Employers Face ‘Tension’ Between Health Care And Financial Wellness

For employers seeking to limit health care costs, raising plan deductibles could be the path of least resistance, according to an EBRI issue brief.

Employers’ adoption of high-deductible health insurance plans and the rise in the cost of deductibles have caused the share of out-of-pocket costs paid by patients to increase in recent years, which could be offsetting the positive impact of financial wellness initiatives, according to the Employee Benefit Research Institute.

An EBRI issue brief, “Recent Trends in Patient Out-of-Pocket Cost Sharing,” shows the share of costs paid by health care patients increased to 19% in 2019 from 17.4% in 2013, before a decline to 16.4% in 2020 related to the COVID-19 pandemic. The research included people enrolled in a variety of health plan types, including exclusive provider organization, health maintenance organization, preferred provider organization, point-of-service plans, consumer-directed health plans and high-deductible health plans.

Between 2013 and 2019, “in general, the share of expenditures that patient’s pay out of pocket increased,” says Jake Spiegel, research associate, health and wealth, at EBRI. “When disaggregated by health plan types … the cost the patient pays in those plans generally decreased over time.”

However, “patients’ out-of-pocket costs increased between 2013 and 2019 [because] people are switching and increasingly enrolling in plans with higher deductibles, which definitionally means that they’re going to be paying more out of pocket,” he adds.

EBRI’s brief notes that deductibles for workers in employer-sponsored health plans have risen significantly since 2002. Individual coverage deductibles, adjusted for inflation, were $1,945 in 2020 compared with $650 in 2002, a 336% increase. For family coverage, deductibles increased 289%, from an inflation-adjusted $1,395 in 2002 to $3,722 in 2020.

For comparison, the Consumer Price Index for All Urban Consumers, commonly used to measure price levels and inflation, rose by 47% over the same time frame.

“Employers face a tension between controlling the bottom-line impact of health care costs and helping workers achieve financial wellness,” said Spiegel in a release. “On the one hand, employers are more frequently implementing financial wellness programs as a means to improve their employees’ financial wellbeing. On the other hand, in an effort to wrangle health care cost increases, employers often turn to raising their health plan’s deductible, potentially offsetting the positive impact of any financial wellness initiatives.”

While EBRI research found that the share of expenditures that health care consumers pay out of pocket has increased, Spiegel tells PLANSPONSOR that several counterintuitive findings emerged with significant implications for plan sponsors.

“Even for patients in high-deductible plans, the costs for them are decreasing, but an aggregate analysis of all health care patients, and all health plans in aggregate, found that costs are increasing because there’s been a shift in the types of health plans that patients are enrolling in,” he says. “Employers are increasingly offering high-deductible plans—some employers have gone full replacement, and you can only enroll in high-deductible plans, and that’s been the reason for the aggregate shift in spending terms.”

High-deductible health plans are paired with health savings accounts as a workplace benefit. Contributions to HSAs decreased because of the effect of the pandemic, EBRI reported in 2021.   

A ‘Fundamental’ Tension

While employers increasingly are embracing financial wellness initiatives to help alleviate workers’ financial stress, employers’ selection of health insurance that requires workers to increase their share of payment for medical expenditures could “run counter” to the trend of financial wellness programs.   

“Asking workers and patients to pay a higher share of their medical expenditures may run counter to new trends that employers are embracing by placing additional emphasis on their employees’ financial well-being,” Spiegel says.  

This tension presents employers with hard choices, he adds.   

“There’s not really a magic bullet, or a single thing in particular that employers and plan sponsors can do to strike the very delicate balance of fostering their employees’ financial wellness while also asking them to pay for a greater share of their medical expenditures,” Spiegel says.

Jason Chepenik, senior vice president of retirement and wealth at OneDigital, agrees that this is a difficult issue. He urges plan sponsors to take the long-term view to find a balance and not use what is perhaps the easy strategy—high-deductible health plans. He explains that cutting company health costs with high-deductible plans is but one among many possibilities. 

“I say it’s the easy path, the easy button, while at the same time it’s not so easy, because it delivers a negative message,” Chepenik says. “It’s easy for a C-suite person to look only at cost, whereas there are likely other strategies to employ which take longer to implement and see impact, like wellness programs and the things that can ultimately drive better behavior, which ultimately would lower costs in general.”

Chepenik advises that plan sponsors, in place of generic financial wellness programming, approach employee well-being holistically through a “workforce strategy versus benefits spend [lense],” Chepenik says.  

“They should also be looking at total benefits spend—not siloed [considerations of] how much is my health insurance, how much is my dental, separate from their 401(k) contribution or the retirement plan savings,” he says. “It should be a conversation about all the benefits—look at total benefits spend and the impact to an organization and have a three- or five-year game plan tied to data and outcomes.”