It’s no secret that rising healthcare costs are taking a financial toll on both employees and employers in the United States. Heading into 2019 healthcare costs are expected to average close to $15,000 per person. As employers usually pay 70 percent of total employee benefits, they are looking into alternative plans such as High Deductible Healthcare Plans (HDHPs) and numerous available voluntary benefits to help offset these ascending costs. Doing so can help them keep or even increase the overall coverage provided to their employees.
Brokers, employers and employees are all winners when it comes to more available healthcare and voluntary benefits options because:
- Voluntary benefits and HDHPs give employees more plan customization options, so they feel they have the full coverage they need.
- Most of the top voluntary benefits can be added to an employer’s benefits program for little to no cost to the company.
- These programs are huge in an employer’s ability to attain and retain top talent.
- Voluntary benefits and HDHPs offer brokers an additional route of revenue that can be fruitful and long-lasting.
Why are HDHPs on the rise?
As we mentioned, the average cost for healthcare benefits in 2019 will be around $15,000 per employee. To offset rising costs, employers and employees are demanding alternative healthcare options such as HDHPs combined with voluntary benefit options.
HDHPs usually result in lower monthly premiums compared to a traditional healthcare plan such as Preferred Provider Organization (PPO) or a Health Maintenance Organization (HMO). However, a person signed up for an HDHP will typically pay higher healthcare costs before their deductible kicks in and their insurance takes over the rest of the costs.
To help alleviate the costs to their employees, employers can combine their HDHP offerings with a Health Savings Account (HSA) option. An HSA allows for employees and/or their employees to contribute funds, free from federal taxes, to an HSA to help fund medical expenses and/or to help save up for use during retirement. With that said, HDHPs are typically more preferred by younger employees and those who haven’t historically needed to visit a healthcare facility all that often in their lives.
According to a report from the Centers of Disease Control and Prevention (CDC), “of Adults aged 18–64 with employment-based coverage, HDHPs with HSAs saw a boost in enrollment from 4.2 percent to 18.9 percent from 2007 through 2017, while over the same period, HDHPs that lacked HSAs rose from 10.6 percent to 24.5 percent.”
3 Advantages of Combining Voluntary Benefits with an HDHP
1. Without offering voluntary benefits, HDHPs can have a sticker shock effect on employees
The name “High deductible,” for a healthcare plan can sound scary for employees who have not been educated enough on the subject. It also makes the plan sound expensive. In reality, HDHPs have lower premiums than a PPO plan which may end up saving people lots of money in the long run. However, this really all depends on how often an individual and/or their family need healthcare-related services per year.
This can lead to a sticker shock effect for employees who switch from a PPO plan to an HDHP. Typically, healthcare plan payments are subtracted out of an employee’s check directly. Once they see how much money they are saving per month, they can use those savings to help build an emergency fund, pay down debt, and save more for something else.
It’s important to remember though for an HDHP, that employees pay 100 percent of out-of-pocket medical expenses until they hit their maximum for the year before the insurance carrier takes over the payments. Employers offering an HSA addition to their HDHP can help their employees save even more.
2. Combining HDHP with HSA can save employers and employees on healthcare costs
By combining an HSA with an HDHP, employees and employers win. Here’s how:
- Contributions made through payroll deposits are typically not subject to federal income taxes. In most states, contributions are not subject to state income taxes either. Employers can also contribute if they want to without affecting an employee’s gross income.
- Others are allowed to contribute to an employee’s HSA. An employer, family member or pretty much anyone.
- HSA funds rollover year-after-year. It’s a not a ‘use it or lose it’ type of situation like an FSA, funds stay with the enrollee.
- Earnings are tax-free.
- Tax-free withdrawals on qualified medical expenses
- Allowing employees to enroll in an HDHP and HSA allows the employer to save on health insurance premiums without sacrificing quality coverage that employees expect.
- The IRS doesn’t consider the contributions employees make to their HSAs pre-tax. This means that both employees and employers both don’t have to pay FICA taxes on them.
- Lower increases on annual premiums drop for companies as employees take ownership over their health and become more educated.
- An HSA/HDHP combination is a great, sought-after benefit from many employees. This benefit helps employers retain and attain talent. It reduces employee churn, which saves companies time and money to be used elsewhere, like improving healthcare benefits.
3. Voluntary benefits are pre-taxed through employee payroll deductions and are typically portable
Voluntary benefits purchased directly through an employer are typically cheaper than the employee searching and paying for the coverage themselves outside of work. These benefits can usually be deducted directly from payroll, which helps employees not have to worry about setting up bank drafts and/or missing premium payments. Plus, pre-tax dollars are often used to pay for many voluntary benefits, meaning employees save even more money.
Most voluntary benefits are portable too. What this means is that when an employee takes a new job, or an employer decides to remove specific benefits from their offerings, the employee will typically be given the option to stay enrolled in the coverage if they decide to. This allows them peace of mind that they can continue their coverage with a specific benefit even if their new place of employment doesn’t offer it.
Common voluntary benefits to assist HDHP enrollees
As HDHPs require the covered enrollee to pay all expenses completely out-of-pocket until they hit their deductible, the coverage can become an expensive burden for them in the event that they are forced to use healthcare services when they historically haven’t had to before. In the event that HDHPs are becoming too expensive, many employees help offset the costs with voluntary benefits.
For example, someone enrolled in an HDHP plan has a stroke. In this event, they more than likely would need an ambulance to take them to the emergency room, doctors would run various blood tests, and they might perform various procedures to see if there are any blocks in that person’s bloodstream.
That’s a whole list of items right there that someone on an HDHP would be charged for. Depending on the deductible from their carrier, the enrollee may be on the hook for thousands of dollars before the carrier takes over the payments. As 40 percent of the country can’t afford $400 emergency, it’s more than likely the person and/or family stuck with the bill will not be able to afford it.
To help combat these high healthcare costs for enrollees in an HDHP plan, employers can help by offering in-demand voluntary benefits that would be the perfect complement to them. In the example above, if an employee had a Critical Illness Insurance plan with their HDHP, whatever plan they signed up for may be enough to pay off the medical bill completely. And, if they hit their deductible, their insurance will be on hook for the rest of the year if there are any more healthcare related visits.
Common voluntary benefits to pair with HDHPs
Critical Illness Insurance—This insurance pays a lump sum to enrollees in the event they contract a disastrous illness such as heart attack, coma or stroke. It helps to cover the medical and non-medical expenses that their HDHP may not such as:
- Bills from both in-network and out-of-network providers
- Prescription costs
- Mortgage or rent payments
- Car payments and other bills
For the full list of what critical illness insurance covers, click here.
This policy pays out in the event an accident causes the enrollee bodily harm. Some policies will reimburse employees if they visit a doctor up to a certain number of times per year.
This insurance pays out upon a cancer diagnosis.
Employees who become disabled as a result of a covered accident or illness will have a percentage of their income covered.
Hospital indemnity insurance
This coverage provides a lump-sum benefit to help with the out-of-pocket costs related to a hospital stay.
Voluntary benefits administration software
Benefits brokers win big when they partner their offerings with a cloud-based human capital management platform (HCM) platform—and its automated HR/payroll modules—that they can offer to their clients. The technology available helps employers automate crucial workflows in the benefits management arena to simplify the process for both administrators managing the platform and the employees utilizing it.
The beauty of an automated HCM platform is that data is corralled in a single-source database which allows for the free flow of information to transfer internally and/or externally to third-party vendors via integrations. Cloud-based, HCM technology promotes efficiencies to both end users and administrators by automating manual tasks and workflows, reducing the need for paper, customizing impactful reports, therefore saving hours of time, money, and more.
Benefits Brokers also win by improving their overall sales and by providing their clients with new technology that can scale to meet the needs of a companies’ ever-changing requirements over the long-term. By providing your clients with HCM technology that works, over time, they will continue to want to use it, as well as potentially add more modules to improve other areas of their HR operations.
Find out more about how the Unum Voluntary Benefits Widget increased sales for Arcoro’s partner, Alexander & Company, by clicking here!
Increasing employee engagement and communication, navigating the challenges of ACA compliance, and seamlessly handling the transfer of employee voluntary selections to appropriate carriers during Open Enrollment are all elements of benefits administration technology that employers today are looking to add most.
Arcoro’s cloud-based, automated HCM platform is the perfect option for benefits brokers who need a strong HCM, benefits management and ACA compliance partner to combine within their current benefits offerings. With seamless integrations to top carriers such as Unum, Aflac, BlueCross BlueShield and more, consultants partnering with Arcoro have seen their opportunity-share rise in the market they are chasing.
The full HCM platform also offers modules in the following areas:
- Benefits Management
- ACA Compliance
- Employee self-service (Employee Portal)
- Payroll Processing
- Recruiting Applicant Tracking
- Time and Attendance
- Performance Management and Feedback Delivery
- Online Learning Management
- Succession Planning
- Employee Onboarding
- Job Posting and more