As an employer, learn how to support your employee health insurance by providing access to affordable healthcare options.
Prioritize the well-being of your employees by implementing proactive measures to address their healthcare affordability challenges, ultimately leading to a healthier and more productive workforce.
Yes, employer-subsidized health insurance helps workers protect themselves against the risk of financial catastrophes due to catastrophic medical events. But with today’s high deductibles and other cost barriers to access to medical care, employees are having a hard time paying even for basic, routine medical care.
Consider: The average deductible for a workplace insurance plan as of 2022 is $1,763 for single coverage.
But according to a new survey from Bankrate.com, more than half of Americans can’t cover a $1,000 emergency.
Clearly, there’s a disconnect.
Millions of American workers simply can’t afford to regularly see a doctor, or pick up their prescriptions for newer and more expensive drugs.
A recent study found that 43% percent of working-age adults were inadequately insured in 2022.
Of these, about 9% were completely uninsured, 11% had a gap in insurance coverage over the past year. And some 23% actually had health insurance in place – but still couldn’t afford to get the health care they needed.
The reason: high deductibles, co-pays, and other out-of-pocket costs for health care are overwhelming their available savings. A health insurance plan with an $8,000 deductible doesn’t help most people who don’t have $8,000 lying around.
According to a recent survey by the Commonwealth Fund, nearly half of employees surveyed – 46% – reported they had delayed or skipped getting medical treatment due to costs. 42% said they were currently paying off medical debt or had trouble affording health care costs.
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Costs to Employers
The healthcare affordability crisis isn’t just an employee problem: The healthcare affordability crisis has a very real effect on employers, as well… particularly small businesses who have less capacity to self-insure, or to absorb the loss of a key employee to a preventable healthcare issue.
If you suspect your employees are avoiding or putting off receiving health care services because of cost, think of it like deferred maintenance: it may save a bit of cash flow for a little while. But eventually, it comes back to bite employers – and sometimes quite severely.
When employees aren’t getting the health care they need, the problem may manifest itself first as presenteeism: Workers are less productive when they are stressed at work, when they are trying to juggle their daily cost of living against the cost of getting their children to a pediatrician or family medicine doctor.
They may also be less productive due to symptoms of high blood pressure, heart disease, anxiety, depression, bipolar disorder, or many other chronic diseases that should be manageable with a little preventive and maintenance care.
Patients that skip medical appointments because of cost are also very likely to skip needed medications, vaccinations, and important health screening.
These early stages of lost productivity are extremely difficult to spot. But they are very real: A 2018 study estimated that healthcare-related presenteeism cost employers some $3,055 per year per person.
Eventually, unaddressed health problems begin to spill over into operations. Employees call out sick more often, causing management to scramble to fill shifts, train new employees, and pay overtime costs.
All told, the combined costs of absenteeism, presenteeism, and increased healthcare utilization costs U.S. employees an estimated $575 billion every year.
When employers provide an inadequate level of healthcare benefits to their employees, they inevitably experience yet another layer of costs: Constant and increasing turnover – usually of their best, most upwardly mobile and most talented employees.
This is because quality workers won’t stay long in jobs that don’t provide adequate health benefits. In today’s competitive market for talent, your best workers will move on.
According to the Society for Human Resource Management (SHRM), the average cost of turnover per employee is around 100-150% of their annual salary.
This means that if an employee earns $50,000 a year, the cost of replacing them could range from $50,000 to $75,000. This cost includes direct expenses such as advertising, recruiting, and training, as well as indirect costs such as lost productivity and decreased morale among remaining employees.
Even at the minimum wage level, the average total hit to employers who have to replace a worker due to turnover is as high as $1,500.
Hiring and training new workers is extremely costly. In most cases, it’s more cost-effective to compensate them well, provide adequate benefits, and keep them on board rather than see your best workers leave the company after all the time and resources you’ve invested in them.
What You Can Do
Health insurance is expensive. But there are several things employers can do to improve health care access for lower and middle-wage earners.
1. Consider Health Savings Accounts (HSAs)
These special savings accounts allow workers to save money tax-free, and pay for medical expenses tax free.
As an employer, you can assist your employees to contribute up to $3,850 to their HSAs on their behalf ($7,750 for families). Your contributions are tax-deductible as a compensation expense, and not taxable to the employee.
After a year or two, most employees will have some significant amounts saved up in their health savings accounts that they can use tax free to cover deductibles, copays, medication costs, and other out-of-pocket qualified medical expenses.
The catch: for employees to be eligible for HSA contributions, they must be covered under a high deductible health plan. These plans have a minimum insurance deductible of $1,500 ($3,000 for families). But higher deductibles also reduce health insurance premiums, making the whole package more affordable for workers and employers alike.
Some lower-wage workers may need some help in the form of employer contributions, since their disposable incomes typically won’t support maximizing HSA contributions on their own, most of the time. But as the employer, you can choose your contribution level, or make it a match.
And adding an HDHP to your company’s health plan costs little or nothing.
2. Consider Direct Primary Care
Direct primary care (DPC) is a new and innovative healthcare business model enjoying tremendous popularity.
With DPC, patients (or their employers) pay a flat, predictable monthly subscription fee for unlimited virtual or in-person visits with a primary care doctor.
DPC memberships typically include traditional doctors’ office services such as routine checkups and exams, screenings, preventative care, immunizations, well mother and well baby visits, care for minor aches and pains, sick day verification, referrals to specialists, as needed, and medication management and updates.
Once the monthly subscription is paid, there are no deductibles or copays to worry about. Your employee will have no additional out-of-pocket costs to see his or her doctor.
With unlimited telemedicine appointments, workers won’t even have to take a half day off work to “see” their doctor. They can do a telemedicine appointment on their lunch break, and not even have to leave the job site.
With DPC, the financial obstacles standing between workers and accessing these critical healthcare services are largely eliminated: your workers can get the care they need, and not have to worry about paying their bills.
To learn more about DPC, see our small employers’ guide to Direct Primary Care.
Tip: To maximize cost effectiveness, consider combining direct primary care with a healthsharing plan specifically designed for this purpose, such as the DPC DIRECT. See the section on healthsharing, below.
3. Offer a Health Reimbursement Arrangement (HRA)
A Health Reimbursement Arrangement (HRA) is an employer-funded health benefit plan that reimburses employees for qualified medical expenses.
The employer sets aside funds for the HRA and employees can use the funds to pay for eligible medical expenses, such as deductibles, copays, and coinsurance.
In general, HRAs are tax-free for employees and tax-deductible for employers. They can be offered in conjunction with other health insurance plans, such as high-deductible health plans (HDHPs), or as a standalone benefit.
HRAs can be a valuable tool for employers to provide cost-effective health benefits to their employees, while also giving employees greater flexibility and control over their health care expenses.
Planning Technique: Cancel Group Health Insurance!
For small businesses (with fewer than 50 employees), HRAs present a terrific cost saving opportunity, especially for those with a lot of lower-wage workers and families: Drop group health insurance altogether.
Instead, set up an HRA that can help your employees purchase their own health insurance as individuals, via your state Affordable Care Act exchange.
The reason: When your employees purchase their own insurance on the open market, most of them will qualify for a premium tax credit subsidy under the ACA. If you keep them on your own group plan, you and the worker would have to pay the full price of coverage, with no subsidy.
Offering an HRA to help employees get their own health insurance preserves much of the subsidy (the subsidy amount may be reduced by the amount of HRA assistance you provide. But the overall cost savings potential is substantial.
Employees can tap HRA money not needed for premiums to pay other out-of-pocket healthcare costs.
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4. Consider Healthsharing
Health sharing plans are lower-cost alternatives to traditional health insurance plans.
With healthsharing, a group of like minded individuals comes together to form an association, and agree to share one another’s unexpected medical bills.
These associations are run by healthcare sharing ministries or other non-profit organizations. Many of these organizations are faith-based, though if you or your workers prefer a more secular, non-religious approach, there are many such plans for you to choose from, as well.
The chief advantage of health sharing plans vs. traditional health insurance is cost. Healthsharing plans are typically 40 to 50% cheaper on a monthly basis compared to health insurance.
For example, as of 2022, the all-in cost of providing health insurance to a worker and his or family tops $22,000, according to data from Kaiser Family Foundation. However, there are several quality healthsharing plans available that will help share even catastrophic medical bills at a total cost for a family of four of $12,000 or less.
The downside: Healthsharing plans typically impose a waiting period on pre-existing conditions; Traditional health insurance plans will cover pre-existing conditions from Day One.
Some employers offer a cost-saving healthsharing plan for healthier employees, while providing assistance to employees who have pre-existing conditions to purchase a traditional health insurance plan.
For a free, no-obligation consultation on how to design a quality set of health benefits, including HRAs, healthsharing, health insurance, direct primary care, and plan design, contact one of our highly-experienced Personal Benefits Managers.
5. Offer Paid Sick Leave
Many employers make the mistake of thinking they save money in the long run by not offering paid sick leave to employees.
In reality, this is pennywise and pound foolish. When employees are cash-strapped, they can’t afford to take a day off work if they’re sick.
Not only are sick employees less productive; They also compound the presenteeism loss because they can rapidly get multiple other workers sick, as well.
As a benchmark, workers nationwide receive an average of seven paid sick days each year.
6. Offer Voluntary Benefits
Voluntary benefits are ancillary benefits that employers are not required to provide under the Affordable Care Act, but can help create a valuable safety net for employees experiencing a healthcare event in their households.
With voluntary benefits, employers are free to pay the entire cost, part of the cost, or have employees pay all of the cost – frequently by list billing and payroll deductions. These are commonly offered as part of a Section 125 “cafeteria plan.”
Employees must usually “opt in” to the benefit.
Examples of common voluntary benefits include:
- Critical illness insurance. This provides a cash lump sum payout if the insured is diagnosed with specific illnesses. The money can be used for any purpose. Frequently, employees use this money to pay costs not covered by insurance, such as time off work to get treatment, travel costs, or in-home care.
- Accident/hospital insurance. According to the Department of Health, a child’s broken leg can result in out-of-pocket costs of more than $7,000, even with insurance. Accident/hospital insurance steps in to provide a cash lump sum – typically a few thousand dollars, if the insured is admitted to a hospital or suffers a qualifying accident. This money can be used to cover health plan deductibles, copays, or other out-of-pocket costs, or allow a parent or family member to take some time off work to recover or help a loved one recover.
- Short/long-term disability insurance. Health insurance and healthsharing plans both help people pay their medical bills after an illness or injury. Disability insurance pays the worker. It’s designed to replace 50-60% of a workers’ income if he or she is unable to work due to illness or injury.
- Employee group life insurance. Life insurance pays a large lump sum payout in the event of the death of the insured. If the employee pays the premiums, the death benefit is normally tax free to the beneficiary.
Voluntary benefits are designed to be affordable for most rank and file employees. They are extremely popular, and in many cases cost just a few dollars per pay period or per month.
Benefits are limited. But to lower-wage employees, even these limited benefits can make a very meaningful difference for employees who are affected by a medical crisis in their families.
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What to Do Now
All told, providing workers with a set of meaningful health benefits and empowering them to get the health care they need to stay healthy and productive is a no-brainer.
But it does take some thoughtful planning and benefits design.
Small business owners should carefully consider what their employees can actually afford both in terms of monthly ongoing costs as well as deductibles, coinsurance, copays, and maximum out of pocket costs.
You should also provide workers with a meaningful healthcare safety net that not only addresses the risk of large, catastrophic healthcare costs, but also helps employees endure the day-to-day grind of actually getting care for themselves and their families, including pediatric care for their children.
By providing workers with not just catastrophic coverage, but a way to eliminate the cost barriers to getting preventive care, updating medications, getting screenings and vaccinations, and monitoring chronic diseases like diabetes, hypertension, and heart disease, you can make a meaningful difference.
You’ll have a healthier and more productive workforce, with lower absenteeism and presenteeism costs. When workers get preventive care, they are also much less likely to incur a catastrophic claim, which helps control your own long-term health insurance costs.
Need help? That’s where we come in.
A free consultation and strategy session with one of our experienced personal benefits managers is just a click or phone call away. If you’d like us to research some preliminary rates, you can upload a census for quoting purposes here.
Here are some additional articles for your reference: Direct Primary Care for Employers: Pros and Cons Discussed | Best Healthshare Plans Comparison Guide 2023 | How Much Money Can Healthsharing Save?
Here are some additional pages related to this article: Everything You Need to Know About Health Sharing Plans for Small Businesses | Health Insurance for Small Business Owners
Mike Montes is a Personal Benefits Manager at HSA for America. His aim is to help you make smart and informed healthcare coverage decisions that will fit your needs and budget. Read more about Mike on his Bio page.