2025 HSA Contribution, HDHP Cost-Sharing Limits

The IRS has announced significantly higher health savings account contribution limits for 2025, with the amount increasing 3.6% for individual HSA plans.

The IRS updates this amount annually, along with minimum deductibles as well as the out-of-pocket maximums for high-deductible health plans. Under its rules, HSAs, which help employees save for medical expenses, are only available to those enrolled in qualified HDHPs.

Understanding these amounts now can help you get an early start on human resources planning for next year.

Here are the changes coming in 2025:

HSA annual contribution limit

  • Self-only plan: $4,300, up from $4,150 in 2024
  • Family plan: $8,550, up from £8,300 in 2024
  • Catch-up contribution (for those aged 55 and older): $1,000 (unchanged)

HDHP minimum annual deductible

  • Individual plan: $1,650, up from $1,600 in 2024
  • Family plan: $3,300, up from $3,200 in 2024

HDHP annual out-of-pocket maximum

  • Individual plan: $8,300, up from $8,050 in 2024
  • Family plan: $16,600, up from $16,100 in 2024

What to do

If you sponsor an HDHP for your staff, you should review the plan’s minimum deductible amount and maximum out-of-pocket expense limit when preparing for the 2025 plan year.

If you allow employees to make pre-tax contributions to an HSA, you should also update your plan communications to reflect the new amounts.

The many benefits of HSAs

An HSA is a special bank account for your employees’ eligible health care costs. They can put money into their HSA through pre-tax payroll deductions, deposits or transfers. As the amount grows over time, they can continue to save it or spend it on eligible medical and medical-related expenses.

Employers can also contribute to the accounts, but the annual contribution maximum applies to all contributions in total (from the employee and the employer).

The money in the HSA belongs to the employee and is theirs to keep, even if they switch jobs. If they go to a new employer that offers qualified HDHPs, they can continue to fund the account in their new job.

Funds roll over from year to year and can earn interest. Many plans also have investment options for the funds to help savers further grow the account.

There are a number of benefits for employees who have an HSA:

  • The money an employee contributes to an HSA is not subject to income taxes, which reduces their overall taxable income.
  • They are not taxed on withdrawals.
  • If employees contribute to their HSA with after-tax money, they can deduct their contributions during tax time on Form 1040.
  • Employees can tap the funds for any approved out-of-pocket medical expenses.
  • They can also grow the account tax-free by investing the funds in the account, sort of like a nest egg for medical expenses in retirement.

HSA-eligible expenses:

  • Payments for services or medicine that go towards health plan deductibles, copayments or coinsurance.
  • Dental or vision care (including orthodontics, eye exams, corrective lenses).
  • Medical devices.
  • Certain over-the-counter medicines, like pain relievers, allergy medication, cold and flu medicine, and menstrual products.
  • Vitamins and health supplements, if recommended by a medical or health professional for the treatment or prevention of a specific disease or condition.

Interest in Health Premium Reimbursement Accounts Grows

Employer adoption of specialized accounts that they fund to help reimburse employees when they buy health insurance on their own is surging in 2024.

The number of employers who offer individual coverage health reimbursement accounts (ICHRAs) grew 30% in 2024 from the year prior, expanding a benefit that provides employers another option than purchasing group health plans for their employees, according to a new report by the HRA Council.

Employers fund these accounts with money that employees can use to purchase health insurance, often on Affordable Care Act exchanges.  

Uptake has been even larger among employers with 50 or more full-time employees (up 85%).  These employers are required to purchase health coverage under the ACA, and offering ICHRAs allows them to satisfy the employer mandate under the law.

Thanks to generous subsidies on the exchanges, the funds that employers contribute are often enough for workers to purchase either Silver- or Gold-level plans, which have the lowest copayments, coinsurance and deductibles.

How ICHRAs work

As mentioned above, employers fund ICHRAs with money that workers can use to help reimburse for the purchase of health insurance, often on an ACA exchange. Excess funds can be used to reimburse them for qualified medical expenses, including copays, coinsurance and deductibles, in addition to medications and some medical equipment.

Funds are deposited into the ICHRA on a monthly basis. These funds are not taxed.

Employers that offered an ICHRA between July 1, 2022 and June 30, 2023 contributed an average $908.80 a month, which was more than enough to purchase the lowest-cost self-only Gold plan on an ACA exchange, according to a report by PeopleKeep, a benefits administration software company.

Some other features of these plans include:

  • No reimbursement limits.
  • Firms of any size can offer an ICHRA.
  • Employers may designate different reimbursement amounts to different types of employees.
  • Employers can offer both group health plans and an ICHRA concurrently.

Satisfying the employer mandate

ICHRAs can satisfy the ACA employer mandate if they meet the standards the law sets out for group health plans:

Affordability: To be considered affordable, employer-sponsored health insurance or benefits for employees should cost no more than 8.39% of the employee’s household income in 2024, using the lowest-cost Silver plan on the ACA exchange as a standard after accounting for the employer’s ICHRA contributions.

In other words, the lowest-cost Silver plan premium, minus the employer’s ICHRA monthly allowance, must be less than 8.39% of the worker’s household income.

Minimum value: Under the ACA, a health plan meets the minimum value standard if pays at least 60% of the total cost of medical services for a standard population, and its benefits include substantial coverage of physician and inpatient hospital services. Any plan a worker purchases on an ACA exchange will satisfy the employer mandate.

Small-employer option

There is actually a similar plan that is only available to employers with fewer than 50 full-time equivalent workers: the qualified small employer health reimbursement account. QSEHRAs differ from ICHRAs in a number of ways.

They have maximum contribution limits, determined by the IRS each year. For 2024, those limits are $6,150 for each self-only employee and up to $12,450 per employee with a family.

While an ICHRA allows for varying allowance amounts based on many employee classes, QSEHRAs only allow employers to vary reimbursement amounts based on age and family size.

All full-time W-2 employees and their families are automatically eligible for a QSEHRA. Employers may offer plans to part-time employees as well.

Employers can’t offer both group insurance and a QSEHRA to their staff.

The takeaway

While these accounts are growing in use, it’s a risky move to stop offering group health insurance and replace it with an ICHRA. These are new accounts and most workers will be unfamiliar with them.

And considering that health insurance is one of the main benefits that employees look for, offering a reimbursement arrangement may turn some workers off. Give us a call if you have questions.

Worker Enrollment in HDHPs Falls

After enrollment in high-deductible health plans soared during the last decade, 2022 marked the first year that enrollment in these plans fell among American workers since 2013, according to a new report by ValuePenguin.

The insurance-review website found that 54% of U.S. workers signed up for HDHPs in 2022, compared to 56% in 2021. The dip, while seemingly small, represents millions of workers that have opted for other plans as employers are offering a greater variety of plans to their employees, including preferred provider organizations (PPOs) and health maintenance organizations.

Additionally, fewer are exclusively offering HDHPs to their employees. In 2022, 9% of employers with 20,000 or more workers offered HDHPs exclusively, a drop from 22% in 2018, according to Mercer’s “National Survey of Employer-Sponsored Health Plans.” And 10% of employers with 500 or more workers offered only these plans, compared to 13% in 2018.

Signs of weariness

There are signs that workers are growing weary of high out-of-pocket expenses associated with HDHPs and are more willing to pay a little extra in premium in exchange for lower deductibles, copays and coinsurance.

Indeed, workers who are enrolled in HDHPs are 30% less confident that they will know what their health care costs will be, compared to those who are enrolled in PPOs, which usually have lower deductibles, according to recent research by Arizent, a publisher of health insurance news. Seven in 10 HDHP enrollees also found their health care costs too expensive, compared to 50% of PPO enrollees.

Offering employees a choice of at least one other type of plan besides an HDHP can avoid blowback. It can create bad feelings if staff think their health plan offers little coverage thanks to a high deductible that they never reach. It hurts even more if they haven’t funded their health savings account (HSA), which often happens.

Additionally, if paying for medical costs becomes a burden, employees may forgo necessary care, likely worsening any conditions they are dealing with, which can affect their productivity at work as well. And if they have a medical emergency, they may have to take on debt to pay for the care.

A happy medium

First: HDHPs are not for everyone. People who have chronic conditions are not good candidates for these plans. A huge deductible before receiving coverage year after year can be a barrier to receiving care.

Fortunately, there are many HDHPs with relatively low deductibles. Under the law, for a plan to qualify as an HDHP it has to have a deductible of at least $1,600 for single coverage and $3,200 for family coverage.

If you can offer an HDHP with a deductible at or near the minimum, along with an attached HSA that you partially contribute to, the plan would be less burdensome for employees. And since HSAs are only available for individuals enrolled in HDHPs, employees need some additional education on the importance of HSAs.

The many benefits of HSAs

  • Employees contribute pre-tax dollars to the account.
  • Employers can also contribute to the account.
  • Funds withdrawn from the account to pay for qualified medical expenses are not taxed.
  • Funds in the account can be invested and build value over time, like a 401(k) plan.
  • HSAs can be moved when an employee switches jobs.
  • Funds can be used for medical expenses at any time, even in retirement.

Finally, HDHPs with a high deductible can be a real value for young and healthy individuals.

That’s because under federal law, an HDHP will pay for a number of basic procedures with no cost-sharing on the part of the enrollee for preventive care like checkups and screenings, which insurers must cover with no out-of-pocket expense on the part of health plan enrollees.

DOL Rescinds Trump-Era Association Health Plan Rule

The Department of Labor on April 29 issued a final rule rescinding Trump-era regulations that expanded the number and types of employers that could band together to create association health plans to cover their employees.

The 2018 regulations, which have been in legal limbo since 2019, also allowed these association health plans avoid many consumer-protection elements of the Affordable Care Act, which critics said would open the door to participating employers offering insufficient coverage.

The DOL said it needed to rescind the law due to concerns about the potential for fraud and mismanagement in association plans. It said that the new rules limit these plans to “true employee benefit plans” that are the result of a “genuine employment relationship” and not an effort to skirt consumer protections built into the ACA.

Once the final rule takes effect in late May, employers that want to create an association plan will have to comply with much stricter rules that narrowly define these plans and limit the instances under which they can be formed.

Background

Prior to 2018, groups or associations that could meet the three criteria below would be considered a single group health plan, which in turn would determine whether they must comply with small-group market or large-group market rules under the ACA:

  • Business purpose standard — Whether the group or association has a business or organizational purpose and function that is unrelated to providing health insurance benefits.
  • Commonality standard — Whether the employers share a commonality of interest and genuine organizational relationship unrelated to the provision of benefits. For example, a trade group for auto shops could qualify since all of the members have a common interest.
  • Control standard — Whether the employers participating in the benefit program exercise control over the program, both in form and in substance.

Trump rules never took off

The Trump-era rules turned the earlier regulations on their head, particularly the first two standards:

Business purpose: Under the 2018 rule, a group of employers could have formed bona fide associations that had as their primary purpose the provision of health coverage.

Commonality: The 2018 rule would have let associations meet the commonality standard solely through the geographic proximity of its members, such as being located within the same state or city, without having any other common interests.

The 2018 rule also eliminated requirements that these plans comply with essential patient-protection elements of the ACA.

In 2019, the U.S. District Court for the District of Columbia held that a large portion of the rule was based on an unreasonable interpretation of the Employee Retirement Income Security Act and inconsistent with “congressional intent.” It later stayed action on the case and ordered the DOL to reassess its rulemaking.

After that, White House administrations changed and the department last year proposed the rule that was finalized April 29.

Pregnant Workers Fairness Act Final Rules: What Employers Need to Know

The Equal Employment Opportunity Commission has published a Pregnant Workers Fairness Act final rule that will give new protections akin to disability accommodation under the Americans with Disabilities Act to pregnant workers and those who have recently given birth.

The rule, which takes effect June 18, will require employers to make reasonable accommodations for employees or applicants with known limitations related to pregnancy, childbirth or related medical conditions.

The new regulations apply to employers with 15 or more workers on their payroll. This is a significant new labor law and another source of potential lawsuits for employers.

Who is covered

Essentially, the Pregnant Workers Fairness Act (PWFA) requires employers to make reasonable accommodations for these workers if they ask for it, particularly if they are temporarily unable to perform one or more essential functions of their job due to issues related to their pregnancy or recent childbirth.

Reasonable is defined as not creating an undue hardship on the employer. Temporary is defined as lasting for a limited time, and a condition that may extend beyond “the near future.” With most pregnancies lasting 40 weeks, that time frame would be considered “the near future.”

What’s required

Like what is required by the ADA, if an employee asks for special accommodation due to a covered issue under the PWFA, the employer is required to enter into an interactive process with the worker to identify ways to accommodate her.

The law requires employers to accommodate job applicants’ and employees’ “physical or mental condition related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions.”

The condition does not need to meet the ADA’s definition of disability and the condition can be temporary, “modest, minor and/or episodic.”

The PWFA covers a wide range of issues beyond just a current pregnancy, including:

  • Past and potential pregnancies,
  • Lactation,
  • Contraception use,
  • Menstruation,
  • Infertility and fertility treatments,
  • Miscarriage,
  • Stillbirth, and
  • Abortion.

What’s a ‘reasonable accommodation’

The law’s definition of reasonable accommodation is similar to that of the ADA. The regulation lays out four “predictable assessments,” which would not be an undue hardship in “virtually all cases”. These would allow an employee to:

  • Carry or keep water nearby and drink, as needed;
  • Take additional restroom breaks, as needed;
  • Sit if the work requires standing, or stand if it requires sitting, as needed; and
  • Take breaks to eat and drink, as needed.

Employer rights

As mentioned, an employer may reject an accommodation if it would create an undue hardship, which is defined as a significant difficulty or expense.

Employers may ask for documentation under the PWFA if it is reasonable and the employer needs it to determine whether the employee or applicant has a covered condition and has asked for accommodation due to limitations the condition causes her.

If the worker is obviously pregnant, the employer may not require documentation.

The takeaway

Employers with 15 or more workers will need to add mentions of the new rule in their employee handbooks and train managers and supervisors about it, in order to keep from running afoul of the PWFA.

The ramping up period is short and it’s important that you have in place policies that require supervisors and managers to notify human resources if a worker asks for special accommodations.

Employers Push Preventive Care to Affect Costs, Staff Health

Chronic conditions and overall poor health are a key cost-driver of health care costs, which is hitting the pocketbooks of both individuals and employers.

There are a number of factors that are driving this, including poor lifestyle choices, poor diets, lack of exercise and hereditary issues. But another reason for Americans’ declining overall health is the cost of accessing health care, not keeping up with checkups and vaccinations and having a poor understanding of their health insurance coverage.

Employers are recognizing the effects their employees’ poor health is having on the insurance premiums they and their staff pay, and some are taking it into their own hands to help their workers through various programs that help them better utilize their benefits.

Declining health

Recent research from Arizent, parent company of Employee Benefit News, found that 65% of employers feel their staff are generally healthy, but only 35% of employers with less than 100 workers think the health of their employees has improved over the past few years, which they directly correlate with rising health plan premiums.

The survey also found that 40% of employers have seen an uptick in the use of sick days and medical leave by their staff. This may also be an outgrowth of the COVID-19 pandemic. Since then, managers have generally encouraged staff to stay home if they are ill to avoid spreading the love to other staff members.

“However, increased use of medical leave does hint at more serious health challenges popping up for workers,” the report says. “Moreover, approximately one-third of employers are seeing a rise in disability leave and the overall prevalence of chronic illnesses.”

This suggests that more employees need time off for their health. These may be warning signs of declining health among workers.

Besides taking more sick and leave time off, less healthy workers may also not be as productive, may have greater instances of presenteeism and cause group health premiums to grow.

What employers are doing

Focusing on preventive care — Overall, 89% of employers surveyed are taking steps to control health care costs, with a majority focusing on improving preventive care access. They are incentivizing preventive care in a number of ways, according to the Arizent survey:

  • 39% host vaccination sessions at the office,
  • 32% host educational talks or webinars about preventive care,
  • 31% host disease screenings,
  • 28% provide monetary incentives, and
  • 26% offer paid time off specifically for primary care appointments. 

Efforts are bearing fruit for employers that do the above, with 21% of them saying that the health of their staff has improved over the last few years.

Improving health care literacy — Studies have shown that most group health plan enrollees have a poor understanding of their insurance coverage, and how to use it. Many do not understand what deductibles, copays and coinsurance are and how they work.

Choosing the wrong plan can result in significant out-of-pocket layouts for care, which can further suppress a person’s financial ability to pay for it. Other studies have found that more and more Americans are skipping doctor’s appointments and forgoing necessary care due to the costs and their current health care debts.

The report said that if employers want their workers to pick the best care for the best price, they need to ensure their employees are knowledgeable about their coverage and how to choose the group health plan that best fits their health status. That requires that employers educate their workers better about their benefits.

The takeaway

The Arizent study suggests that by helping and encouraging employees to access prevent care and by educating their staff on their benefits, the efforts can pay off in a healthier workforce, and possibly affect premiums.

Employers may need to invest in educational resources and health care navigation tools to help employees better understand the true cost of their plans, beyond what they are paying in premium.

Cutting Through the Alphabet Soup of Dental Insurance Plans

When you look at the dental options for your employer-sponsored health plan, or if you’re just looking at the options available on the market, you may encounter the acronyms DMO and PPO (also known as a PDN), as well as indemnity plan, in the marketing literature.

These terms describe types of dental insurance plans. To pick the best plan for your own needs, you’ll need to know how each type is structured, and the advantages and disadvantages of each.

The DMO

A dental maintenance organization is very similar in concept to a health maintenance organization, or HMO.

Essentially, DMOs are designed to reduce premiums and costs — at the expense of a certain amount of freedom when it comes to choosing your own dentist.

Under these plans, when you want to receive dental services, you must choose a primary care dentist. If you need to see a specialist, such as an orthodontist or endodontist, you must get a referral from your primary care dentist.

Both HMOs and DMOs attempt to save money and reduce expenses by restricting the number of care providers that the insurance company will allow in the plan.

Negotiators for the insurer approach dentists and clinics in the coverage area and ask them to reduce prices in exchange for a steady flow of referrals from the plan. The fewer providers in the network, of course, the more patients each dentist will receive, and the more valuable the DMO is to the dentist.

They also save money by reducing expenses on specialists. The primary care dentist acts as a “gatekeeper” to more advanced services, and ensures that any referrals to more advanced or specialized levels of care are legitimately medically necessary.

By using restricted networks, leveraging their bargaining power to obtain reduced fees and reducing unnecessary expenses on specialist care, the DMO plan is usually able to realize significant cost savings — and pass those savings along to consumers in the form of reduced, affordable premiums.

These plans are usually best for those who are sensitive to premium costs and who are indifferent about what dentists they can see under the plan.

The dental PPO, aka PDN

A dental preferred provider organization is much less restrictive than its DMO counterpart. You can normally visit any dentist you want who is willing to accept the insurance, and you don’t need a referral to see a specialist.

However, there still may be a network, and your out-of-pocket costs may be lower if you see dentists from within these networks.

You will still have to pay deductibles and copays, but the plan may reduce or waive them for dentists and clinics within the preferred network.

These types of plans may also be referred to as participating dental networks, or PDNs. Their premiums are generally low, but usually not as low as comparable DMO plans.

Indemnity plans

If you have an indemnity plan, you can generally see any dentist who is willing to accept the insurance. You don’t have to restrict yourself to practitioners in the network. If a dentist doesn’t accept direct payment from the insurance company, they may reimburse you directly for covered expenses after the fact.

These plans offer the most flexibility and freedom and the fewest restrictions on care. But they also have the highest premiums.

What’s best for you?

If it’s important for your staff to be able to choose their own dentist or access any specialist they like for covered services, they may want to lean towards the indemnity plan.

Meanwhile, DMOs generally offer the lowest monthly premiums and have low out-of-pocket costs for routine services like cleanings. But, their out-of-pocket costs may rise quite a bit if you need services beyond routine checkups and cleanings. Dentists may try to upsell additional work, which costs more out of pocket.

If you have staff that anticipates needing more extensive treatment, or access to the services of a specialist, they may wish to select a PPO-type plan.

You can talk to us about which plans are available and which might be the right fit for your workplace.

Biden Administration Clamps Down on Short-Term Health Insurance

The Biden administration has rolled back regulations that allow Americans to stay on short-term health insurance plans for up to three years while still satisfying the Affordable Care Act’s individual mandate.

The new rules will limit these controversial plans to no more than four months and they require more disclosure on behalf of the insurers and agents that sell these plans to help consumers understand what they are buying.

These plans are not full-fledged health plans; they offer limited scope of coverage that caps insurance for many services, and they are not subject to ACA consumer protection rules that bar discrimination and guarantee coverage regardless of pre-existing conditions.

The ACA originally limited short-term plans to just three months to fill temporary gaps in coverage when someone is transitioning from one source of coverage to another. The Trump administration enacted new regulations that allowed people to stay on a plan for 12 months, with the option to renew for three years.

These plans have gotten a lot of bad press citing horror stories of people finding out their policies were virtually useless, leaving one man more than $43,000 in debt after his plan wouldn’t pay for his treatment after it deemed his cancer a pre-existing condition.

Critics say the plans are deceptively marketed and consumers are duped into buying health insurance that has stripped-down coverage. Proponents say that these plans serve a valuable purpose in helping people transition from one type of coverage to another.

Many people who have purchased these plans thought they were receiving comprehensive coverage but were surprised later when the insurance wouldn’t cover certain procedures or capped coverage.

Some common features of short-term plans are:

  • They often use health histories to determine who can get coverage.
  • They often exclude key service categories from covered benefits, such as maternity.
  • They can decline coverage due to pre-existing conditions.
  • They may limit or cap coverage both on a per-service or daily rate basis or in the aggregate (like capping total payments during the year at $100,000).
  • They are not required to cover the 10 essential health benefits that the ACA requires compliant plans to cover at no cost to the enrollee.

 

What the final rule does

The new regulations only apply to new plans that are launched on or after June 17, the day the final rule takes effect.

New plans that claim to be “short-term” health insurance will be limited to just three months, with renewal for a maximum of four months total, if extended.

Also, the final rule restricts how these plans may be marketed and requires new levels of disclosure. Plans will now be required to provide consumers with a clear disclaimer that explains the limits of what services they cover and how much they cover. 

It should be noted that the new rule does not affect fixed indemnity plans like critical illness, which pays a lump sum if someone is diagnosed with a covered illness. Other plans pay a pre-determined amount on a per-period or per-incident basis, regardless of the total charges incurred.

Plans might pay $200 upon hospital admission, for example, or $100 per day while a person is hospitalized to help with out-of-pocket costs.

Employee Mental Health Leave Requests Skyrocketing

If you’ve noticed a lot of employees asking for time off for a “mental health day,” you aren’t alone.

A recent study found that the number of mental health leave-of-absence requests has grown by a third since the COVID-19 pandemic. And, data from ComPsych, a provider of employee assistance programs (EAPs), shows that such leave requests have skyrocketed by more than 300% in the past six years.

Roughly seven out of 10 of leave requests for mental health reasons are from women — in part but not entirely because of the burden and added stress of childcare.

Poor mental health is a serious problem in the workplace. Stress, anxiety, depression and substance abuse lead to reduced focus and concentration, increased absenteeism and presenteeism, higher turnover costs, and more dangerous workplace accidents.

If you’re seeing a broad increase in the number of mental health-related absences, it’s a sure sign that something is wrong. It’s time to take action: 

1. Destigmatize mental health problems. Create a culture where it’s ok to discuss mental health issues, and to seek help.

2. Establish an EAP. Workers can use this program to get confidential counseling treatment for a variety of issues. 

3. Invest in mental health training for managers. Your leaders need training on how to recognize and sensitively deal with workers experiencing mental health problems. 

4. Offer flexible work schedules. Many minor issues can be dealt with by allowing employees more control over their time and work-life balance. Working from home, flex hours, job-sharing programs and generous paid-time-off policies can all help employees manage their stressors before they become real mental health problems.

5. Create a less stressful workplace. Work to reduce unrealistic deadlines, spread the workload and maintain adequate staffing levels. Reassign or eliminate “toxic” managers.

6. Address the cost barriers to care. Many employees can’t afford to see a doctor or counselor, even with insurance. Studies show that one in four adults skips needed care or medications due to cost. Consider adding a direct primary care benefit, which allows workers and covered family members unlimited appointments with their primary care physician with no out-of-pocket costs. 

7. Offer mental health or sick day leave. Employers nationwide are responding to the employee mental health crisis by expanding their leave programs. In 2024, over 50% of organizations plan to add paid parental leave, paid mental health days and flexible time off programs. Additionally, 49% are adding bereavement leave, and 37% are adding paid caregiver leave as an employee benefit. 


The takeaway

Employers have a number of tools they can access to help employees who are dealing with stress and anxiety. Work can also be a cause of stress, so it’s important that your staff should feel comfortable approaching their supervisors or managers if they are having trouble coping.

You can’t prevent all mental health problems. But you can alleviate work stressors and provide support so that small problems don’t metastasize into mental health crises.

Study Pegs Group Benefits Return on Investment at 47%

A recent study has found that employers who offer health insurance coverage to their staff had an average return on investment (ROI) of 47%, meaning that for every $1 an employer spends, it will receive $1.47 in benefits.

The analysis by Avalare, a wellness plan provider, and commissioned by the U.S. Chamber of Commerce, found that firms with 100 or more workers to whom they offer group health benefits gained from increased productivity, reduced direct medical costs (for self-insured firms), tax benefits and improved retention and recruitment.

The study confirms that offering health coverage does more than meet a basic need for your staff. Here’s how the 47% ROI is generated:

 

Improved productivity (53% of ROI)

Workplaces where group health benefits are offered have higher productivity thanks to reduced absenteeism and sick days taken, as well as less presenteeism. In addition, workers who maintain their health and have access to a health plan or wellness program when they need one are less sick, and hence more productive at work.

 

Tax benefits (23% of ROI)

Employers that offer group health benefits receive both federal and state income tax deductions, reducing their overall tax bills.

 

Reduced direct medical costs (19% of ROI)

Employers who offer group health plans in addition to associated wellness programs, tend to have healthier employee populations and spend less on direct medical costs. The analysis found that this combination of group health and wellness programs boosted overall ROI for employers.

 

Savings from employee retention (4% of ROI)

Another ROI driver is employee retention thanks to the savings involved in not losing employees to competitors. Providing health insurance reduces staff turnover, lowering how much employers have to spend on recruitment, onboarding and training. Add tens of thousands of dollars if you are paying for a new employee to relocate. 

 

Recruitment costs (0.3% of ROI)

Offering a solid group health plan can also drive down the cost of recruiting as it can positively influence a prospect’s interest in accepting an offer. While the value of recruitment benefits pales in comparison to other benefits, 9% of prospects base their decision to accept an offer on the group health benefits on offer.

 

The takeaway

While the study focused on health coverage, and to some part wellness programs, employers that go beyond just health insurance by creating and offering a balanced benefit program, have the greatest ROI.

Examples include retirement benefits like 401(k) plans, wellness plans, dental insurance, vision coverage, short- and long-term disability protection, critical illness coverage, accident coverage and employer-funded life insurance.

Before the COVID-19 pandemic, most businesses considered health benefits little more than a cost to be managed. But the value of health benefits is rapidly changing — and employers need to keep up with the changes and new offerings.

.The Avalere study reinforces what many companies know: Employer-provided coverage helps create a stronger workforce and gives businesses valuable benefits to provide to their employees.

We have the expertise to help you transform your health benefits and programs from an expense into an investment that will help both your organization and your staff thrive.