Can Your Employees Afford Your HDHP?

November 26, 2015

Will Rumsey

Many companies are moving to high deductible health plans (HDHPs) out of necessity. While premiums increase by double digits every year –– even though inflation is nearly stagnant in the U.S. –– businesses simply can’t afford to take on more premium costs for each of their employees.

When you work in HR for one of these companies, offering an HDHP seems like a logical solution for combatting surging healthcare costs. Lower premiums allow you to contribute the same amount for each employee as you were before, so you’re still able to provide comprehensive health plans to your staff.

But with this “good news” comes some bad news for many of those on your payroll. It’s all in the name: high deductible health plans. For employees who need medical treatment often throughout the year, they will need to meet this deductible before their insurance covers anything.

Can your employees afford the switch?

It Depends On Their Healthcare Needs

As of 2014, the average employer contribution to an employee’s health plan is $16,000 per year. This is much more than the lion’s share of healthcare costs, which is a generous thing for your company to do. But using an HDHP gives you the chance to keep your budget in check as this number increases every year.

With a high-deductible plan, you’re still paying half or more of each employee’s healthcare costs: it’s just that now, their deductible is raised to $5,000 instead of the $500 it may be on a low-deductible one.

That’s the bad news. You’ve been forced to shift that cost to your workers, making them pay out-of-pocket until they reach that high deductible.

Some of your employees have very few healthcare costs in the year; they rarely get colds, fight through the occasional flu, and almost never seem to use all of their sick days. This means they may enjoy your HDHP, because they almost never pay co-pays anyway, and they can pocket some of the difference in a health savings plan.

At the other end of the spectrum, employees who face catastrophic medical expenses will also be thankful for an HDHP because they only pay up to $5,000 per year for any and all healthcare costs a major accident or trauma may incur. For someone who faces a long illness, such as cancer treatments or multiple surgeries due to a car accident, that’s a small price to pay for so much treatment.

But for the middle-of-the-road, average families who will meet that deductible in-full (just to cover a year’s worth of average medical expenses), an HDHP can be financially strapping. Now, around 1/6th of their post-tax annual household income will go toward these deductibles –– which they just can’t afford.

But What Choice Do You Have?

Choosing this type of plan is a necessary result of rising healthcare industry costs. When balancing a benefits budget, you may feel like you’re stuck between a rock and a hard place: offer bare-bones coverage to all employees at a high cost to the company, or offer an HDHP that still fits into the budget.

While it might seem impossible at first, you can mitigate this cost-shift by providing a “way out” for employees who will take on high out-of-pocket costs this year. Telemedicine gives those people an alternative to an expensive doctor’s office, urgent care, or emergency room visit. When you add employees to your telemedicine plan –– which costs $5 a month or $60 a year per employee –– you save them money.

Now, these middle-of-the-road employees may actually be able to afford your HDHP.

No matter why your company chose to move to a high-deductible health plan, you’ll have some unhappy employees who will pay the price of up-front costs on their own. To provide these employees with the best possible medical treatment (without going under as a business), a telemedicine benefit can be a perfect compromise.

You’ll provide for your employees and their families, keep your company healthcare costs down, and make sure excellent healthcare is never out-of-reach. That’s a plan everyone can get behind.

Originally published Nov 26, 2015 3:00:00 PM.