Helping Employees Select the Best Health Plan Can Benefit Employers

A recent HSA Bank survey of 100 human resources (HR) executives showed only 10% are “very confident” their employees understand the choices they are making with health insurance, while 75% believe employees are “somewhat confident.”

One-third (33%) of HR executives believe the copay amount is most important factor to employees when selecting a health plan, and 27% believe a low deductible or out-of-pocket maximum is most important. However, HSA Bank says in the survey report that it believes the total estimated annual cost of medical services (covered and out-of-pocket) should be the most determinative factor when selecting) a health plan; this is a better representation of actual annual health care expenses. Seventeen percent of the employers surveyed agreed.

“When employees do not understand their health plan options and the factors that influence health plan selection, they could end up making a costly mistake. Selecting the ‘wrong plan’ may cause employees to pay more without getting more coverage or benefits in return,” HSA Bank says.

Chad Wilkins, president of HSA Bank, points out that if employees select the wrong plan for them, it could cost employers as well. “Plan sponsors pay a portion of the premium to the insurance company for employee coverage. The higher the premium, the more the plan sponsor pays for health benefits. If an employee selects the health plan with the lower deductible, but the ‘cost’ of that lower deductible is a much higher premium, then the employee and plan sponsor will end up paying more. For example, if an employee can reduce their deductible by $500 for an additional premium cost of $750, they would have a lower deductible but would end up paying $250 more overall,” he says.

Wilkins adds that if one of the plans offered is a health savings account (HSA)-qualified high deductible health plan (HDHP), the plan sponsor and employee can also realize lower health benefit costs from HSA contributions in the form of federal insurance contribution act (FICA) tax savings.

According to the survey report, consumers can end up selecting the wrong plan for several reasons: uncertainty about plan cost sharing amounts, fear of a high deductible or out-of-pocket maximum, and lack of plan evaluation. “When employees see the cost of the deductible or out-of-pocket maximum associated with the HDHP option, they are sometimes deterred from considering that plan—even though it may be their most cost-effective option,” the report says.

Many employees do not take enough time to review their health plan options and do not make informed decisions based on their current options and circumstances. An Aflac survey found 80% of employees spent less than one hour, and 56% spent less than 30 minutes researching their options during their last open enrollment session. In addition, nearly all (93%) employees typically choose the same benefits (in terms of medical, dental, and vision) year after year.

“In order to determine the most cost-effective health plan option, both plan sponsors and employees would benefit from a health plan analysis that shows the total annual expenditure (premiums, deductible, out-of-pocket costs, HSA contributions and tax savings) at various levels of medical spend. In many cases, the lower premium plan will be the ‘right’ plan for employees, therefore reducing the plan sponsor’s health benefit costs,” Wilkins concludes.