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.
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.
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.
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.
As the workforce ages and many employers want to keep on baby-boomer staff who have the experience and institutional knowledge that is irreplaceable, one issue that always comes up is how to handle health insurance.
Once your older workers reach the age of eligibility for Medicare, under current law you can help them pay for Part B and D premiums with a Medicare Premium Reimbursement Arrangement. These types of arrangements became legal after legislation was signed into law in 2013 to help employers provide benefits to their Medicare-eligible staff.
But the issue surfaced again recently when the Trump administration came out with new guidance for health reimbursement arrangements that paves the way for employers to set up HRAs to reimburse staff for health premiums in their personal (not company group) health plans.
Anybody who is about to turn 65 has a six-month period to sign up for basic Medicare, but if they want additional coverage they can pay for Medicare supplemental coverage such as Parts B and D.
Part B covers two types of services:
Medically necessary services: Services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice.
Preventive services: Health care to prevent illness (like the flu) or detect it at an early stage, when treatment is most likely to work best.
Part D, meanwhile, covers prescription drug costs.
The dilemma for employers has often been whether to keep the Medicare-eligible employee on the company health plan or cut them free on Medicare.
Smaller employers — those with 20 full-time-equivalent employees — have the option to open a Medicare Premium Reimbursement Arrangement for those employees if they are coming off a group health plan and into Medicare.
For small employers, it’s legal to set up an arrangement like that, as long as doing so is at the employee’s discretion. Employers are not allowed to push an employee into a Medicare Premium Reimbursement Arrangement in order to get them off the company’s health plan.
The good news for employers is that they often can reimburse their employees in full for Part B and D, as well as Medicare Supplement, and still pay less than they would pay in group employee premiums alone.
On top of that, the employee gets a lower deductible and overall out-of-pocket experience with less, if any, premium contribution.
What you need to know
Here’s what you should know if you’re considering one of these arrangements:
A Medicare reimbursement arrangement is one where the employer reimburses some or all of Medicare part B or D premiums for employees, as long as the employer’s payment plan is integrated with the group’s health plan.
To be integrated with the group health plan:
The employer must offer a minimum-value group health plan,
The employee must be enrolled in Medicare Parts A and B,
The plan must only be available to employees enrolled in Medicare Parts A and B, or D, and
The reimbursement is limited to Medicare Parts B or D, including Medigap premiums.
Note: Certain employers are subject to Medicare Secondary Payer rules that prohibit incentives to the Medicare-eligible population.
One often overlooked cost driver to your employee benefits plans is administrative errors and oversights that are the result of sloppy record-keeping and a lack of checks and balances among your account and human resources teams.
If you are not diligent in keeping up with outgoing employees, are not paying enough attention to admin details and checking billing for errors, and are not reviewing accounts regularly, you could be leaving money on the table unnecessarily and overpaying for your group health insurance and other employee benefits you offer.
The following are some of the most common administrative mistakes that could lead to overspending on your group health plan.
Failing to keep up with staffing numbers
If your human resources and accounting are not talking to each other, you risk failing to account for personnel that leaves and continuing to include them in the health insurance roster and paying their premium.
Obviously, this is typically not an issue in a small organization of 10 to 15 employees, but the more workers you have, the easier it is for one to slip through the cracks after they leave.
Consider having HR review personnel numbers monthly and updating your files to avoid this happening.
Failing to check for ‘age-outs’
Workers who have turned age 65 may not require your company health plan anymore, since they are eligible for Medicare. You can reduce health care administration and benefits costs substantially by keeping an eye out for age-outs each year.
Missing changes to plans
Before and during open enrollment it’s important to review all of the benefits plans that you offer — health, dental and vision coverage — to make sure there aren’t any changes that will increase the cost of any of the plans.
Sometimes a plan will introduce additional coverage that your employees may not need and, if you are not staying on top of changes, you may miss the opportunity to move them to another plan.
Admin mistakes by insurers
Administrative mistakes made by the insurers you contract with can be overlooked, forcing you to overpay for your employees’ coverage.
Your accounting and HR teams should regularly audit your insurers’ billings to check for errors and ask the companies to correct any that are found. One of the most common mistakes is for an insurer to have an incorrect employee count. But the carriers can make other mistakes in billing, too.
If you notice an increase in your monthly bill with no new staff additions, you may want to delve deeper.
The takeaway
By putting in place administrative controls and a regime for regular billing and personnel-count auditing, you can avoid mistakes that add to your employee benefits costs.
Keep an open line of communication with your insurers in case you need to work with them to address any issues that arise.
