Boost Employees’ CDHP Comfort Zone with Voluntary Benefits
Mar 9, 2010
Despite the continuous debate over healthcare reform in Washington, one thing is for certain – healthcare costs and medical insurance premiums are going to continue to rise. Between 2008 and 2009, the average annual premium for family coverage on an employer-sponsored health insurance plan increased by 5% to $13,375. And, that rate is 131% higher than it was just 10 years ago!1
With figures like these, it’s not surprising that employers are searching for ways to trim their benefit costs. The good news for many workers is only 8% of employers are likely to drop coverage, so it doesn’t appear that the cost cutting measures will come through the elimination of benefits altogether. To control costs, employers are more likely to adopt other measures, such as increasing employee premium contributions, deductible amounts, and office visit and prescription drug cost-shares.1
This type of environment makes it likely that more employers will offer High Deductible Health Plans (HDHPs). These types of plans typically have lower premiums than more traditional plan designs like HMOs or PPOs because they have higher deductibles and coinsurance amounts.
Often referred to as Consumer-driven Health Plans (CDHPs), these plans are designed to encourage participants to manage their healthcare spending through higher deductibles and coinsurance requirements. Employers often couple their CDHPs with a funding mechanism such as a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) to help employees meet their out-of-pocket medical costs. An HSA, for example, can be funded through employer and/or employee contributions while an HRA is solely employer-funded.
Employees Uncertain About CDHPs
Already popular among employers, CDHP usage is projected to rise. Nearly a quarter of employers are likely to offer an HSA-eligible HDHP in the next year, and another 20% are likely to offer an HDHP coupled with an HRA.1
While employers have embraced CDHPs, there is still considerable uncertainty surrounding these plans among employees. The following statistics indicate that employee apprehension about CDHPs generally stems from a lack of understanding about how the plans work, as well as concern for higher out-of-pocket costs:
- Only 29% of employees with medical insurance have even heard of HSAs. And, only one-third of those employees feel they completely or mostly understand how they work.2
- More than half of employees find paying higher deductibles to be extremely undesirable.2
- Nearly a third of employees are concerned that they will incur medical expenses before they can build up a balance in their HSA.3
- More than two-thirds, 68%, of employees prefer more traditional medical plan designs, such as PPOs or HMOs.3
Voluntary Programs Can Drive CDHP Participation
Through the statistics above and our own conversations with employees, it’s pretty clear that the fear of a “worst case scenario” – a financially devastating illness – is a primary roadblock to employee acceptance of CDHPs. However, employers may give their CDHP enrollment a real boost by offering an additional safety net of voluntary programs to complement their core medical coverage.
Underscoring this, 57% of employees would be more likely to participate in a CDHP if their employer offered additional coverage for serious medical conditions such as heart attack and cancer – making a strong case for employers to offer a voluntary Critical Illness or Cancer Insurance program alongside their CDHP. 3 With hospitalization and emergency treatment being significant healthcare cost drivers, voluntary Accident and Disability Insurance programs are also great CDHP complements.
And employers have virtually nothing to lose by offering a comprehensive voluntary benefits program. Providing employee-paid supplemental coverage has little to no impact to their own budget and only helps to increase their employees’ comfort with and participation in the CDHP. Plus, higher participation in an HSA plan with an employer pre-tax contribution also has the added benefit of greater tax advantages for the group.
Opening the Door to Communication
Introducing a CDHP requires a significant communication effort to provide employees an understanding of the plans and their features. While group meetings, newsletter articles, calculators and other supporting materials are a good start, many employees are interested in knowing how CDHPs will impact their family’s finances, as evidenced above.
In addition to providing complementary coverage, voluntary benefits also offer employers a valuable opportunity to communicate their CDHP to their employees. For example, during individual enrollment meetings, licensed benefits advisors can educate employees about their voluntary benefits, as well as their CDHP, tailoring the information to each employee’s unique circumstances. In turn, employees gain a better understanding of the CDHP, its features and how it fits in with their own needs. Plus, they’ll better understand how the voluntary options provide more protection from potentially significant medical bills and which programs best fit their individual needs.
A comprehensive voluntary benefits program coupled with a focused, effective communication campaign can help employers meet their CDHP goals while giving their employees a higher level of financial security.
About the Author
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Steve Frankel is Director of Corporate Services for The Farmington Company, a national provider of benefit communications and voluntary benefits administration. Steve has over 20 years of experience in voluntary benefits and worksite communication and administration. Steve is a published author and has been an industry speaker on a variety of worksite benefit topics. For more information about The Farmington Company, please visit www.farmingtonco.com. Steve can be reached at sfrankel@farmingtonco.com or 610-660-7708.
