Tackling the Group Health Employee Premium Burden
As the labor market tightens and businesses struggle to attract new talent, many companies are starting to boost their employee benefit offerings, particularly voluntary benefits.
But besides added benefit choices, what many employees want is relief from continually increasing health premiums as well as more options to choose from for their health insurance.
Group health insurance cost inflation has been averaging about 5% annually over the past few years and many employees have been put into plans that may have kept their share of premiums steady (like high-deductible health plans, or HDHPs), but which have instead increased their out-of-pocket costs.
As we exit the ravages of the COVID-19 pandemic, more workers are looking to their employers to give them some relief from spiraling premiums and health care expenses. Here are a few things you can do.
Reduce the employee’s share of premium
You could choose to pay for a higher percentage of the premium, which would reduce their monthly contributions. If that’s not feasible, one tactic that can end up saving you and your employees money is offering to either pay a certain portion of the premium if they choose a silver plan, or pay for the entire premium for employees who choose bronze plans.
The trade-off for the workers who choose the latter option is having no premiums, but more out-of-pocket expenses when they use health care services.
But if you are thinking about taking this route, please discuss it with us first as it’s best to crunch the numbers to see how cost-effective it would be for you.
The majority of workers contribute a portion of the premium for their coverage. According to the Kaiser Family Foundation “2020 Employer Health Benefits Survey”:
- The average U.S. worker contributes 17% of the group health plan premium for single coverage, and 27% of the premium for family coverage.
- Workers in small firms contribute on average 35% for family coverage.
- Workers in large firms contribute on average 24% for family coverage.
- Workers in both small and large firms contribute on average 17% for single coverage.
The other option is to just offer to pay for a greater percentage of the premium across the board on the policies you do offer. Obviously, that comes with added expense. But it’s not a strictly financial decision, as a more generous benefits package can have the added advantage of helping you keep key talent and generate employee loyalty.
Offer different types of plans
This can be a win-win for everyone. Younger, healthy employees that do not use health care services often can opt for an HDHP, which features a lower up-front premium in return for the participant having to spend more out of pocket for services they access. But if someone doesn’t use medical services often, this type of plan may the right and most cost-effective option.
On the other hand, for older workers or those who see the doctor more often or have health issues, they may be more inclined to go with a preferred provider organization (PPO) to pay more for a higher premium in exchange for lower out-of-pocket costs over the year.
For the fifth year in a row, the percentage of companies that offer high-deductible plans as the sole option will decline in 2021, according to a survey of large employers by the National Business Group on Health. That may be a continuation of a trend, but the pandemic has also put an emphasis on improved employee benefits.
Here’s a breakdown of the kinds of small group plans across the country in 2020, according to Kaiser:
- PPOs covered 47% of workers.
- HDHPs covered 31%.
- Health maintenance organizations (HMOs) covered 13%.
- Point-of-sale plans covered 8%.
- Conventional (indemnity) plans covered 1%.
Hire more employees
The more people you have in your group health plan, the more the risk is spread around, which can yield lower premiums.
If you divide the risk amount of a small group of workers compared with a large pool, the law of averages dictates that the insurer will pay less in claims per worker in the larger pool.
In other words, the more employees you hire, the less risk for the insurance company, and the greater premium discount they can offer.
Talk to us
An experienced benefits consultant can help you analyze your spending, and a good broker can help you get the best rates thanks to their network and know-how.
We can provide the insights you need to make the best decision on which types of plans to offer your workers and the best plans for your and your employees’ money ― and we can negotiate the best rates possible on your behalf.