PlanSponsor: The Importance of Offering Health Benefits to Employees
Employees are looking to change jobs and gain improved benefits.
“It’s important to offer good benefits packages in general, but of course that includes health benefits,” says Kim Buckey, vice president, client services at DirectPath. “With COVID, employers have become painfully aware of what coverage they don’t provide, and whether what they provide is enough.”
Buckey says health coverage is “table stakes” for employers in this competitive market. And with employees especially sensitized to the need for health coverage in light of COVID—and any future pandemics—any employer not offering some form of coverage or assistance will be at a competitive disadvantage when it comes to attracting and retaining employees.
Buckey says DirectPath is seeing increased interest in advocacy and transparency services, which can help employees make better choices at enrollment and when they actually need care. These services also help to resolve claims and billing issues that might otherwise add to employee stress and reduce productivity.
In addition, behavioral health continues to be important as the workforce grapples with the effects of COVID and the stresses of returning to the workplace. Communications support—especially in this era of remote workers—has also been a requested service as HR teams find their bandwidth taken up with return-to-the-worksite planning, recruiting and new regulatory requirements, Buckey adds.
“If you think of just the sheer cost of anything related to health care these days, it’s such a financial safety net to have any coverage of that cost,” Buckey says. “Standard” health coverage, along with prescription drug coverage, is a significant component of financial wellness, she adds. Programs such as health care flexible spending accounts, health savings accounts and health reimbursement accounts can provide an additional level of protection—and, in many cases, can reduce current income tax liability as well. Buckey says employees should look at health coverage—and the ability to set aside money in tax-advantaged accounts for future health expenses—as important tools in avoiding potential financial hardship and medical debt. In addition, “companion” services such as advocacy and transparency services can help employees identify less costly options for their care, resolve billing issues and negotiate payment plans if necessary.
Voluntary Benefits and Financial Wellness
More than two-thirds (68%) of large employers say they revised their employee value proposition regarding wellbeing, and 52% have expanded voluntary benefits to address emerging wellbeing needs, according to Buck’s 2022 Wellbeing and Voluntary Benefits Survey.
However, results showed employers place a higher value on physical health benefits, while employees place a higher value on financial wellbeing benefits.
Tom Kelly, principal in the national health practice at Buck, says he thinks the disconnect is probably due to employees’ lack of awareness and understanding of supplemental medical plans like critical illness, hospital indemnity or health accident. “Most employees understand auto maintenance, auto insurance, travel discounts or even college savings … they deal with them all the time (and these ranked high in the survey),” he says. “However, when it comes to supplemental medical most employees aren’t as familiar. That is why how employers choose to communicate, enroll and educate employees is so critical.”
Kelly explains that in the past, many employers opted to treat these coverages like auto/home insurance or pet insurance, often promoting them through a non-integrated discount site. Today, more employers are aligning these elections with medical and use communications, including examples, to illustrate how the plans work and what they cover and don’t cover. “Twenty-seven percent of employers plan to integrate all voluntary benefits with annual enrollment (up from 14% in 2020). In addition, employers cited ‘integration with wellbeing strategy’ as a top change they planned to make with respect to their voluntary benefits strategy,” Kelly says. “These types of integrated approaches help employees better understand the plans and make the right choices when they are considering their total health and welfare elections.”
According to Buck’s survey report, supplemental life/AD&D, critical illness, health accident and hospital indemnity are on the top 10 list of voluntary benefits being offered by employers, with hospital indemnity the fastest growing voluntary benefit, at 20% year over year.
More than two-thirds (68%) of employees indicate they believe voluntary benefits are an essential part of a comprehensive benefits package, and 61% believe accessing voluntary benefits through their employer provides a better value than buying them on their own. Despite the disconnect on financial vs. physical wellbeing between employers and employees, employees still rated supplemental medical benefits high in value, Kelly says. “That is fleshed out in the participation rates in plans, which is now approaching 20%,” he adds.
When asked what benefits they value most, financial wellbeing assessments, budgeting and money management and unexpected medical benefits topped the list. Kelly points out that supplemental medical benefits are the largest area of voluntary benefits that have helped with unexpected medical benefits. Voluntary medical benefits are a help to employees’ overall financial wellness.
For example, Kelly notes, critical illness plans often pay for more than medical expenses. These benefits, which he says were invented by a doctor who saw a high degree of bankruptcy among people who had critical illnesses, can cover other associated expenses, such as travel for care. “Even if an employer offers a generous health plan, these types of voluntary benefits can help with unexpected expenses,” Kelly says.
DirectPath has seen an interest and uptick in three classic voluntary benefits that address medical expenses: critical illness, hospital indemnity and accident insurance. “While health insurance covers a lot of things, it doesn’t pay for everything,” Buckey says. “And other than out of pocket health expenses, employees still need to pay for rent, food and other necessities. They want to protect their families not only from a health perspective but from an overall financial perspective.”
According to a recent broker survey DirectPath conducted, accident insurance topped the list last year (78%), followed by critical illness (73%), hospital indemnity (60%) and pet insurance (28%). There seemed to be slightly less interest in add-on disability and life insurance offerings last year—perhaps reflective of the hyper-focus on all things health related (whether employees’ own health or their pets’!), Buckey adds.
She says she had to chuckle when she saw that pet insurance has moved up to the fourth spot on the list. “People got COVID kitties and pandemic puppies to get them through the pandemic, and now they’re realizing, ‘Not only are our health care costs high, but it costs a lot to cover health care for a pet,’” Buckey says.
How Small Employers Can Offer Health Benefits
Buck’s survey was concentrated among employers with a minimum of 1,000 employees; however, Kelly says, supplemental medical benefits have made their way down to small and medium-sized employers as well. “Voluntary benefits might be more valuable in these cases because health plans offered by smaller employers might come with higher out of pocket costs,” he says.
Buckey says most of DirectPath’s smaller employer clients are managing to find health plans, though they are not necessarily very rich plans. They realize that if they want to attract employees, they have to offer something. Voluntary benefits then become that much more important to fill those gaps. For the really small employers—less than 50 employees—they have the ability to direct employees to the Affordable Care Act marketplace.
One option for small employers is to open a qualified small employer health reimbursement arrangement, or QSEHRA, which allows the employer to use pre-tax dollars to reimburse employees who buy individual coverage. “These plans have special rules that enable the employee to take advantage of this HRA subsidy and the difference between that amount and any premium tax credit they are eligible for on the marketplace,” Buckey explains.
QSEHRAs first became available to employers with fewer than 50 full-time employees in 2017. “Because it doesn’t come with the expensive premiums, annual rate hikes and restrictive participation and contribution requirements of traditional group health insurance plans, the QSEHRA has only grown in popularity among employers,” PeopleKeep’s 2022 QSEHRA Annual Report says.
According to the report, the average reimbursement for health insurance premiums (including major medical, dental, vision, or Medicare) was $433. Out of employees who received reimbursements, 71% of their allowance was used, leaving the remaining 29% with the employer.
Employers who have offered a QSEHRA since 2017 provided 26% more in allowances than employers who started offering a QSEHRA through PeopleKeep in 2021. The QSEHRA is the first health benefit offered to employees for nearly nine out of 10 employers.
Buckey says small employers can also investigate group plans that may be available through industry associations, local chambers of commerce and similar entities.
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(Rebecca Moore is Managing Editor for PlanSponsor)