HDHPs Poised to Take Over Traditional Health Benefits Offerings
For companies looking to cut down on their health care spending, the high-deductible health plan (HDHP) represents a powerful way to shift costs to employees and encourage thriftier health care utilization, contends Benefitfocus, a platform provider for cloud-based benefits management.
The promise of big bottom line savings has recently led more and more employers to introduce HDHPs as an alternative to their traditional, higher-premium plans. On the Benefitfocus platform, 52% of employers offer at least one HDHP in addition to traditional plans. But, traditional plans still dominate the health care benefits mix. Employers are still offering more choice in traditional plans than HDHPs—an average of 1.7 to 1.4 options, respectively, when both are offered.
Benefitfocus data also shows 42% of large employers are offering only traditional health plans, with an average of 2.5 options for their employees. Only 6% of employers have gone “full replacement” to offer HDHPs exclusively—2.1 of them on average—at varying deductible levels.
Employee adoption has been a significant challenge for many employers introducing HDHPs, perhaps understandably so. These plans are not only foreign to a workforce that’s mostly familiar with traditional plans, but also represent a dramatically different way of thinking about health care, Benefitfocus notes. HDHPs require subscribers to take on much more financial risk than do the traditional plans, which can be a strong deterrent to employee participation.
When given the choice, approximately 41% of employees enrolling through the Benefitfocus platform selected an HDHP over a traditional plan for 2016. HDHP adoption rates were highest for Millennials, at approximately 44%, and decreased with each older generation.NEXT: Options to reduce participant health costs not taken
Although HDHPs require participants to take on more financial risk, Benefitfocus found HDHP participants are not taking full advantage of health savings accounts (HSAs). On average, HDHP participants only contributed approximately 40% of the annual maximum amount to an HSA for 2016. When employer contributions are added, the amount is still less than 70% of the 2016 limit. Millennials contributed the least to HSAs.
In addition, potentially crucial voluntary benefits are lacking among large employers. Critical illness, hospital indemnity and accident insurance are common products that can give employees—particularly HDHP participants—added financial protection when they encounter unexpected medical expenses. However, only 36% of large employers offered such voluntary benefits for 2016, and only 14% of employees actually enrolled.
Finally, Benefitfocus found large employers on its platform are well positioned to avoid the Affordable Care Act’s (ACA’s) excise tax on high-cost health plans, or “Cadillac tax.” Total premiums across both HDHPs and traditional plans averaged approximately $15,000 for family coverage and $6,000 for individual coverage, with no plans reaching more than 62% of the tax’s penalty thresholds on average. However, the firm notes that health cost inflation could significantly narrow that margin by the time the tax goes into effect in 2020.Benefitfocus’ report, “2016 State of Employee Benefits,” may be downloaded from here.
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