2017 Benefits Enrollment Data - HDHP vs PPO Salary Comparison

Consumer-Driven Health Care: Can Your Employees Afford It?

No one likes parting with their money. Especially in exchange for something that's not particularly pleasurable - like health care.

But it's a necessary sacrifice, and one that you, as an employer, try to mitigate as much as possible by sponsoring health insurance for your employees.

Of course, in most cases, your employees must still pay part of the premium for that insurance, and how much they pay depends on the type of insurance plan.

The two most prevalent options employees have today are the traditional PPO plan and the relatively new high-deductible health plan (HDHP). These two plan types distinguish themselves in the trade-off between the price of premiums and out-of-pocket costs. PPO subscribers pay more up front in premium for the benefit of paying less when they use health care services, while HDHP subscribers experience the inverse.

You might expect that employees who make less money would want to keep more of it in their paycheck, and thus prefer the lower fixed cost of the HDHP and accept the higher risk that comes with it. But you would be wrong.

In 2016, according to Benefitfocus' State of Employee Benefits research, employees who selected an HDHP made approximately $5,000 more on average in annual salary than those who selected a PPO.

That gap has narrowed somewhat for 2017, but the trend still holds up - especially for older employees. Among workers over the age of 36, HDHP subscribers are making up to 17 percent more than PPO subscribers.   

 

So what does this mean?

On one level, it appears that lower-wage workers are less willing to take on the high out-of-pocket risk of HDHPs than their higher-wage peers, who presumably have more room in their budget for unexpected medical costs. 

This has significant implications for the future, considering President Trump's stated interest in expanding health savings accounts (HSAs) as part of the new administration's health care reform policy. If employer-sponsored health care becomes increasingly reliant on HSAs (and thus HDHPs, which HSAs are meant to supplement), lower-income employees could get burned, since the data suggests they lack the funds to comfortably navigate the arrangement.

As health care becomes more consumer-driven, your employees look to you to provide additional resources to help them maintain their financial security. In the coming years, voluntary income protection benefits, digital health care services and financial wellness programs will be crucial to your ability to keep your workforce happy and healthy.

On another, more immediate level, the stark contrast in plan selection behavior between older workers of varying income levels suggests that these employees may have a firmer grasp on their coverage needs. Millennials, on the other hand, may need additional help understanding how to evaluate their health care options based on their financial situation. Make it a point to communicate with your youngest workers through the channels and styles that will resonate with them and drive meaningful engagement. Consumer-driven health care can be more affordable when consumers (your employees) understand the facts behind the plans.

Get more insight into employee benefit trends for the 2017 plan year. Click here to get your free copy of Benefitfocus' State of Employee Benefits 2017 report!