The Rise of HDHPs

The field of human resources is changing. In our HR Redefined series, we give innovators a medium to share personal reflections, professional advice, and best practice guidance.


The following is inspired by a presentation given at Namely’s Client Summit by our very own Director of Benefit Operations, Greg Autuori, and Director of Benefit Consulting, Christiana Lu.

It’s no secret that healthcare costs are rapidly increasing. Premiums have risen by 58% since 2006, according to the Kaiser Family Foundation’s 2016 Employer Health Benefits Survey. There are a variety of factors driving this drastic hike, including the predominance of fee-for-service providers, cost of prescription drugs, and even government regulations. However, in the past few years, deductible costs have actually risen four times faster than premium rates—increasing 12% from 2015 to 2016 (where premiums have only increased 3% during that time).


In response, companies are using different tactics to lower costs. Some turn to the market to find the lowest price, and others implement plan changes designed to lower premiums. These redesigned plans typically take the form of High Deductible Health Plans (HDHPs), which have become increasingly popular over the past few years. While HDHPs drive down the cost for companies, they shift the burden of upfront costs onto employees.


So how do you successfully use an HDHP plan at your company? Let’s dig into the strategies you need to ease concerns around high deductibles and help employees maximize their benefits.

 


What are HDHPs?


High Deductible Health Plans have higher deductibles than a traditional insurance plan, but lower monthly premiums. This means that covered individuals pay more of their healthcare costs upfront until they meet the deductible. Once the deductible is met, coverage kicks in. The higher the deductible, the more the employee must pay out-of-pocket.

Both HMO and PPO plans can be paired with a high deductible offering. When you’re guiding employees to the right plan for them, the most important questions to ask are how employees want to access care and how they want to pay for it. For example, individuals who typically only receive preventive care as well as high utilizers can both benefit from the right HDHP.


HDHP plans can offer advantages for employees as well as companies. As a result, HDHP enrollment shot up over the past 10 years, rising from only 4% of covered workers in 2006 to 29% of covered workers in 2016. Why? Many employees want the option to lower their monthly premiums—and as employees take on more upfront healthcare costs, the cost to the company also lessens.

 

Supplementary Benefits


An easy and cost-efficient way to help employees maximize the benefits of an HDHP plan is to offer supplementary benefits, such as pre-tax savings accounts and voluntary benefits. These supplementary benefits provide a way for insured employees to help manage unforeseen health care expenses that would otherwise have to be paid out of pocket. They include:

  • Health Savings Accounts (HSAs). HSAs are pre-tax medical savings accounts that can be funded by employee or employer monies. These funds can be used to pay out-of-pocket health expenses. HSA balances can also be invested into mutual funds once the minimum requirement is met.
  • Flexible Spending Accounts (FSAs). FSAs are also pre-tax, employee-funded accounts. FSAs are used toward out of pocket health care expenses that are not covered by the insurance plan.
  • Health Reimbursement Accounts (HRAs). HRAs are pre-tax accounts, but unlike the other two accounts, they are employer-funded. These funds are used to reimburse employee health expenses.

In addition to pre-tax savings plans, voluntary benefits are insurance products that can fill in coverage gaps and minimize deductible exposure for employees under HDHP plans. Most voluntary benefits are offered by employers but paid for by employees. Some voluntary benefits you might consider offering are:

  • Supplemental Health (ex. Accident, Cancer, Hospital)
  • Financial Wellness
  • Telehealth
  • Employee Perks (ex. Fond, OneMedical, gym reimbursement)

While options are always a good thing, offering too many can be confusing without an appropriate communication strategy in place. Think of supplementary benefits as a way of rounding out the overall message of your company’s wellness initiatives.

 

Communicating HDHPs to Your Employees


Considering that only 7% of U.S. workers understand all four basic insurance concepts (premium, deductible, coinsurance, and out-of-pocket maximum), it is crucial that you clearly communicate your benefit offering. Here’s how to engage employees with information on their benefits package:

  • Personalize the package. Establish characteristics of common employee demographics covered by each plan so they can identify their best fit.
  • Get creative. Use graphics or videos to explain dense insurance concepts. Hold “office hours” to help employees during open enrollment, and even reach out to them directly for 1:1 support.
  • Supplement your benefits. Offer and promote savings mechanisms and voluntary products to ensure employees are set up for success.

As you work to shed light on confusing insurance concepts, ask yourself: Do employees understand our benefits packages? Do they feel good about their selections? Do we talk to them throughout the year about the choices they made?


Ongoing benefits communication is crucial in a landscape where 38% of Americans do not have a good understanding of which health care services are covered under their current plan. But when employees are educated and empowered, your benefits offering can be a valuable tool in retention and engagement—and in the world of modern benefits, HDHPs are a key part of the puzzle.