What's the deal with HDHPs?
Less than a decade ago, experts in the benefits consulting industry were projecting that by 2018, more than half of U.S. employers would only offer high-deductible health plans (HDHPs) to their employees, a technique referred to as “full replacement.”
The prevailing sentiment held that switching to these plans would create significant cost savings for employers and underpin an increasing consumer mindset for employees, who would have more transparency into health care costs and thus more ownership.
Predictions are often fallible, and this one was no exception. The anticipated rush to full replacement didn’t materialize. Today, among clients using our BenefitsolverSM platform, around 9 percent are full replacement, a number that’s remained constant since 2016.
What we have seen is a consistent uptake over the years in employers offering HDHPs alongside traditional medical options, with more employees voluntarily opting into these plans.
Do HDHPs actually help with health care cost consciousness?
Some of the promise of employees taking more ownership of health care costs with HDHPs has indeed borne fruit. A recent study by EBRI found that HDHP enrollees were more likely to engage in cost-conscious behaviors including seeking out cost information than those enrolled in traditional plans. But that cost-consciousness can have a downside. The same study uncovered that people enrolled in an HDHP were more likely to delay care because of cost.
In many cases HDHPs make solid financial sense for employees. When you consider the premium contribution, cost-sharing in the form of deductibles and coinsurance, and the out-of-pocket maximum —plus any employer contribution to a health savings account — the employee is often ahead of the game. Employers have been driving this message home for some time, and employees are seeing the advantages and signing up. In 2018, about a third of employees were covered under a high-deductible plan, a number that has been rising steadily.
Why are employees finally enrolling in HDHPs?
Part of the shift may be due to the fact that traditional PPOs and HDHPs are looking more similar than they have in the past, as employers have tweaked the cost-sharing components of PPOs in the face of rising health care costs.
According to the Kaiser Family Foundation, average plan deductibles are increasing. Back in 2006, someone in a PPO faced a deductible of $473, while an HDHP participant shelled out $1715. By 2010, the average PPO deductible had risen to $675 compared to $1903 for an HDHP. In 2018 the average deductible for single coverage under a PPO was $1,204. For an HDHP, it was $2,349.
While the average HDHP deductible is still almost twice that of a PPO, both amounts are large enough for an employee to pause and seriously consider the other advantages of an HDHP such as savings on premium contributions and employer HSA seed money.
While premiums for HDHPs may be less, they are still significant—and, on average, closer to contributions for a PPO than you might imagine. For 2018, the annual employee contribution for single coverage in a PPO was $1,074. For an HDHP it wasn’t much more at $1,252.
Health care costs are rising, and everyone is feeling the pain. So, what do employees actually want in benefits?
Cost-shifting through plan design may have reached its saturation point as employees are starting to feel the strain. According to PwC, when asked what would most help them achieve their financial goals, employees’ number-one response was lower health care costs. And, almost a quarter of employees said they would be willing to sacrifice future pay increases for better health care benefits. In our 2019 State of Workplace Empathy Study, both employees and HR pros cited lowering the cost of employee benefits as the most empathetic action an employer could take.
With benefits programs acting as a front-and-center lever in many employers’ recruitment and retention strategies, there is more focus on quality. Employers need to find innovative techniques for balancing cost containment with competitiveness as benefits are increasingly aligned to an overall business strategy. Helping employees manage their holistic well-being with innovating savings programs, a redoubled focus on health, and the promotion of telemedicine are all techniques we’ve seen our clients adopting.
That’s because benefits are constantly evolving to meet changing needs. Even if thought leaders don’t quite get all the details right, their predictions are still helpful in offering ideas and options for employers needing to keep pace.
Want more insights into the 2019 State of Workplace Empathy Study? Check it out below.
