Even though the majority of workers receive health insurance coverage on the job, a new survey has found that many of them understand surprisingly little about their health plans and are leaving money on the table.

The “Health Insurance Literacy Survey” by Healthcare.com found widespread misunderstanding about how copays and deductibles work, and what premiums and benefits are.

Experts say that when people don’t understand their health insurance they may make poor coverage decisions, such as choosing plans that provide more benefits than they need, or too few.

Those poor choices can be costly in terms of the premiums they pay or what they pay in copays, coinsurance and deductibles out of pocket.

Some of the key findings:

• 26% of Americans surveyed say lack of health insurance understanding caused them to receive a higher-than-expected medical bill.
• 41% were unable to correctly answer what “in-network” means. Understanding the meaning of in-network is crucial when choosing where to receive treatment and avoiding paying excessive fees for medical services when going out of network. Most health plans do not cover out-of-network care.
• 59% don’t understand that low-deductible health insurance plans start paying out sooner than high-deductible health plans (HDHPs).
• 22% incorrectly believe that if they think their medical expenses will be low in the coming year, they should choose a low-deductible plan.
• 43% of those surveyed could correctly identify what a health savings account is, and 20% could not describe a single feature of these tax-advantage accounts.

What it costs them

The costs of choosing the wrong plan can be in the thousands of dollars per year, according to a 2021 analysis conducted by Trevor Collier and Marlon L. Williams, both associate professors of economics at the University of Dayton in Ohio.

Collier and Williams found that 97% of 2,300 employees studied would have been better off choosing a plan that had lower premiums, but higher cost-sharing for medical services. Despite that, 23% chose the higher premium plan anyway.

They calculated that the average cost per year of choosing the wrong plan was more than $2,000.

The study shows just how little many people know about their health insurance coverage. As their employer, you can help your employees make good choices about their health coverage.

What you can do

During your open enrollment meetings, you should go over some of the basics of coverage and explain that people who are not frequent health care users may be better off in high-deductible health plans, that have a lower premium in exchange for more out-of-pocket expenses.

Conversely, people who have chronic conditions are not good candidates for HDHPs.

Make sure to schedule a series of meetings in the run-up to open enrollment where you can go over the basics of how health insurance works. Get your human resources team to urge staff to schedule time with them if they have any questions.

As the 2023 group health open enrollment season nears, more employers have heard concerns among their staff and are focusing on affordability and easier access to health care services, according to a new study.

Mercer’s “Health & Benefit Strategies for 2023” study, which surveyed more than 700 employers, found that more than two-thirds of businesses are planning to improve their health benefit options to better compete for talent.

The survey found that 70% of all large employers were planning benefit enhancements for 2023. While small employers are somewhat less likely to be planning enhancements, still more than half (53%) say that they are.

One in five employers said they would put a special emphasis on improving benefits for low-wage and unskilled workers, while two-thirds said they planned to focus on all employees. The biggest concern among employers is the increasing costs that employees have to shoulder for their health benefits.

Employers are starting to realize that a high-deductible health plan with an attached health savings account is not a good fit for all of their employees. In fact, the high-deductibles have been blamed for saddling an increasing amount of U.S. workers with more medical debt.

Tackling affordability issue

Businesses are taking different approaches to tackling the affordability issue, both on the front end in terms of premiums or the back end in the form of out-of-pocket expenses. Mercer found that:

• 41% of employers said they’ve already introduced a low- or no-deductible plan option, while 11% said they are considering adding one.
• 11% said they offer at least one plan with no employee premium-sharing (meaning the employees pay nothing for their coverage and the employer covers the entire monthly premium). Mercer found that these kinds of arrangements are more common among small employers, although more large employers are starting to offer them as well. Another 11% said they are planning on adding a free option.
• 16% said they offer a narrow/high-performance network plan with low cost-sharing, and another 24% said they are planning on offering one for 2023.
• 17% said they offer salary-banded health plan contributions (with lower-wage workers required to pay less for their share of premium than higher-wage colleagues). Another 15% said they plan to offer this type of arrangement for 2023. But employers need to be careful.
  Writes Mercer: “It’s important to be thoughtful about the possible consequences of implementing salary banding for the first time now. While charging lower-paid employees less is the goal, charging some employees more could have a negative impact on hiring at those levels.”

Find out what they want

But just improving benefits or adding benefits without consulting staff can backfire. It’s important employers understand their employees’ needs before embarking on changes to their benefits.

“When it comes to retaining talent, taking a standard approach to benefit design is almost guaranteed to come up short,” Mercer writes.

Mercer also notes that employees are more concerned these days about having the right lifestyle fit at their employer, so employers should take into account differences in their employees’ lifestyles.

Here’s what employers are doing to get the answers they need:

• Employee surveys: 61%
• Analysis of needs based on employee demographcis and personas: 46%
• Input from employee resource groups: 35%
• Focus groups: 26%
• Other sources of information: 46%
• Nothing: 6%

If you are pinched for resources, Mercer notes that offering your staff greater flexibility in their benefits and better targeting communications about their benefits can be the way to go.

Flexibility can be a simple as supporting a work-life balance and giving them the option for flexible hours so they can run errands or tend to family issues like dentist or pediatric care appointments.

Flexibility can encompass a wide range of benefits. Here’s what Mercer found that employers offer or plan to offer in 2023:

• 66%: Flexible work schedules, such as flex time during the day or a four-day work week.
• 78%: Option to work from home regularly, but not every day.
• 9%: Option to work from home every day.
• 12%: Lifestyle accounts — employer-funded accounts that employees can use for a variety of purposes.
• 45%: Paid time off to volunteer.
• 50%: Other benefits/policies to support work-life balance.

As we enter 2022, there are a number of changes on the horizon that plan sponsors need to be aware of as they will affect group health plans as well as employees enrolled in those plans.

Some of the changes concern temporary rules that were implemented during the COVID-19 pandemic. In addition, new rulemaking is likely to be introduced in 2022 that will affect health plans, including non-discrimination rules for wellness plans and new rules governing what must be included on insurance plan ID cards.

Here’s a list of what to expect in 2022.

HDHP telehealth services — The CARES Act, signed into law in 2020 after the pandemic started, temporarily allowed high-deductible health plans to pay for telehealth services before an enrollee had met their deductible.

That comes to an end Dec. 31, 2021, and for plan years that start on or after Jan. 1, 2022, HDHPs must charge enrollees for telehealth services if they have not yet met their deductible.

Mid-year election changes — The Consolidated Appropriations Act of 2021 (CAA) and ensuing guidance from the IRS relaxed a number of rules that will come to an end for plans incepting on or after Jan. 1, 2022. These rules were all not mandatory and employers could choose whether to relax them or not.

Here are the rules that will sunset at the end of 2021:

• Allowing employees who had declined group health insurance for the 2021 plan year to sign up for coverage.

• Allowing employees who had enrolled in one health plan option under their group health plan to change to another plan (such as switching insurance carriers or opting for a silver plan instead of a bronze plan).
• For health flexible spending accounts (FSAs), allowing participants to enroll mid-year, increase or decrease their annual contribution amount, or pull out of the plan altogether and stop contributing.
• For plan years ending in 2020 and 2021, permitting employers to modify their FSAs to include a grace period of up to 12 months to spend unused funds from the prior policy year.
• Allowing for a higher FSA carryover amount than the typical $500.

Any plans that allowed these changes would have to have been amended to reflect that, and for 2022 they’ll have to be amended to reflect reverting to the old rules that forbid such changes.

Affordability level falls — Under the Affordable Care Act, employers with 50 or more full-time or full-time equivalent workers are required to provide health coverage to at least 95% of their full-time employees. The ACA requires that the coverage is “affordable” for the worker, which is set as a percentage of their household income.

For 2022, the affordability level will be 9.61% of their household income, down from 9.83% in 2021.

Electronic filing threshold drops — Starting in 2022, employers with 100 or more workers will be required file their 2021 ACA-related tax forms with the IRS electronically, as a result of changes brough on by the Taxpayer First Act. That’s a change from the prior threshold of 250. This applies to forms 1094-C, 1095-C, 1094-B and 1094-B.

While the IRS has yet to release guidance for this change, it’s expected it will do so by the end of 2021.

More guidance coming

The CAA created a number of new requirements that affect health insurance and coverage. Look for various government agencies, chiefly the Centers for Medicare and Medicaid Services, to provide new guidance on:

Insurance plan identification cards — Part of the CAA requires health plans and issuers to include information about deductibles, out-of-pocket maximum limitations and contact information for assistance on any ID cards issued to enrollees on or after Jan. 1, 2022.

Continuity of care requirements — The CAA also requires insurers to offer anyone who is a “continuing care patient” of a provider or facility the option to elect to continue to receive care for up to 90 days from the provider or facility, even when there’s a change in that provider’s contract status with a health plan that could normally result in a loss of covered benefits.

If certain conditions apply, this transitional care would be provided as if the contractual relationship with the provider had not changed.

Wellness program incentives — The Equal Employment Opportunity Commission is expected to issue new regulations on what kind of incentives are permissible for employer-sponsored wellness programs. The main focus is on incentives and if they are discriminatory to some workers.

Watching their group health plan premiums climb higher with each passing year, some employers start looking into alternative funding strategies in hopes they can get a better handle on their employees’ health costs.

While group plans are the standard, larger employers have typically had more options for funding their group health coverage. But now even small and medium-sized employers – even companies with fewer than 100 employees – can benefit from alternative funding approaches.

There are three main types of alternative funding strategies that are available to employers:

• Captives
• Private exchanges
• Full and partial self-funding.

Captives

With a captive, multiple employers pool their resources and share the risk in providing health insurance to their employees. It is essentially a self-insured pool built into a captive insurance company (an insurer that is owned by the entity that created it). The captive has staff that will administer the health plan.

Captives are also multi-year agreements, so once an employer commits to make it worth their investment, they need to stick with it for a period of time.

Group captives will often have a specific funding mechanism that is broken down into four layers:

Layer 1: The employer is responsible for the first $25,000 of any claim made by one of its employees.

Layer 2: All employers involved in the captive will share the costs of that claim if it exceeds $25,000, up to $250,000.

Layer 3: For claims that cost more than $250,000, the captive will secure reinsurance coverage to cover amounts above that level. This reinsurance is also called “stop-loss” insurance.

Layer 4: Another layer of protection known as “aggregate stop-loss” coverage protects each employer in the captive for the total claims of their employees, ranging from 115% to 125% of expected claim costs in a year.

Private exchanges

Typically, businesses using a private exchange will offer employees a credit that can be applied toward the purchase of a health plan. Employees can then access a variety of health plans through an online portal and can chose and enroll in plans that meet their needs.

Private exchanges are run by insurance carriers or consultancies, and plans on the exchange are regulated as group coverage. Employees shopping on these exchanges are not eligible for the Affordable Care Act’s tax credits or cost-sharing subsidies.

Most employers currently using private exchanges are large; therefore, most private exchange plans are regulated as large-group coverage and are not part of the ACA’s single risk pool. However, to the extent that smaller employers participate in private exchanges, they are subject to the ACA’s small-group rating regulations and risk-pool requirements.

One of the main features of private exchanges is that they enable employees to comparison-shop among multiple health insurance plans.

Self-insuring

There are many different types of self-insurance, from minimum-premium or risk-sharing arrangements to a fully self-funded plan, in which the employer is responsible for all claims.

Employers can choose from:

Retrospective premium arrangements – The insurer will credit back a portion of the unused premium to the employer (typically as a credit for the following year). This is often used in a fully insured arrangement.

Minimum premium arrangements – The employer pays fixed costs (administration charges, stop-loss insurance and network access fees) and claim costs up to a maximum liability each month.

Partial self-funding -The employer takes on more liability and pays fixed costs (administration, network access, stop-loss premiums and some fees and taxes). It’s partial self-funding because the employer will purchase individual stop-loss insurance, which caps the employer’s liability on any given claim to a certain amount, say $50,000.

That way, the employer is self-insuring most of their employees’ medical needs, but is protected in case some of those claims become catastrophic.

Full self-funding – This is like partial self-funding except that there is no stop-loss insurance and the employer is responsible for all costs that are not shared by its employees.  This kind of arrangement is usually only available to large employers.

The takeaway

These alternative funding approaches are what is available now. But the industry is innovating to making health care and insurance more affordable for all involved.