDHP would start picking up the tab through coinsurance, until the out-of-pocket maximum was reached. Then their insurance would cover everything at 100%. Other voluntary benefits employers often offer staff in HDHPs include:
- Accident insurance,
- Cancer insurance, and
- Life insurance.
The takeaway
Introducing an HDHP to your employees can be a fraught exercise as they learn that they’ll face higher out-of-pocket costs for medical services. But these plans can be beneficial to many people, and those who understand how they work and how they may benefit from their plan will be more satisfied with their coverage.
