Poor health insurance literacy among plan enrollees costs both them and plan sponsors billions of dollars each year, according to a new report by Cigna Healthcare.
According to the report, Americans with poor knowledge of how their health insurance works are twice as likely to be stressed about their health, which can worsen any health problems they are struggling with. This can also affect employers through decreased worker productivity, increased absenteeism and turnover and other indirect costs.
There is also a disconnect between employers and their plan participants: 80% of plan sponsors believe that their staff understand their benefits, while 66% of employees find it difficult to know which benefits to use and in what circumstances.
The report’s finding that employees who are confused about their benefits may suffer worse health outcomes should spur employers to ensure they are getting their money’s worth by emphasizing employee education and support.
“Employers invest in health benefits because a healthy workforce is imperative to organizational performance and growth,” the report said. “For maximum ROI, employees and their families must use those benefits effectively. Employee utilization and engagement data can help employers address gaps.”
Cigna found that of those who reported being stressed about their health often or very often:
50% had missed one or more days of work due to physical or mental health,
49% had come to work feeling sick,
50% said they were not mentally present while at work,
34% were unable to perform at an optimum level, and
49% often or very often found work stressful.
On the flip side, the 20% of workers who reported being confident in their health insurance knowledge were also healthier and had fewer medical concerns than those who were less informed, the report states.
The report found that those in the top 20% of health insurance literacy were more likely to positively rate their physical and mental health compared to those with a limited understanding of their benefits. They were also more likely to be more proactive about their health by taking steps to:
Research and compare health plans,
Seek out regular preventive care,
Manage chronic conditions, and
Stick to prescription regimens.
What employers can do
In light of the study’s findings, it’s clear that employers should boost health insurance literacy among all staff, not only for their employees’ health and finances, but also for the firm’s finances, productivity and office morale.
The report recommends that employers focus on three areas:
Educational programs: Hold regular in-person health engagement sessions that give staff the opportunity to ask questions and learn about their benefits. Some employees may benefit more from sessions like these if offered as webinars or online courses that educate them about their health benefits.
Interactive tools: Provide interactive tools that can guide your employees when making plan decisions. These are often available through the insurance company and can include:
Plan comparison tools — These online platforms can be used during open enrollment to help employees and their families compare plans based on premiums, coverage, doctor networks, out-of-pocket expenses and maximum limits.
Cost calculators — These online or app-driven tools allow employees to estimate their out-of-pocket costs for various medical services and treatment options.
Benefit portals — These online or app-driven tools can help your staff make decisions about their health care and how insurance will help pay for it.
Provide support: Create an environment where your workers feel comfortable approaching HR with questions about their health insurance benefits. Designate one or more team members as point persons for these interactions and emphasize to staff that the department has an open-door policy.
Finally, as your broker, we can also help educate your workers and provide resources that help them make better decisions.
The “Big Beautiful” tax bill being debated in Congress has several provisions that would make major changes to rules governing individual coverage health care reimbursement arrangements and tax-advantaged health savings accounts. Many of these changes would benefit both employees and employers.
The legislation has not yet been signed into law and could undergo significant changes in committees in the U.S. Senate. After the Senate makes changes to the bill, which has already passed the House, it may be completely different. However, the changes proposed for ICHRAs and HSAs seem to be noncontroversial, with no opposition reported.
Here’s a look at the proposed changes.
Making changes to HSAs
HSAs, which are tied to qualified high-deductible health plans (HDHPs), allow employees to sock away untaxed income for future medical and health-related expenses. Usually, a set amount is withdrawn from their paychecks before taxes are applied.
Account holders can invest the money in these accounts like they do with 401(k) plans; the accounts can be moved from one employer to the next and kept into retirement. Funds are withdrawn tax free to reimburse for qualified medical and health-related expenses.
The bill would:
Allow working seniors who are 65 and older to continue contributing to an HSA, a change from current law that prohibits this.
Expand HSA eligibility to people with ordinary bronze-level plans and catastrophic major medical coverage. Currently, only individuals in HDHPs have access to HSAs.
Allow an HSA to reimburse for gym memberships and other fitness-related costs. The reimbursement limit would be $500 annually for individuals and $1,000 for families.
Permit workers with access to an employer’s on-site clinic to contribute to HSAs. Under current law, access to an employer health clinic violates the rule that an HSA owner must have an HDHP.
Allow married couples who file taxes jointly to make catch-up contributions to the same HSA. Currently, married couples can only make catch-up contributions to their own accounts. The maximum HSA contribution in 2025 is $4,300 for an individual and $8,550 for a family. Individuals over the age of 55 can make catch-up contributions of up to $1,000 each year.
Allow HSA owners to pay dues for a “direct primary care practice,” a subscription service for primary care. It would limit the reimbursable dues to $150 for an individual and $300 for a family.
Allow workers with health reimbursement or flexible spending arrangements that are terminating to roll some unused funds from those accounts into an HSA. The maximum amount that can be converted is linked to the FSA contribution limit, which is $3,300 in 2025.
Would allow one spouse to contribute to an FSA and the other to an HSA. Under current law, if one spouse has an FSA, the other cannot contribute to an HSA.
Would set the maximum HSA contribution based on earnings. For example, for employees making $75,000, the contribution limit would increase to $8,600 for an individual, compared to $4,300 today. For a couple making $150,000 annually, the amount would jump to $17,100 from the current $8,550.
Tweaking ICHRAs
The legislation would rebrand ICHRAs to individual care expense arrangements (CHOICE arrangements), which would be made available through a cafeteria plan.
This change would also address an issue that has plagued ICHRAs: funds in those accounts are not eligible for tax-free status if used to purchase individual coverage on Healthcare.gov or other Affordable Care Act exchange. By funding them through a cafeteria plan, workers with CHOICE arrangements would be able to pay for individual coverage on the exchange using tax-free dollars.
The bill would also allow employers to give workers the option of enrolling in a CHOICE arrangement or a traditional group health plan.
Further, it would provide employers a monthly tax credit of $100 per employee enrolled in a CHOICE plan when the plan includes major medical coverage that offers at least the same type of benefits that a bronze plan on the government exchange would. Typically, bronze plans cover about 60% of medical costs.
The takeaway
Much can change between now and when the tax bill is signed into law. If the above provisions make it into the final version, they could greatly expand the use of HSAs and ICHRAs. One analysis of the bill predicts it would expand the pool of people eligible for HSAs by 20 million.
The IRS has announced slightly higher health savings account contribution limits for 2026, with the amount increasing 2.3% for individual HSA plans.
The IRS updates this amount annually, along with minimum deductibles and out-of-pocket maximums for high-deductible health plans. HSAs, which help employees save for medical expenses, are only available to those enrolled in qualified HDHPs.
Understanding these amounts now can help you get an early start on human resources planning for next year.
Here are the changes coming in 2026:
HSA annual contribution limit
Self-only plan: $4,400, up from $4,300 in 2025
Family plan: $8,750, up from $8,550 in 2025
Catch-up contribution (for those aged 55 and older): $1,000 (unchanged)
HDHP minimum annual deductible
Individual plan: $1,700, up from $1,650 in 2025
Family plan: $3,400, up from $3,300 in 2025
HDHP annual out-of-pocket maximum
Individual plan: $8,500, up from $8,300 in 2025
Family plan: $17,000, up from $16,600 in 2025
Maximum employer excepted-benefit HRA contribution
$2,200, up from $2,150
What to do
If you sponsor an HDHP for your staff, review the plan’s minimum deductible and maximum out-of-pocket limit when preparing for the 2026 plan year.
If you allow employees to make pre-tax contributions to an HSA, you should also update your plan communications to reflect the new amounts.
The many benefits of HSAs
An HSA is a special bank account for your employees’ eligible health care costs. They can put money into their HSA through pre-tax payroll deductions, deposits or transfers. As the amount grows over time, they can continue to save it or spend it on eligible medical and medical-related expenses.
Employers can also contribute to the accounts, but the annual contribution maximum applies to all contributions in total (from the employee and the employer).
The money in the HSA belongs to the employee and is theirs to keep, even if they switch jobs. If they go to a new employer that offers qualified HDHPs, they can continue to fund the account in their new job.
Funds roll over from year to year and can earn interest. Many plans also have investment options to help savers further grow the account.
There are several benefits for employees who have an HSA:
The money an employee contributes to an HSA is not subject to income taxes, which reduces their overall taxable income.
They are not taxed on withdrawals.
If employees contribute to their HSA with after-tax money, they can deduct their contributions at tax time on Form 1040.
Employees can tap the funds for any approved out-of-pocket medical expenses.
They can also grow the account tax-free by investing the funds in the account, like a nest egg for medical expenses in retirement.
HSA-eligible expenses:
Payments for services or medicine that count towards health plan deductibles, copayments or coinsurance.
Dental or vision care (including orthodontics, eye exams and corrective lenses).
Medical devices.
Certain over-the-counter medicines, such as pain relievers, allergy medication, cold and flu medicine and menstrual products.
Vitamins and health supplements, if recommended by a medical or health professional for the treatment or prevention of a specific disease or condition.
If you are offering high-deductible health plans to your staff to reduce overall premium outlays, you know that this type of insurance has one major drawback: higher out-of-pocket expenses that some may struggle to afford if they experience a sudden illness or accident. Fortunately, you can offer a product that can help them cope with unexpected out-of-pocket costs for their health care: gap insurance, otherwise known as supplemental medical expense coverage. Supplemental insurance is an extra layer of coverage designed to help with expenses primary health insurance may not fully cover, including copays, coinsurance, deductibles and even living expenses.
With more Americans going into serious debt due to medical expenses, supplemental insurance can provide a financial lifeline when someone needs it most.
Group supplemental insurance is a voluntary benefit that is usually less expensive than if someone purchases it on their own. There is typically no underwriting or health exams for group policies, which is not always the case with individual policies.
This voluntary benefit can be structured in different ways, but they usually cover deductibles, copays, coinsurance costs, prescription drug costs and other health care-related expenses.
Gap insurance may also cover nonmedical expenses, including living expenses during a hospital stay or while recovering at home from an illness or accident. Other gap plans might include income replacement for periods when individuals can’t work due to an illness, accident or after a medical procedure.
Types of gap insurance
There are a few types of gap insurance, each covering something a bit different:
Hospital indemnity insurance — This can help cover the costs associated with a hospital stay, including the cost of childcare or if a patient needs to travel far from home to receive medical care. Depending on the plan, hospital indemnity insurance gives you cash payments to help pay for added expenses that may come while you recover. Typically, plans pay based on the number of days of hospitalization.
Critical illness insurance — This provides a benefit if a policyholder becomes very ill or suffers a serious medical problem, like a heart attack or stroke. This plan supplements existing health insurance coverage with extra funds when a policyholder incurs extra expenses due to an illness and when they can’t work. They may receive a lump sum to cover these added expenses or monthly payments depending on the plan.
Accident insurance — This can help the policyholder cover medical costs or living expenses if the policyholder is injured in an accident. Policies pay out a preset number of times over a specific time or in a lump sum.
Cancer insurance — This can cover radiation, chemotherapy, immunotherapy, surgery, hospitalization and possibly screening benefits — all related to a cancer diagnosis and treatment. It can pay out in different ways:
Expense incurred policy, which pays a specific percentage of treatment costs up to a set limit.
Indemnity policy, which covers expenses for approved treatments up to a predefined limit.
Lump-sum policy, which pays a fixed amount after a cancer diagnosis.
Benefit to employees
The cost of gap coverage is reasonable, ranging from $10 to $50 a month depending on the coverage. Employers can offer to pay all or part of the premium.
If you offer HDHPs to your staff, supplemental insurance can help your employees weather a serious illness or accident by providing much-needed funds to help them get buy during a difficult period.
One often-overlooked factor that can drive up group health plan premiums is employee health behavior, particularly the tendency to skip preventive care visits.
According to Aflac’s most recent “Wellness Matters Survey,” 94% of Americans have delayed or skipped checkups and screenings that could detect serious illnesses early. When employees avoid the doctor until a major health issue emerges, the resulting claims can be far more costly — both in terms of medical expenses and lost productivity.
For employers, this can lead to higher utilization and claims down the road, ultimately pushing up premiums at renewal time.
Why people skip appointments
Checkups and screenings can help detect chronic conditions like hypertension, diabetes and certain cancers early, when they’re easier and less expensive to treat.
Yet many workers don’t act until a health scare forces the issue. The Aflac survey found that nearly two-thirds of Americans only became proactive about their health after a major incident. Barriers like distrust of doctors, fear of bad news, scheduling hassles and uncertainty about insurance coverage keep many from seeing their primary care physician.
The study sheds light on the myriad reasons so many people are skipping routine checkups and screenings:
37% have canceled or not scheduled a doctor appointment because the wait was too long.
48% of those surveyed say they refrain from regular checkups because of logistical issues (such as difficulty finding a babysitter, taking time off from work or finding transportation).
26% say they do not trust doctors or would rather not be embarrassed.
14%, including 18% of Gen Z workers, say insurance issues keep them from getting checkups and screenings.
41% — primarily Gen Z (51%) and millennials (54%) — rely mainly on urgent care or the emergency room for their medical needs.
62% of those who believe they will be diagnosed with cancer are more likely to delay screenings.
What employers can do
One of the more striking findings was that 87% of those surveyed said they would be more likely to attend routine checkups and screenings if they received a cash incentive to do so.
Employers have a unique opportunity to promote preventive care and reduce friction that stops employees from making appointments.
Practical steps employers can take
Encourage your staff to book annual checkups at a specific time each year and put it on their calendar. The study found that those who book appointments at a specific time of year are twice as likely to complete recommended doctor visits and screenings.
Promote preventive care. Use company newsletters, e-mail, intranet posts or Slack messages to remind employees about the importance of annual physicals and screenings.
Urge employees to get a primary care physician if they don’t already have one. Patients who have a primary care doctor are more likely to attend checkups and receive reminders from their doctor. The survey found that one in five did not have a primary care physician.
Advise employees to get their families involved in health for everyone. Seven in 10 said that a loved one’s urging would make them more likely to go to the doctor.
Host an “Annual Checkup Day.” Block off a “no meetings” hour across the company and encourage employees to use the time to schedule their appointment or even take a walk, meditate or engage in another wellness activity.
Offer incentives for scheduling checkups. Small rewards like gift cards or company swag can go a long way.
Protect paid time off. Reassure employees that they won’t have to take paid time off to attend a medical appointment.
Educate employees about coverage. Make sure employees know which screenings are covered under their plan.
A new poll has found that most small and mid-sized enterprises consider offering group health insurance benefits to their staff a fundamental business value, despite many firms making difficult financial tradeoffs to maintain that coverage.
It’s been well-reported that SMEs are disproportionally burdened by rising health insurance costs and a labor market that demands robust benefits. A study by Morgan Health, a unit of JP Morgan, found that one-third of SMEs drop their health insurance each year, but the ones that stay the course must be nimble and sometimes make choices that allow them to continue offering health insurance.
The goal of the survey was to better understand how businesses make tradeoffs to keep health care coverage in place and areas where they need additional support or innovation.
Here’s a look at how most SME operators view their role in group health benefits, the challenges they face and steps they are taking to provide benefits and improve their offers.
Firms, staff value health coverage
Most SMEs polled said they consider group health insurance a fundamental part of their benefits package to stay competitive in the job market.
The challenge facing these firms is balancing the cost of group health insurance against the financial benefits of attracting the best and brightest. SMEs often struggle to match the expansive benefits choices of larger employers who usually have more resources to offer wellness programs, mental health benefits and virtual care.
As a result, SMEs will often prioritize their employees’ well-being and happiness as part of a family-like company culture to set themselves apart from larger employers. This focus can positively affect employee satisfaction and business performance, even if that means absorbing other costs.
Financial tradeoffs
A separate report by JPMorganChase Institute found that one out of three small businesses discontinue paying health insurance premiums from one year to the next. However, many executives polled by Morgan Health said that prospect would be the absolute last option.
One executive of a firm with between 100 and 500 employees told the surveyors, “There would have to be a lot of cuts made in our budget before we would [discontinue benefits] … I think that would be one of the last things on the chopping block.”
Dropping coverage is only an option for firms with fewer than 50 full-time and full-time equivalent employees. Employers with 50 or more of these workers are required under the Affordable Care Act to offer group health insurance to their staff that is affordable and covers essential services.
Employers may take other steps like:
Reducing family plan contributions (not always popular).
Shifting to a high-deductible health plan, which in turn lowers the premium. On the flipside, your employees will have higher maximum out-of-pocket expenses. This can include promoting health savings accounts, which allow employees to save for future medical expenses with pre-tax dollars. HSAs can only be tied to an HDHP.
Choosing a plan that doesn’t cover doctor office visits or prescription drugs until the deductible is met.
Selecting a carrier with lower rates even though you may sacrifice network availability.
Offering an individual coverage health reimbursement arrangement. These are basically accounts that the employer funds to allow their staff to purchase health insurance in the private market or on an ACA marketplace.
The takeaway
A word of warning: Making big changes to save money can result in unintended consequences. As a result, considering a big change requires research, which takes time and money. Large employers will usually have a dedicated human resources team that can do the research, but SMEs, not as much.
We can help you evaluate your options, stay competitive in the talent market and retain key personnel. As your strategic partner, we can work with you to manage your health insurance costs and explore new options as the market continues to evolve.
