How to Coax Disengaged Employees to Sign Up for Health Coverage

One of the most difficult aspects of annual open enrollment is reaching workers who are disengaged from the process and never bother signing up for your group health plan and other benefits they could take advantage of.

While employers shoot for maximum employee enrollment, there are always those employees who for a multitude of reasons never take the first step of signing up for benefits. These workers are likely going uncovered for their health insurance and risk serious outlays if they have to see a doctor or go to the emergency room.

They also miss out on preventative services that insurers are required to provide without cost-sharing and that can help them maintain their health.

This disengagement is more typical with younger workers, who may feel that the extra expense for their share of their health plan premium isn’t worth it since they are young and healthy. A recent study, the fifth annual “HSA Bank Health & Wealth Index,” noted that targeted communications to millennials and Gen Zers are key to sparking their interest.

One way to do that is by focusing on pending life events that younger-generation workers may be encountering:

Marriage and children — Employers can focus their messaging to these generations of employees by highlighting these major life milestones and the importance of having health insurance in place.

Both of these events should be a wake-up call that it’s time to get serious and purchase health insurance to either cover their spouse or impending children. Childbirth is expensive and newborns require numerous doctor’s visits and vaccinations in their first year and beyond.

Turning 26 — This is the age that individuals are no longer allowed to be covered by their parents’ health insurance. Young workers will often forgo their employer’s health plan as they are still covered by their parents’ plans.

They may not be aware that this is the cut-off age. If you have Gen Z workers, you should consider sending out e-mail blasts to them about this law and that if they are turning 26 in the coming year, they’ll need to find new coverage other than their parents’.

Health savings accounts

There is one group of employees that is more engaged in their health insurance than any other, according to the Health and Wellness Index: Those who have health savings accounts that are linked to an HSA-eligible high-deductible health plan.

Also consider that one in three employees are uncertain about their ability to cover future health care expenses. HSAs, if used properly, can provide the peace of mind and the funds to cover those costs. 

HSAs are savings accounts that allow your employees to put a portion of every paycheck into the account to bank for future medical expenses. These accounts can be kept for life and transferred to new employers. They are funded with salary that has not yet been taxed and the funds in the account can be invested, much like a 401(k) plan.

The study recommends targeting your communications to the disengaged by appealing to the traits that most HSA users have:

Spenders — This group of HSA owners will use most of the funds in their accounts to pay for qualified medical expenses.

They want information that helps them get the most bang for their buck. You can do this by sending them lists of eligible expenses and directing them to online technology that helps them get reimbursed.

Savers — This group doesn’t touch their HSA balances, even for current medical expenses. Instead, they prefer to use their account to save for future expenses, even in retirement.

They are interested in tools to track expenses not paid from their HSAs and direct deposits for self-reimbursement.

Investors — This group of employees are also savers. They seek to maximize growth of their HSAs by investing the funds to grow them even more.

They are interested in information that can help them make good investment decisions and changes. Providing them with timely advice can help them start an HSA and continue investing in it in the future.

Employees and Employers Save with Cafeteria Plans

As health care costs continue rising and employees are being asked to shoulder more of the expense burden, you can help them by offering a tax-advantaged plan that allows them to save for medical expenses.

These cafeteria plans, which are governed by Section 125 of the Internal Revenue Service Code, allow your employees to withhold a portion of their pre-tax salary to cover certain medical or childcare expenses. Employees can save an average of 30% in federal, state and local taxes on items they already pay for out of pocket.

Because these benefits are free from federal and state income taxes, an employee’s taxable income is reduced, which increases the percentage of their take-home pay. 

The plans benefit employers, as well. Since the pre-tax benefits aren’t subject to federal social security withholding taxes, employers don’t have to pay FICA or workers’ comp premiums on those payments. A cafeteria plan can save employers an average of almost $115 per participant in FICA payroll taxes.

Types of cafeteria plans

Premium-only plan: POP plans allow employees to elect to withhold a portion of their pre-tax salary to pay for their premium payments. Most companies currently have this set up through their payroll provider. A POP plan is the simplest type of Section 125 plan and requires little maintenance once it’s been set up through your payroll.

Flexible spending account: With an FSA an employee pays — on a pre-tax basis through salary reduction — for out-of-pocket medical expenses that aren’t covered by insurance (for example, annual deductibles, doctor’s office copayments, prescriptions, eyeglasses and dental costs). 

Dependent care flexible spending account: The dependent care FSA is an attractive benefit for employees who pay for childcare or long-term care for their parents. Employees may hold back as much as $5,000 annually of their pre-tax salary for dependent care expenses, which include expenses they pay while they work, look for work or attend school full-time.

How an FSA works

Before the start of the year, employees estimate how much they expect to spend on medical expenses and dependent care over the course of the year. 

Employees should be careful to not put too much into the account. (They can carry over $500 in unused funds from the prior year into the new year, but any funds in excess of that would be forfeited.) 

Whatever amount they choose to deduct for the year will be deducted on a pro-rated basis from each paycheck and deposited into their FSA. 

On or after the first day of the plan year, an employee is restricted from changing or revoking the Section 125 agreement with respect to the pre-tax premiums until the plan year has ended, unless a change in family status occurs.

Employees pay out-of-pocket expenses upfront and then submit a claim and documentation to the plan administrator. They are then reimbursed for their expense in the form of a check or account transfer.

Finding Health Cost, Insurance Data Still a Struggle for Patients

Despite newly enacted federal transparency rules for hospitals and health plans, some large hospitals are still not posting the required price lists for their services, according to a recent report.

The Centers for Medicare and Medicaid Services’ transparency rules were implemented to shine the light on what hospitals charge for their various medical services, the negotiated rates insurers have with health plans and the out-of-pocket costs enrollees can expect to pay for these services.

The rule has taken effect in stages and hospitals were the first required to comply, but the report finds their efforts have fallen short. Insurers were required to start posting negotiated rates for their health plans starting July 1, 2022, but currently much of that information is hard to find and decipher.

That means, for now, it may be difficult for plan enrollees to shop around for procedures that they will pay for partially or fully out of pocket. But hopefully, that should change as more rules take effect.

The non-profit Patients Rights Advocate found a number of omissions when recently analyzing price data for seven hospitals in Florida and Texas that are owned by two major health systems: Ascension Health and HCA Healthcare.

The transparency rule requires hospitals to publish machine-readable price lists and display rates for medical services in a format that allows consumers to comparison shop, meaning they are published online.

Insurers for their part are required to post their negotiated rates with providers in machine-readable format.

The effect on health plan enrollees

Health plan enrollees that want to shop around for medical services may currently find it difficult. While the data is posted on the insurers’ and hospitals’ websites, it’s hard to access and decipher since each entity handles the data differently.

Another report, by National Public Radio, highlighted the hurdles a health plan enrollee may encounter if they were trying to find their insurance carrier’s negotiated price for an MRI:

Locating the files — First they have to find the files, which are unlikely to be posted in an easy-to-find section of the insurer’s website. They may have some luck by searching on Google and typing in their insurer’s name, plus “transparency in coverage” or “machine-readable files.” Maybe.

Finding their plan — If they succeed with that approach, next they need to find their plan in all of those files. The files are supposed to have a table of contents, but insurers can have hundreds, if not thousands of different plans, some specific to just one employer. They’ll have to find their plan among those plans, many of which will have similar names to theirs.

Deciphering the data — If they are able to find their plan and download the information, they will have to decipher the various codes for the service for which they are trying to find a price. Each procedure has a specific service code, which the enrollee may not have.

It may get easier soon

The process may become easier on Jan. 1, 2023, when a new rule that requires insurers to provide apps and other tools to help policyholders estimate costs for visits, tests and procedures takes effect.

At that time, carriers will be required to make available online, or in hard copy upon request, patient costs for a list of 500 common shoppable services. That includes things like knee replacements, mammograms, X-rays and MRIs, to name just a few.

In 2024, insurers must add all remaining shoppable items/services to their comparison tools.

Remote Workers Find Benefits Selection Difficult

A new survey has found that remote workers have a more difficult time choosing benefit plans that are the right fit for them compared to their colleagues who work on-site or have hybrid remote-office schedules.

The poll by MetLife found that nearly half of remote workers struggle to understand their employee benefits. As a result, these workers may end up choosing plans that do not meet their needs and they may also spend more time on trying to choose their benefits.

The survey results also reflect the challenges that employers continue to face in meeting their employees’ increasingly diverse needs and that they need to improve their communications, particularly with staff who are working remotely full-time — and especially if they are in another state.

It’s crucial that employers get this right in light of the importance these workers place on their employer-sponsored benefits.

The survey of 1,000 full-time employees at companies with at least two employees found that 61% of workers said that employee benefits are a significant part of what’s keeping them at their company. Those figures were even higher for work-from-home caregivers with children (72%) and millennial and Gen Z workers (67%).

Widespread concern

There are a number of benefit issues that concern remote workers. The survey found that:

  • 45% of remote workers are struggling to understand their employee benefits, compared to 29% of their colleagues that work on-site.
  • 55% of remote workers are highly anxious about their finances, compared to 46% of hybrid and on-site workers.
  • 55% of telecommuters spend over one hour per week worrying about their benefits, compared to 37% of on-site and hybrid employees.

In fact, 65% of remote workers said that a better understanding of open enrollment would help make them feel more financially secure. That’s bad news for those employees, as their lack of knowledge can result in choosing the wrong plan, which may end up costing them more than necessary. As a result:

  • Remote workers are twice as likely to say they enrolled in the wrong type of benefits last year.
  • 57% of remote workers require more information to make the right benefit choices, compared to 47% of hybrid and on-site workers.

What you can do

Without clear communication, employees are less likely to understand and utilize their benefits.

Set up virtual information sessions where plan options, including key defining details and specific benefits, are outlined and covered clearly.

Depending on how many employees you have, you may want to consider offering a few sessions for them to choose from, to ensure they can all make it. If not, record the original session for employees to watch later if they can’t attend.

Also, you should make sure your human resources department is available for one-on-one questions. Some of your employees may need additional help in choosing a plan. You may want to consider offering phone or video chat meetings for them in case you need to show them documents and graphics.

Get Communications Right for Open Enrollment

As group health plan open enrollment looms for most companies, communicating your offerings to your staff is key to getting as many of them as possible to sign up for coverage.

That requires a solid strategy aimed at helping your employees understand their choices and the financial implications of them. Most importantly, you want to reach those employees who didn’t sign up last year and stress the importance of health insurance.

To achieve maximum participation, your communications in the run-up to open enrollment are crucial both in terms of how and what you are messaging. A robust strategy includes: 

Simple messaging

Simplify the process of deciding which health plan to choose in a series of snappy messages that are easy to understand. One of the best ways to get the point across is by using vivid examples, preferably with graphics.

Explain the basics — Focus on your employees’ costs and coverage considerations:

  • Their share of premium,
  • Their deductible, copay or coinsurance,
  • If their doctor is in the plan’s network,
  • If there are any drugs they need for any ongoing health issues.

Help them with the math — Many people have trouble grasping the math. They may look at a low premium without considering the cost on the back end in terms of a higher deductible and/or other out-of-pocket expenses.

Break expenses down with different health care scenarios and the associated out-of-pocket costs based on the plan they have.

Explain coverage for big-ticket items— This includes costs associated with things like a knee replacement or cancer treatment. Humanize the examples by creating a persona and how their health plan covered treatment.

Use creative materials — Provide vivid documentation that includes a lot of bullet points and quick, punchy messages.

Use sidebars to cover important information they need to know, like an increase in deductibles or copays, or that a plan has overhauled its doctors’ network.

Dispensing sage advice

Help your employees by providing guidance on choosing the right plan:

  • Provide clear and direct advice.
  • If an employee is getting family coverage, it’s important they discuss possible choices with their spouse. You can assist by sending hard copies of the enrollment materials to their home.
  • Provide tools for comparing plans to see what their costs would be under each option.
  • Highlight wellness and virtual benefits, which are growing in popularity. Provide details on how to sign up and access these benefits.

Staggering your communications

Step up announcements to build interest by focusing on:

New or changing plans — Use these blasts to let them know about any new benefit programs you are offering or plans you may be discontinuing. You can point them to resources on how the benefits work and any demos. You can also announce changes to plan out-of-pocket costs or deductibles ,or if a plan has beefed up coverage.

Timely communications — These should include reminders about open enrollment and checklists on what your employees should do before it starts.

Once open enrollments starts, you’ll need to send out messaging to get stragglers to act.

Popular programs — If you are adding a plan that your staff has requested, make sure to blast out a few announcements to the troops.

The takeaway

Communication is a key component of a successful open enrollment. You can follow the above advice to generate interest and to help your staff pick plans that are right for them.

Employee Assistance Programs in Times of Need

The COVID-19 pandemic has brought mental health to the forefront for many people, as they tried to cope with abrupt changes to their work and social lives, isolation, fear of getting sick and losing loved ones to the disease.

Even now, as the pandemic ebbs, the mental health crisis has not. A recent National Safety Council survey of 1,600 employers and 7,000-plus workers found that half of large employers saw an increase in mental health or impairment-related absences and incidents. Meanwhile, mental health has become American’s biggest health concern, overtaking COVID-19, according to a study by Ipsos.

The number of Americans who said COVID was one of the biggest health concerns in the U.S. dropped from 68% in 2021 to 43% in 2022. Meanwhile, more Americans rated mental health as one of their top health concerns, rising from 35% in 2021 to 51% over the same time frame.

Fortunately, employers can step up their efforts to help employees dealing with mental health issues by offering an employee assistance program (EAP). Many employers already have. According to the NSC study, 25% of organizations with an employee assistance program implemented that program during the pandemic, while 66% expanded their offerings.

If you do not already have an EAP, you may want to learn more about them as it can be crucial to helping struggling workers.

What’s an EAP?

An EAP is an intervention program designed to help employees resolve personal problems that might be affecting their work performance. Many employers make EAP services available to employees’ family members, as well.

These programs can help cover the costs of counseling services that employees seek out. An EAP provides outside counselors, resources, and referrals to assist employees and their family members. Any EAP benefit received by employees or family members remain confidential. Employers do not get to know who is utilizing the service, what the reasons are for, or how often employees call.

Typical services include:

A study by the University of Warwick in the U.K. found that satisfied workers are 12% more productive and provide better customer service than their less happy peers. The study found that employers who implement EAPs experience:

EAPs also help managers to become more effective. They can help them develop skills in consulting with employees, managing workplace stress, maintaining drug-free workplaces, responding to crises, and helping employees achieve an appropriate work-life balance.

EAP options

Employers have several options for establishing EAPs.

They can run them with their own staff or outsource them to third party providers. Providers can be hired on a fee-for-service basis or for a fixed fee.

They can be arranged by single employers, groups of small employers banding together, or by unions. Some employers or unions even train employees to provide peer counseling to their fellow workers.

EAP providers should meet the standards set by the Employee Assistance Professionals Association. These include standards for program design; management and administration; confidentiality; direct services; drug-free workplace and substance-abuse professional services; partnerships; and evaluation of the program.

The takeaway

Besides COVID-19, employees are subject to the stresses of day-to-day living, sudden illnesses or deaths of loved ones, natural catastrophes and work. Family members can develop substance-abuse problems, parents grow old and need care; unexpected financial shocks occur; and marriages often deteriorate.

By implementing an EAP, an employer can help make these problems, and the shock of a natural disaster, a little easier for their employees to manage.

EAPs can help retain good employees, make them more productive, and make their lives a little better. In turn, this can make a business more profitable and a better place to work.

How to Budget for Your Group Benefits Plan

As the labor market remains tight and businesses struggle to find staff, more small firms are starting to offer employee benefits, particularly health coverage.

But the costs of coverage can be daunting and many employers worry about whether they can afford benefits programs and struggle to set a budget that won’t deplete or severely dent their profits.

Typically, the most expensive and most important benefit is health insurance. For most people, purchasing health coverage on their own is prohibitively expensive. They will gravitate toward employers that offer affordable health plans with networks that include their doctors and provide reasonable coverage.

If you have more than 50 full-time employees, the Affordable Care Act requires you to provide your employees with coverage that is affordable and covers a set of essential benefits without cost-sharing. Not offering this coverage can result in penalties.

On the other hand, companies with fewer than 50 full-timers are not required to offer coverage. That said, 53% offered health benefits in 2020, including 48% of businesses with three to nine employees.

However, there are options for those who want to offer it. For example, employers with fewer than 25 employees may qualify for federal tax credits if they offer health insurance.

Don‘t game the system

Firms that should be covering their employees under the ACA sometimes try limiting the amount of shifts they give employees to avoid hitting the hours-worked threshold that requires them to offer coverage.

But that’s not a good strategy if you want to keep your employees happy and avoid high turnover. Think of an employee benefits plan as a need-to-have, not a nice-to-have. Also think of it as an investment in the future of your business, your staff’s lives and your community.

Getting it right

Finding room in your budget for group health insurance can be especially difficult when you’re just starting out or your profit margins are thin. According to a 2021 Kaiser Family Foundation (KFF) report, the average annual health insurance premium for small businesses (those with up to 199 employees) was:

  • $7,813 for single coverage (the average employer contributed $6,485, or 83% of the premium, while workers covered the rest).
  • $21,804 for family coverage, of which employers contributed an average of $13,737, or 63%.

The considerations

The factors employers need to consider when determining the budget include:

Employer premium contributions. You should expect to pay 50% or more of the premium, for two reasons:

  • Most insurers require it.
  • Federal tax credits are available only to small employers who pay at least that much.

To get an idea of what your baseline cost will be, multiply the numbers from the KFF report by the 50% requirement. Keep in mind that premiums tend to rise each year, so your actual cost will be higher even if you limit your contribution to 50%.

Caution is called for when deciding how much to require employees to contribute. Setting their contribution too high may discourage workers from participating. If employee participation falls below 70%, you may not be able to purchase the plan you want.

Your employee profile. The ACA prohibits insurers from raising premiums based on most employee characteristics. However, it does permit them to raise premiums based on employees’:

  • Age
  • Tobacco usage
  • Residence location

A business made up of older employees, most of whom smoke, will pay more than one whose workforce is younger and doesn’t smoke.

The type of plan you pick.The ACA requires state health insurance marketplaces to offer four tiers of coverage. These tiers differ based on the premium cost and the percentage of health care costs the plan pays for:

  • Bronze (least expensive; insurer pays 60% of health care cost, employee pays 40%)
  • Silver (insurer pays 70%, employee pays 30%)
  • Gold (insurer pays 80%, employee pays 20%)
  • Platinum (most expensive; insurer pays 90%, employee pays 10%)

You aren’t limited to offering just one tier. You can give your employees a choice of plans in different tiers and still hold your per-employee cost constant.

There are also four types of plans:

  • Exclusive provider organization (EPO) — A plan where coverage applies only if employees use health care providers within a specified network, unless there is an emergency.
  • Point of service (POS)— A plan where the employee out-of-pocket cost is reduced if they use health care providers within a specific network, but referrals to specialists are required.
  • Preferred provider organization (PPO) — Similar to a POS plan, but employees can see specialists without a referral and see out-of-network providers for an additional cost.
  • Health maintenance organization (HMO) — Coverage applies only if employees see health care providers who work for or are under contract with the HMO, unless there is an emergency.

EPO, POS and PPO plans tend to cost more than HMO plans, but they offer employees wider choices of health care providers.

The takeaway

Some businesses simply cannot afford to provide their employees with health insurance and paid leave. Those that can, however, should view these benefits as investments in the business. They make employees’ lives more comfortable, and good employees who are comfortable tend to stay.

Finding the budget space isn’t easy. It takes careful strategic planning, and it may require either cost-cutting in other areas, raising prices or accepting lower profits.

However, many successful companies have found offering benefits to be worth the effort and cost. For them, it has paid off because it has enabled them to attract and keep the talented employees who make their businesses successful.

Getting a Head Start on Open Enrollment

As open enrollment is right around the corner, now is the time to gear up to maximize employee enrollment, help them make the best selections for their own personal circumstances, and stay compliant with relevant laws and regulations.

It’s a lot to take in as uncertainty has been a constant during the last few years with the COVID-19 pandemic and its lingering effects on people’s health and the economy.

Still, since health coverage and other employee benefits are an important part of your compensation package — and your competitive edge for talent — it’s important that you get it right, particularly now with the intense competition for talent. 

Here are some pointers to make open enrollment fruitful for your staff and your organization.

Review what you did last year

Review the results of the previous year’s open enrollment efforts to make sure the process and the perks remain relevant and useful to workers. How effective were various approaches and communication channels, and did people give any feedback about the process itself?

Start early with notifications

You should give your employees notice at least a month before open enrollment to let them know it’s coming, as well as provide them with information on the various plans you are offering. Encourage them to read the information and come to your human resources point person with questions.

Help them sort through plans

You should be able to help them figure out which plan features fit their needs, and how much the plans will cost them out of their paycheck. Use technology to your advantage, particularly any registration portal that your plan provider offers. Provide a single landing page for all enrollment applications.

That said, you should hold meetings on the plans and also put notices in your employees’ paycheck envelopes.

Plan materials

Communicate to your staff any changes to a health plan’s benefits for the 2023 plan year through an updated summary plan description or a summary of material modifications.

Confirm that their open enrollment materials contain certain required participant notices, when applicable – such as the summary of benefits and coverage.

Check grandfathered status

A grandfathered plan is one that was in existence when the Affordable Care Act was enacted on March 23, 2010 and is thus exempt from some of the law’s requirements. If you make certain changes to your plan that go beyond permitted guidelines, the plan is no longer grandfathered.

If you have a grandfathered plan, talk to us to confirm whether it will maintain its grandfathered status for the 2023 plan year. If it is, you must notify your employees of the plan status. If it’s not, you need to confirm with us that your plan comports with the ACA in terms of benefits offered.

ACA affordability standard

Under the ACA’s employer shared responsibility rules, applicable large employers must offer “affordable” plans, based on a percentage of the employee’s household income. For plan years that begin on or after Jan. 1, 2023, the affordability percentage is 9.12% of household income. At least one of your plans must meet this threshold.

Out-of-pocket maximum

The ACA’s out-of-pocket maximum applies to all non-grandfathered group health plans. The limit for 2023 plans is $9,100 for self-only coverage and $18,200 for family coverage.

Make sure your plans are in line with these figures.

Other notices

Consider also including the following notices:

  • Initial COBRA notice.
  • HIPAA notice. This may be included in the plan’s summary plan description.
  • Notice of HIPAA special enrollment rights.
  • HIPAA privacy notice.
  • Summary plan description.
  • Medicare Part D notices.

Get spouses involved

Benefits enrollment is a family affair, so getting spouses involved is critical. You should encourage your employees to share the health plan information with their spouses so they can make informed decisions on their health insurance together.

Also encourage any spouses who have questions to schedule an appointment to get questions answered.

Most Workers Make Bad Health Insurance Decisions

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.

Group Health Premiums Set to Rise 6.5%: Poll

U.S. employers can expect to see their group health insurance premiums climb an average of 6.5% in 2023 from this year, according to a new study.

Economic inflationary pressures will push the average premium cost per employee to about $13,800, compared to about $13,020 for 2022, according to the study by professional services firm Aon.

While the expected increase is higher than the average 3.7% rises in 2021 and 2022, it’s still lower than the current 9.1% increase in the Consumer Price Index, a key measure of inflation.

One of the reasons costs are not increasing as much as inflation is that health insurers lock in pricing with health care providers for multi-year contracts. As a result, Aon predicts that inflationary pressures will take a few years to be reflected in health care costs after current contracts lapse and new ones are negotiated.

It’s unclear how long it will take for inflation to fully be reflected in health care costs, though it will likely take a few years until most insurance contracts have been renegotiated, according to a Kaiser Family Foundation and Peterson report.

What’s happening

In 2020, the first year of the COVID-19 pandemic, health care usage dropped dramatically as many people put off routine health care to avoid going to a provider and risk infection. Also, many providers stopped doing non-emergency care like knee replacements.

In all, health insurers paid out far less in claims in 2020 than they did the year prior, even though many people were being hospitalized after contracting the coronavirus.

Since then, medical care has returned to the same pre-pandemic level, but with a twist: All those skipped procedures in 2020 and 2021 are now being performed and most hospitals have backlogs for many procedures like colonoscopies and cancer screenings.

Other contributing factors adding pressure on health care trends include:

New technologies — This includes new technologies providers are using, as well as investments in telemedicine by both health insurers and providers.

Catastrophic claims — The severity and cost of catastrophic claims continues increasing substantially.

Chronic conditions — More Americans are battling chronic conditions, which can quickly drive up their cost of care.

Blockbuster drugs — Pharmaceutical companies are developing groundbreaking, yet costly drugs that can cost tens of thousands of dollars a year.

Specialty drugs — Doctors are prescribing more specialty drugs, which also have high price tags.

Employers curtail cost-shifting

As costs have increased, employers seem to be absorbing most of the premium increases and have grown reluctant to pass on more of the premium cost to their employees.

On average, employers subsidize about 81% of the plan cost, while employees pay the remainder. According to the Aon report, in 2022, when the average annual group health insurance premium increased 3.1% to $13,020 per employee, from $12,627 in 2021, employers took on more of the premium burden:

  • Employers on average are paying out $10,500 for their portion of the premium, up 3.7% from $10,123 in 2021.
  • Employees’ share of the premium increased only 0.6% during that same time to $2,520.

Meanwhile, overall employee costs (premiums and out-of-pocket expenses) increased 2.6% from 2021 to 2022:

  • As mentioned above, employees’ share of premium increased 0.6% to $2,520.
  • Average employee out-of-pocket costs (deductibles, copays and coinsurance) jumped to $1,892 in 2022, up 5.1%.

Looking ahead

When insurers quote your group coverage, they look at your claims experience and the costs your employees incur overall. Employees with chronic conditions can quickly increase those costs.

As a result, many employers are focused on helping their workers with chronic and complex conditions rein in those costs. One way is to offer wellness plans that help them improve their overall health, such as smoking cessation, exercise and weight loss programs.

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