Employee income is correlated to greater use of workplace benefits, with lower-paid workers using fewer because the cost is prohibitive, according to new Alight Solutions research on insurance and benefits enrollment’s connection to income and age.  

Although the overall rate for employee medical enrollment decreased slightly to 73% in 2023, down from 76% in 2021, employer-provided medical enrollment has declined by larger margins year-over-year for employees earning less than $60,000, according to the benefits and enrollment trends research.

“When we look at medical enrollment rates by salary, we see a pronounced decline in medical enrollment year-over-year for employees earning less than $60,000,” the Alight white paper stated.

Workers with salaries less than $40,000 have the lowest medical enrollment rate at 56%, compared to 84% for individuals who earn more than $100,000. Overall, 45% of the employees that said they declined employer medical coverage indicated it was because the benefit was unaffordable, research showed.

“Income, combined with increasing costs of medical coverage, other financial challenges and expanded marketplace premium subsidies, may account for the overall decline in medical enrollment year-over-year,” stated the report section on medical coverage enrollment. “Employees simply may not be able to afford medical coverage from their employer.”

Employees who decline the employer medical plan are either going without medical coverage, or are covered under a spouse’s or parent’s plan; Medicare or Medicaid; or a health insurance marketplace, the research stated.

While lower-income employees decline medical coverage at higher rates than higher earners, research from health savings account platform provider Lively found that 84% of HR leaders expect to plot increased benefits to attract employees in 2023.

The research also found 58% of employers reported enhancements to health coverage, 60% of HR leader respondents rated health care as a top-three employee benefit and 36% of HR leaders reported that employees asked for better health coverage from their employer.  

Medical Enrollment

Alight found employee medical enrollment highest among individuals 65 and older, at 66%, and lowest for the 21 to 25 age group cohort at 39% research showed.

For employees earning $20,000 to $39,999, enrollment in employer-provided medical insurance decreased to 56% in 2023, from 60% last year and 65% in 2021; for employees earning $40,000 to $59,999, enrollment decreased to 78%, from 80% last year and 82% in 2021; and for employees earning $60,000 or more, enrollment remained static between 83% and 85%.  

The average total annual cost of medical coverage in 2023 is $5,330 for single coverage and $13,998 for family coverage—an increase of 2.3% and 3.2%, respectively, compared to 2022 costs, stated the Alight research.

“Employees are carrying a larger share of the medical cost increases, with an average increase of 3% for single coverage and 4.6% for family coverage,” the research found. “Overall, employers are contributing 72% toward the cost of single coverage and 70% for family coverage.”

The average annual medical cost to employers of single coverage increased to $3,757 in 2023, from $3,684 in 2022, and increased for employees in 2023 to $1,573, from $1,527 in 2022. The average annual medical cost to employers for family coverage increased to $9,904 in 2023, from $9,645 in 2022, and for employees increased to $4,094 in 2023, compared to $3,914 in 2022, Alight found.

Preferred provider organization, health maintenance organization and high-deductible health plans were the medical plan types, Alight research examined.

In addition to Alight’s findings, research published separately by financial technology and business services company HealthEquity found that among workers with yearly earnings less than $100,000, 45% said several workplace benefits are unaffordable.  

HealthEquity found that 57% of workers earning less than $100,000 do not participate in the employer-provided health savings account, while 50% of workers who earn more than $100,000 do participate.

While the data showed worker participation rates in health savings accounts that are different from Alight Solutions, the reason is unclear.

According to Alight, employer high-deductible health plans paired with health savings accounts are “more attractive to older employees with higher earnings,” the paper stated.

Overall, 80% of employees participate in an HSA in 2023, compared to 79% last year and 78% in 2021, according to Alight. HSA participation by salary showed discrepancies based on income.

• For workers earning more than $100,000, 91% participate in an HSA;
• For workers earning $80,000 to $99,999, 87% participate in an HSA;
• For workers earning $60,000 to $79,999, 82% participate in an HSA;
• For workers earning $40,000 to $59,999, 74% of workers participate in an HSA; and
• For works earning $20,000 to $39,999, 61% participate in an HSA.

“The perceived risk of HDHPs—that is, the need to pay a large amount up-front for medical services (the deductible or more) along with the variable nature of those costs—may make these plans less attractive to some employees even if the fixed annual premium cost of these plans is lower than other plan types,” the Alight research paper stated.

Alight Solutions gathered data for the research from October through December 2022, a spokesperson said. The report included data from more than 450 organizations, totaling more than 9.5 million employees.

The HealthEquity research, Employees: Perspectives on Benefits and DEI, was published in January. The data was gathered by HealthEquity through an online survey conducted from November to December 2022. The total sample size comprised 1,387 respondents: 1,003 marketplace responses and 384 HealthEquity participating members.  

The Lively Employee Benefits Pulse Check report partnered with CITE Research Inc. for the report and surveyed 250 HR leaders across the United States in multiple industries, according to a spokesperson.