Employees have focused more on their financial health in the wake of the COVID-19 pandemic. As a result, American workers are paying more attention to their benefits. A recent survey of Voya consumers shows that nearly 6 in 10 employees eligible for benefits (56%) spent more time reviewing their employer’s benefits during their last open enrollment period. (1)
This is good news and quite understandable: American workers want to protect the health of their families and choose employee benefit coverage at a price they can afford. Industry research shows healthcare costs are growing twice as fast as incomes (2), which means – now more than ever – it’s important not to overspend on healthcare benefits . However, employee bias towards certain health plans could influence their decision, which could lead to excessive health care spending and also hurt their future retirement savings.
Discover employee prejudices against HDHP
The most common health plans that employees have access to through their employers are Preferred Supplier Organizations (PPOs) and High Deductible Health Plans (HDHP). The PPO option usually has a lower deductible with higher premiums, while the HDHP option generally has higher deductibles with lower premiums and is usually paired with a Tax-Advantageous Health Savings Account (HSA) – a powerful vehicle for savings and spending. New Voya Study Finds American Workers Bias Against HDHP, which could be costly – both now and in the future. (3)
As part of the study, Voya designed an experience where participants were presented with two different plans and said to see them as the same in terms of quality of care, access to care, and all other characteristics of the patient. -beyond the cost. The only difference between the HDHP and PPO plans was the premiums and deductibles. Almost two-thirds of study participants (65%) chose PPO – despite the study being designed so that HDHP was always the optimal financial choice. (4)
As a result, depending on how they used their benefits, the average employee over-spent on their health care plan between $ 500 and $ 2,500 more throughout the year. (5) If employees take the money they overspend on health care and put it into a retirement account instead, like a 401 (k) or IRA where it has the potential to grow over time , the results could be powerful.
Why do employees choose the least optimal health plan?
Voya’s research revealed three main reasons:
- The name of the regime influenced membership. In Voya’s study, the name of the plan had a clear impact on employee choice. In fact, participants were almost twice as likely to choose a PPO over an HDHP that was marked with the words “high deductible” in its name. Yet when the names of the shots were unbranded, the gap was much smaller. Participants were almost as likely to choose an HDHP (47%) as a PPO (53%). (6)
- Many employees prefer to “set and forget” their coverage. Another key factor was the propensity of employees to simply replicate their plan choice from the previous year. About 89% of respondents said they simply chose the same health plan from the previous year, especially those currently enrolled in a PPO versus an HDHP (94% versus 80%, respectively). (7)
- A majority of employees want to avoid deductibles. Another big factor in the Voya study was aversion to franchises in general. Almost two-thirds of participants (63%) said they chose the plan with the lowest deductible. (8)
Which health plan is right for me?
It’s a common question, but the answer isn’t always that simple. In order to understand the financial impact of joining a plan that is not the right solution, Voya has partnered with SAVVI Financial to perform an analysis of actual healthcare spending in 2018 using a database. National Claims Information Data Center provided by the US Agency for Research and Quality of Health Care. With this claim data, we then compared it to the plan design information from the Kaiser Family Foundation to see how employees would have been financially successful if they had an “average” PPO or HDHP.
What we found is that – in a variety of age groups – HDHP would have been a better financial choice. Specifically, the analysis showed that the average individual would have saved the following amount by choosing an HDHP over a PPO plan (9):
- The 25-34 age group saved $ 566 per year
- The 35-44 age group saved $ 481 per year
- The 45 to 54 age group saved $ 395 per year
- The 55 to 64 age group saved $ 326 per year
It is important to note that these savings are only for people with single coverage – the analysis showed that the savings could have been even greater for family groups.
As part of the claims analysis, the study also found that nearly 60% of employees had less than $ 2,000 in claims, where savings from an HDHP plan are greatest – and about 16% had no complaints at all. (10) By selecting an HDHP plan with lower premiums and paired with a tax-efficient HSA, many employees could spend less on healthcare. That being said, everyone needs to weigh the risks and the benefits. You should take a close look at the health plan options offered by your employer and carefully consider your planned health expenses for the coming year. In some cases, a traditional PPO plan might be the best choice, while for others, HDHP might be more affordable.
Maximize your benefits in the workplace
More than ever, the high costs, combined with the complexity of choosing the right health plan, can contribute to difficult and stressful decisions. Yet rushing into these decisions without proper research or without consulting your employer can be costly.
Therefore, it makes sense to plan ahead. During open benefits enrollment, most employees make all of these critical decisions – including choosing their health plan – in under 17 minutes. (11) That’s less time the average streaming service user spends going through their options to decide what to watch. . It’s also not enough time to know the nuances of each type of plan, let alone calculate the premium differences, tax implications, and benefits of each choice.
And remember, you don’t have to fight to find out for yourself. Your HR team can answer questions, share additional information, and possibly give you access to decision support tools – like budget and healthcare expense calculators – to help you think holistically about your health needs. health and heritage. Just make sure you approach benefit planning with an open mind and don’t let any biases sway your decision – or it could literally cost you money.
1) Voya Financial survey conducted by Ipsos on the online omnibus platform Ipsos eNation among 1,005 adults aged 18 and over in the United States (including 294 currently working and entitled to social benefits). The research was conducted from December 17 to 18, 2020.
2) Based on 2018 data from the U.S. Agency for Research and Quality of Medical Care Medical Expenditure Survey.
3, 4, 5, 6, 7, 8) Based on an online survey conducted by Voya Financial, in partnership with Russell Research, between September 2 and 6, 2020, among 315 U.S. consumers currently enrolled in a health plan sponsored by the employer. 9) The costs of a PPO plan are calculated as premiums plus out-of-pocket expenses, less federal tax savings from contributing to an FSA to pay out-of-pocket expenses up to current contribution limits. The costs of an HDHP plan are calculated as the premiums, plus out-of-pocket expenses, minus the average employer’s contribution to the HSA, minus the federal tax savings from contributing to an HSA to pay direct costs up to current contribution limits to the extent that these amounts exceed the employer’s contribution. . Federal tax savings for the FSA and HSA are calculated as a federal marginal 22% and 7.65% of the FICA payroll tax. 10) Based on 2018 data from the U.S. Agency for Research and Quality of Medical Care Medical Expenditure Survey. Analysis by SAVVI Financial, LLC.
11) Businessolver “What Netflix Can Tell You About How Employees Buy Benefits”, 2018
SAVVI Financial LLC (“SAVVI”) is a registered investment adviser with the Securities and Exchange Commission. SEC registration does not imply a certain level of skill or training. Voya Financial, the parent company of Voya, and a number of other Voya Financial subsidiaries, have financial and business relationships with SAVVI, which prompts Voya to promote SAVVI’s products and services. You must access and read the SAVVI firm brochure, available at this link: https://www.savvifi.com/legal/form-adv. It contains general information on SAVVI’s activities, including conflicts of interest.
CEO, Healthcare Solutions, Voya Financial
Rob Grubka is Managing Director of Health Solutions for Voya Financial. In this capacity, he is responsible for the development and management of products, distribution and the end-to-end customer experience for Voya’s stop loss, group life, disability and supplementary health solutions, as well as the accounts of Voya. savings and health spending offered in the United States. companies and covering more than 6.6 million people in the workplace.