3 key reasons why employers struggle with health insurance cost-sharing
For decades, employers have realized the importance of competitive health insurance benefits for recruiting and retaining the talent needed to operate their organizations. Employers initially covered the entire cost of these plans, leaving employees with no financial responsibility. Over the past 25 years, more and more of the financial responsibility has shifted to employees.
One reason for this shift is the concept of consumerism: empowering employees to take a more active role in selecting and engaging with their health care providers. The concept holds that if employees bear some financial responsibility, they are more likely to be engaged in their own care, which should result in better outcomes and more prudent spending. Nobody spends other people’s money as wisely as they spend their own, as they say.
In recent years, as the cost of health care has continued to outpace wages and inflation, employers have been challenged to balance their share of financial responsibility with employees. Many employees have been challenged to pay even basic medical bills, causing them to act as if they are functionally uninsured. In the end, both parties often wind up feeling burdened.
Here are three key reasons that employers are struggling with increasing health insurance cost-sharing:
- There seems to be no end in sight:With inflation beginning to impact every segment of the economy, employers are bracing for continued premium increases over the next few years with no known plans on the table to course correct. Historically one of employers’ main methods for fighting the rising cost of health insurance was a combination of raising deductibles, coinsurance, and copays. With average out-of-pocket liabilities ballooning into the $8,000 range, employers are realizing that there is little room left before health care benefits turn into liabilities — leaving employees with risk that even the best-paid employees find exorbitant.
- Current issues with recruiting and retaining talent:Employers are having a difficult time retaining and recruiting talent in the current labor market, so they feel like they can’t increase employee cost-sharing even as their own costs are increasing. Most employers, in fact, are trying to add creative benefit offerings without incurring huge costs. This is especially true for small group employers that compete with larger employers and their typically richer and broader benefit offerings.
- A growing confusion around health plan design: Many employee cost-sharing devices leave employees wondering what they will owe at the point of service or when the provider bills start rolling in. While HSA, HRA, and FSA plans provide some financial relief on the cost-sharing side, without continuous education, the average plan member struggles to keep the rules straight as to how these high deductible health plan designs work. Between this and a healthy fear of financial liability, a whopping two-thirds of individuals enrolled in a high deductible health plan report skipping or delaying care. Employers sponsor these health plans to help employees show up at work as their best self, but when the health plan cost-sharing prevents them from receiving the right care at the right time, this foils the intent.
As inflation rises, competition in the job market heats up, and employees become more fearful about how they will pay their share of the health care bill, the need for creative benefits around financial education and financial safety nets has never been more important. Termed by the market as “financial wellness,” this emerging category of benefits aims to assist employees with payment of their out-of-pocket health care costs, whether creating programs that stretch out payments, enable consumer-friendly loans, or educate on how to best utilize tax-preferred accounts like HSAs, HRAs, and FSAs.
In this market, most employers have no option but to split costs with their employees, and the argument to preserve consumerism in health care is strong. However, employers should consider adding financial security nets for employees so that they can seek care with confidence and take full advantage of their health care benefits plan — ensuring that these very costly health care “benefits” do not become liabilities.
Dean Ferris is the chief growth officer at HealthBridge responsible for sales, distribution, and partnership development.
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