Employee Benefits Blog

Governor Ducey is working on a plan to fund Arizona’s CHIP program until Congress either passes a new budget or finds a way to pass an independent CHIP bill, which would require some legislative maneuvering with very few legislative days left in the year and a tremendous backlog of bills.

On September 30, 2017, the government’s fiscal year ended without passing a new budget, essentially cutting off all federal funding for the Children’s Health Insurance Program (CHIP) across the country. Because 9 million children in the U.S. (and their parents) depend on the insurance CHIP provides, states are trying to find extra cash to sustain the program.

Who Does CHIP Cover?

CHIP was created to fill in the gaps for families that make too much money to qualify for Medicaid, but not necessarily enough to pay for private or employer-sponsored health insurance.

Children up to age 19 are eligible for the program, but states have discretion over further eligibility standards, including those related to income. The Affordable Care Act (ACA) also expanded CHIP eligibility to children of state employees.

Ask nearly any employee how they feel about the importance of health insurance and they’ll tell you it ranks pretty high on their list of priorities. Research backs this up time and time again. A 2017 Harvard Business Review survey reveals that employees value better health, vision and dental insurance over benefits like additional vacation time and work-from-home options.

As an employer or Human Resources professional, you know that health insurance is a must-have benefit workers want. What you may not know is how to choose a health insurance plan that keeps workers happy and attracts new talent to your organization. Here is a quick guide to selecting a plan that works for everyone.

Choosing What Type of Health Insurance Plan to Offer

Perhaps you’re an employer who has grown to the point where you have to legally start offering healthcare per the ACA, or perhaps you're still classified as a “small business” but would like to offer insurance as a retention and recruitment benefit. But where to start? Selecting health insurance for your employees may seem like an overwhelming decision. By breaking it down and approaching the decision step by step, you can better manage the decision making process.

Since the passage of the Affordable Care Act (ACA) in 2010, the idea of “preventative care” has been more widely discussed. The law requires insurance companies to provide certain preventative care services at no additional cost to the enrollee (meaning that the insured will not be charged a copay or coinsurance as long as the provider is in-network). 

Many employee benefits brokers, employers, and insurance companies started emphasizing preventative care and maintenance years ago, when they discovered that doing so can decrease their overall costs over time, but the ACA is what put this type of healthcare on the map.

What is Preventative Care?

Preventative care (also known as preventive care) is any health service aimed at the prevention of disease or in support of general health maintenance. Preventative care is also one of the primary focus areas in wellness programs, which are of particular interest to companies who understand the long-term value preventative care can provide in taming runaway healthcare expenditures, including rising premiums.

Every employer is looking to cut employee benefits costs, but it can be difficult to do so without compromising employee satisfaction. Employers therefore need to be careful when restructuring their benefit offerings.

Of course the most common way to reduce employee benefits costs is to alter medical plan design, since medical coverage makes up a significant portion of benefit expenses. That said, it's not the only way to tame costs.

Here are some of the most popular areas for cost savings for employee benefits.

Medical Plan Design

One of the most popular ways for employers to control the cost of employee benefits and healthcare costs these days is switching to high deductible health plans (HDHPs). Making this switch reduces the cost of medical premium while pushing up deductibles. It should be noted, however, that HDHPs must be introduced with a great deal of employee education, since out-of-pocket expenses flow very differently than with those of traditional health plans.

For example, if offered multiple plan choices, some employees may elect an HDHP (in absence of any education), simply in an effort to save on premiums, when another plan was perhaps more appropriate for their particular situation. These employees may then experience buyer’s remorse as the plan year unfolds. This contributes to the negativity surrounding HDHPs, which is undoubtedly one of the reasons these plans come with mixed reviews.

In the never-ending quest to curb employee benefits costs, many companies have transitioned away from traditional healthcare plans and toward high deductible health plans (HDHPs) with savings options, such as health savings accounts (HSAs).

The danger with high deductible health plans (especially for employers who don't help fund the HSA nor employees who don’t stow away the premium savings for a rainy day) is that they can leave a participant extremely vulnerable in the event of a catastrophic event, such as a heart attack or stroke. Even an extended hospitalization or the diagnosis of a chronic condition can run up the tab. Therefore, it’s imperative that employers add the right voluntary benefits to their portfolio to help shore up with vulnerabilities.

Voluntary benefits are a great way to beef up your employee benefits package without increasing costs. Employees feel better equipped to deal with unanticipated health issues and employers don’t have to invest any additional money into their benefits package. If you’re considering offering a HDHP to your workforce (whether as one medical option or the only medical option), voluntary benefits can be a great way for employees to supplement their health insurance policy.

Employers often compete against each other for the same pool of talent, whether that be within specialized industries or simply within a geographic community. It’s never been easy to secure the best workforce, but it’s even more difficult these days with such a low unemployment rate and the recent government crackdown on immigration and employment laws. Those who rely on recruiting talent through H-2B visas found that petitions ran out months early this year and Arizona employers, in particular, have to abide by the e-verify law. 

In the relentless quest to claim the best talent, employee benefits benchmarking is crucial. This practice allows you to measure where your organization's position is in terms of benefits offerings versus the competition. Some companies conduct benchmarking as part of a strategy of good governance every few years (which we highly recommend), while others perform benchmarking in response to something specific, such as an acquisition, the need to fill a specific role, or the launch of a new division.

Benchmarking is determined through public and proprietary information, the latter of which can be quite costly for employers, but it’s also quite necessary. Employee benefits benchmarking isn’t always an easy process, but a good employee benefits advisor can help you navigate the system in accordance with the law and help you understand the pros and cons behind this important practice.

Open enrollment is a very busy time of the year for companies both large and small. Employers can approach employee benefits open enrollment in one of two ways: active or passive enrollment.

Active enrollment means that employees MUST re-evaluate their previous benefit choices and elect from current options for the upcoming year. Passive enrollment allows employees to simply re-enroll in their current choices with little or no involvement in the open enrollment process.

So what are the pros and cons of active vs. passive enrollment?

Passive Enrollment

According to the most recent (albeit very dated) survey available, 72% of U.S. employers prefer passive enrollment over active enrollment. Why is that? Well, for starters, it's simply easier on both ends. Employees can check off a box re-selecting their previous year's health insurance choices, and employers have less of an administrative burden to deal with, especially if plans remain relatively the same. A passive approach saves time for both employees and employers.

But does simple mean better? With benefits trending more and more towards consumer-driven health plans, a passive enrollment does not work well alongside that type of benefits approach. 

According to a 2016 Open Enrollment survey by Aflac, over half of employees (54%) claim that they waste up to $750 per year on poor decisions related to insurance benefits. Passive enrollment is basically an invitation to continue making the same benefit election mistakes of the past, and it allows for a path of least resistance which cheats employees from an opportunity to reflect, reevaluate and reeducate themselves on what works best for their families.

Life situations can change yearly, whether it's divorce, marriage, adoption, the birth of child, maturing dependents or significant health changes. An auto pilot approach to this simply isn't beneficial to employees or employers.

Health savings accounts (HSAs) have grown in popularity in recent years for a variety of reasons. Many employers are looking to cut employee benefit costs due to the rapid and seemingly never ending increasing cost of healthcare, while others are looking to avoid the ACA’s hefty Cadillac Tax (an ACA-related 40% tax, set to go into effect in 2020 which impacts “rich” health coverage that exceeds predetermined threshold amounts).

High deductible health plans (HDHPs) allow both employers and employees to save on premiums and are a simple way to accomplish both goals. They also fit with a growing trend towards consumer-driven healthcare. Most importantly, as HDHPs become more prevalent, so do HSAs as they go hand-in-hand.

Enrollment in HSAs has exploded in the past decade, growing from 3.2 million people in 2006 to 20.2 million in 2016 and once the data is in for 2017, this number is expected to be even higher. Even with all their pros and cons, it appears that HDHPs with HSAs are here to stay as more and more companies make the transition to less expensive health insurance options.

HSAs may be a good deal for businesses and workers alike, but it’s important for employers to be informed of HSA regulations so they can ensure the HSA they offer is compliant with federal law. Here are four common mistakes employers make when offering an HSA.

4 Common HSA Mistakes to Avoid

Mistake #1: Setting Up An HSA with a Non-Qualified High Deductible Health Plan

Employers are only allowed to offer an HSA when it’s set up in conjunction with a qualified high deductible health plan. Note that this doesn’t simply mean a health insurance plan with a high deductible — many comprehensive plans are now being built to have higher deductibles so they can boast lower premiums, which is another common money saving strategy among employers these days. Rather, the term “High Deductible Health Plan” is specific to health insurance plans that not only have high deductibles, but also conform to other established federal guidelines.

The term “healthcare” gets thrown around quite a bit these days. As HR professionals, you may have seen “healthcare” used interchangeably with “health insurance,” although it’s the layman doing so, rather than industry professionals. Healthcare and health insurance are two completely different things. They have different definitions, even though we, as a country, have largely co-mingled the two.

This co-mingling has led the county to erroneously focus on health insurance as an equal target of wrath for the rising cost of medical care, when in truth, healthcare has been the driving force. This understanding is critical if we’re to wrestle the ever escalating cost of medical care in this country.

Healthcare vs. Health Insurance

Healthcare

Healthcare is defined as “the field concerned with the maintenance or restoration of the health of the body or mind.” This also pertains to any “procedures or methods” related to the care of a person’s physical or mental health.

The industry in which medical professionals work is often referred to as the “healthcare industry.” Healthcare is provided by doctors, nurses, dentists, therapists, hospital systems, and pharmaceutical companies. The price these providers set for their products and services is the primary driver of health insurance costs.

As the cost of traditional group health insurance has gone up, high deductible health plans (HDHPs) with tax-advantaged health savings accounts (HSAs) have become increasingly popular among employers of all sizes. But offering a HDHP is only helpful if employees, assuming they’re given a choice, then choose to adopt them. And employees who are most satisfied with HDHPs are the ones who make the most of a HDHP’s best feature, the HSA.

HSAs (which are only available with a qualifying HDHP) are primarily designed to help employees offset the high out-of-pocket costs which come along with HDHPs by allowing both employers and employees to contribute dollars into a special savings account. (Employee contributions are made on a pretax basis.) Because HSA funds roll-over and can eventually be converted into retirement savings, savvy employees have quickly learned how to take advantage of these accounts and those who can afford it are maximizing this benefit to the full extent of the contribution limits, which currently stand at $3,400 for an individual and $6,750 for a family.

That said, the average HSA participant can’t afford to max out this benefit. In fact, most HSA participants barely contribute enough to the HSA to cover their anticipated out-of-pocket medical costs for the year. The average individual contribution is just $833, far less than any deductible on a HDHP, thereby causing enrollees to suffer under the weight of this type of plan design. Some of this behavior is simply due to limited incomes, but some can be attributed to other factors, such as a lack of education on how an HSA works.

To ensure that your workforce fully embraces HDHPs with HSA plans, it behooves every employer to explore ways to motivate employees to participate in their HSA. Afterall, according to the Employee Benefit Research Institute, between 20 and 22 million people in the U.S. are currently enrolled in an HDHP with an HSA.

Here are just a few ideas for improving HSA participation: