A new study has found three out of four U.S. workers would accept a job with a slightly lower salary if it offered better health care and medical coverage.
The main driver in workers prioritizing benefits is the rapidly rising cost of group health insurance premiums and out-of-pocket costs, according to the study by Voya Financial.
Besides looking for better health coverage, there’s growing interest among employees for voluntary benefits that can buffer health care costs, like critical illness, accident and dental and vision insurance.
As we approach open enrollment season for policies incepting at the start of the year, the study findings provide food for thought as you try to balance your benefit offerings with employee salaries.
The general theme of the poll was that health insurance and out-of-pocket costs like copays, coinsurance and deductibles are having a real effect on many workers’ finances, and in particular, their ability to save for retirement.
Consider the following:
72% of workers surveyed strongly or somewhat agreed they would take a job with a slightly lower salary for better health care and medical coverage, including lower premiums and out-of-pocket costs.
51% said that high health care costs were having a major or significant impact on their ability to save for retirement.
51% said they would be more likely to stay with their current employer if it provided access to a health savings account (HSA).
51% said they would be more likely to stay with their employer if it provided access to voluntary benefit offerings, and
54% said they would be more likely to stay with their employer if it provided access to mental health benefits and resources.
The above bullet points have one theme in common: reducing the employees’ premium and out-of-pocket outlays.
The takeaway
As open enrollment approaches, consider holding information sessions to help your staff understand the true value the benefits you offer can provide.
Voya Financial found that 75% of workers surveyed strongly or somewhat agreed they were interested in receiving support to maximize their workplace benefits dollars across their:
Health insurance,
HSAs,
Voluntary benefits, and
Retirement savings.
For example, “Many individuals may not realize that voluntary benefits can help lessen the financial impact of a covered event such as an illness or accident and can potentially reduce the need to tap into a retirement account for any out-of-pocket medical or other expenses,” said Christin Kuretich, vice president of supplemental products at Voya Financial.
With that in mind, offering benefits like critical illness or accident insurance can provide a safety net in case of one of these events hits one of your staff.
To better explain benefits to your staff, providing training, individual guidance and literature that explains how best to maximize their benefits. Importantly, employees are increasingly interested in digital tools (like apps or websites) that can provide tools and advice to help them make decisions related to health care, workplace benefits and retirement.
Finally, HSAs can also reduce an employee’s total costs and also help lower their taxable income. HSAs are accounts to which workers contribute with pre-tax funds and then reimburse themselves for out-of-pocket medical costs. Those funds are also not taxed.
With 2025 just a few months away, it’s important that small employers understand their group health insurance reporting obligations under the Affordable Care Act as they changed at the start of 2024.
Before 2024, only employers that sent out 250 or more Forms 1094-B/1095-B and 1094-C/1095-C were required to file them online with the IRS. But since early 2024 (and affecting the 2023 tax year), employers filing 10 or more ACA reporting forms have been required to file electronically.
It’s important that you understand your filing obligations to avoid fines that can quickly add up.
Here are the deadlines for 2025
Meeting the filing deadlines for Forms 1094-C and 1095-C is critical to complying with ACA requirements. Here are the deadlines for next year:
Jan. 31, 2025 — Employers must by this date have sent Form 1095-C to all of their full-time employees, who must supply the form to the IRS when they file their taxes.
Feb. 28 — This is the deadline to file Forms 1094-C and 1095-C by paper with the IRS for the few employers who are still eligible to do this.
March 31 — This is the deadline to file Forms 1094-C and 1095-C electronically with the IRS.
Filing electronically
You can file your forms electronically on the ACA Information Returns (AIR) Program, which is run by the IRS. This page includes all of the resources and guidance you need to understand and use it.
Hardship waivers
Employers can request a waiver for filing electronically if they can prove that doing so will cause an undue hardship on them or if it goes against their religious beliefs. Employers must submit their waiver request at least 45 days prior to the due date for returns by using this form.
Penalties
Employers who offer their workers health insurance and who fail to file the ACA forms electronically despite being required to do so (and if they don’t have a waiver) can be subject to a fine of $310 per return that was not reported electronically.
There are also other penalties regarding ACA reporting forms:
Failure to file correct information on a form: $310 per return for which the failure occurs. The maximum penalty an employer may incur under this penalty is nearly $3.8 million per calendar year.
Failure to provide a correct information return or payee statement: $310 per return for which the failure occurs. The maximum penalty that may be incurred is nearly $3.8 million per calendar year.
The IRS has significantly increased the group health plan affordability threshold — which is used to determine if an employer’s lowest-premium health plan complies with the Affordable Care Act rules — for plan years starting in 2025.
The threshold for next year has been set at 9.02% of an employee’s household income, up from 8.39% this year. The higher threshold will give employers a little more wiggle room when setting their workers’ premium cost-sharing level for their lowest-cost plans in 2025, to avoid running afoul of the ACA.
Under the ACA, “applicable large employers” — that is, those with 50 or more full-time or full-time equivalent employees (FTEs)— are required to offer at least one health plan to their workers that is considered “affordable” based on a percentage of the lowest-paid employee’s household income.
If an employer’s plan fails this test, it will be deemed as non-compliant with the law, resulting in hefty penalties for the employer.
The new threshold will apply to all health plans whenever they incept in 2025. The affordability test applies only to the portion of premiums for self-only coverage, and not for family coverage.
Also, if an employer offers multiple health plans, the affordability test applies only to the lowest-cost option that provides also minimum value (another ACA plan metric).
Calculating
Employers can rely on one or more safe harbors when determining if coverage is affordable:
The employee’s most recent W-2 wages, as reported in Box 1.
The employee’s rate of pay, which is the hourly wage rate multiplied by 130 hours per month (at the start of 2022).
The federal poverty level.
Employers with a large low-wage workforce might decide to utilize the federal poverty level ($15,060 for 2024) safe harbor to automatically meet the ACA affordability standard, which requires offering a medical plan option in 2025 that costs your full-time employees no more than $113.20 per month.
If an employee’s coverage is not affordable under at least one of the safe harbors and at least one FTE receives a premium tax credit for coverage they purchase on an ACA exchange, the employer may have to pay a penalty, known as the “employer shared responsibility payment.”
The shared responsibility payment for 2025 will be $4,350 per employee that receives a premium subsidy on an exchange, down from $4,460 this year.
The Takeaway
As 2025 nears, you should review your health plan costs and premium-sharing to ensure that your lowest-cost plan complies with the affordability requirement.
We can help you assess affordability to ensure you don’t run afoul of the law. It will be particularly crucial in 2025, considering the significant change in the threshold.
One of the most underused employee benefits available is the “cafeteria” plan ― which can benefit both the employer and the employee.
These plans allow workers to withhold a portion of their pre-tax salary to cover certain medical or childcare expenses. The benefits are free from federal and state income taxes, employees’ taxable income is reduced and that means that employers don’t have to pay FICA on those dollars.
Cafeteria plans enhance your employee benefits package while boosting your margins. They have three specific flexible benefits for your employees to choose from:
1. Pre-tax Health Insurance Premium Deductions
Premium-only plans allow your employees to elect to withhold a portion of their pre-tax salary to pay for their portion of the premium contribution to their employer-sponsored plan. The plan offers a simple way to reduce the cost of their benefits.
2. Flexible Spending Accounts
An FSA allows you to fund certain medical expenses on a pre-taxed basis through salary reductions to pay for out-of-pocket expenses that aren’t covered by insurance (think: deductibles, copayments, prescriptions, over-the-counter drugs and orthodontia).
Each paycheck, a certain amount is withheld pre-tax and put into an account. Employees pay for medical expenses up front out of pocket and then seek reimbursement from their FSA.
The average U.S. worker spends more than $1,000 every year on these types of benefits.
And there’s one more benefit: By participating in an FSA, your employees’ taxable income is reduced, which increases the percentage of pay they take home.
3. Dependent Care FSA’s
The dependent care FSA is an attractive benefit for employees who have to pay for childcare or long-term care for their parents.
Many employees don’t take advantage of this benefit and may be unaware of the significant tax savings. Employees may hold back as much as $5,000 annually of their pre-tax salary for dependent care expenses.
Qualified dependent care expenses include, but are not limited to:
The care of a child under the age of 13,
Long-term care for parents,
Care for a disabled spouse or a dependent incapable of caring for her- or himself, and
Summer day camps.
What You Get Out of It
Every dollar that goes through a cafeteria plan reduces your payroll by the same amount. That means you don’t have to pay FICA or workers’ comp premiums on that part of your workers’ salaries.
The savings can add up to as much as 20% of every dollar being passed through the plan.
It’s also a great recruitment tool and an essential part of a larger employee benefits package.
As open enrollment is right around the corner, now is the time to make a plan to maximize employee enrollment and help your staff select the health plans that best suit them.
You’ll also need to make sure that you comply with the Affordable Care Act if it applies to your organization, as well as other laws and regulations.
Here are some pointers to make open enrollment fruitful for both your staff and your organization.
Review What You Did Last Year
Review the results of last year’s enrollment efforts to make sure the process and the perks remain relevant and useful to workers.
Were the various approaches and communication channels you used effective, and did you receive any feedback about the process, either good or bad?
Start Early with Notifications
You should give your employees at least a month’s notice before open enrollment, and provide them with the materials they will need to make an informed decision.
This includes the various health plans that you are offering your staff for next year.
Encourage them to read the information and come to your human resources point person with questions.
Help in Sorting 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.
Also, hold meetings on the plans and put notices in your staff’s paycheck envelopes.
Plan Materials
Communicate to your staff any changes to a health plan’s benefits for the next 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 ACA was enacted on March 23, 2010, and is thus exempt from some of the law’s requirements.
If you have a grandfathered plan, talk to us to confirm whether it will maintain its grandfathered status for the next 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 , 2025, the affordability percentage is 9.02% of household income. At least one of your plans must meet this threshold.
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.
As they wrestle with providing attractive but affordable health care benefits for employees, employers are trying a variety of strategies. A recent report from insurance brokerage Gallagher shows businesses are balancing workers’ physical and emotional health against ever-rising costs.
There are many cost drivers in health care and insurers and employers are in a fine balancing act of trying to keep a lid on costs and also keeping their employees happy. And while firms are leaving no stone unturned in their quest for reducing costs, some are also adding new services employees are keen on.
Here’s what the report found:
Offering More Plans
To combat rising costs, many employers (80%) offer more than one health plan. A growing share of employers offer high-deductible health plans (HDHPs) and health savings accounts (HSAs) to employees. The percentage of companies offering such plans has increased five consecutive years and is now at 56%. At the same time, 24% of employers report more employees choosing HDHPs than the other offered plans.
Employers and employees contribute to the HSAs. When employers contribute, they provide about $500 or more for single coverage and $2,000 or more for family coverage.
Weight-loss drugs such as Ozempic and Wegovy are growing in popularity. However, these drugs (known as GLP-1s) are expensive, and employers are trying to manage the effects of those costs.
Slightly more than half of employers surveyed include weight management in their benefits programs, but they attach strings to the use of weight-loss medications. This may include:
Step therapy, which entails trying other, less expensive yet proven pharmaceuticals and health and fitness regimens first.
Prior authorization before approving their use.
Eligibility requirements. Around one-fifth of employers set eligibility requirements that include a combination of minimum body mass index and comorbid conditions. They do not pay for the drugs for otherwise healthy employees looking to drop a few pounds.
Plan Eligibility and Scope
Despite rising costs, some employers are expanding eligibility for and the scope of their health care plans.
The Gallagher report shows a small increase in the share of employers offering coverage to employees’ domestic partners and to part-time employees, though these remain the minority.
Some are also offering more specialty coverages. For example, more than half cover hearing aids and behavior analysis for employees’ children with autism. A small but growing fraction (17%) cover gene therapy.
Almost half of employers cover some form of treatment for infertility, including drugs, specialist evaluations, in vitro fertilization and other fertilization procedures. However, controversies surrounding some of these procedures have led to a patchwork of state mandates and restrictions. This has made providing these benefits more complex for companies.
Mental Health and Leave
More employers are paying attention to their employees’ mental and emotional states in addition to physical wellness. Most are concerned about staff suffering from burnout and stress.
However, they also believe their managers are not able to recognize the signs. More than a fifth now offer training to managers and human resources staff on identifying warning signs and referring employees for help, and that share has grown in the past two years.
Finally, more firms are offering family-focused leave policies. This recognizes the growing emphasis employees place on work-life balance amid tight labor markets.
Almost 90% offer paid bereavement leave (outside vacation leave,) while almost half provide paid time off to bond with a new child, and 15% provide it for taking care of ill or disabled family members.
The Takeaway
Employers are faced with two difficult realities. The workforce is aging, meaning that retirements will shrink the pool of available skilled workers. At the same time, health care costs are ever-increasing.
To meet both these challenges, employers are using the strategies detailed above, as well as other approaches. Some combination of them will help you compete in the war for talent while protecting your bottom line.
