The end of the calendar year is hectic for everyone due to the hustle and bustle of the holiday season, but HR professionals and benefits leaders must contend with an additional wrinkle: open enrollment.
This annual period when employees select their health coverage for the year ahead can be tricky during the best of times. This year, historically high inflation rates have experts warning of prohibitive cost increases. According to a benefits survey by Mercer, health plan costs per employee are expected to rise 5.4% in 2023 — nearly double the increase we saw in 2022.
In this increasingly complex business environment, employee benefits management becomes a balancing act between affordability and attractiveness. Indeed, Mercer found that 84% of employers said it was important to improve benefits for employee attraction and retention; another 68% said the same about increasing the affordability of healthcare.
To strike this balance, benefits leaders must understand what their employees need out of a benefits package and then educate them on how to maximize their benefits to eliminate gaps and enhance financial wellness.
Meeting the Needs of Employees
When it comes to finding the right benefits package for their team, employers must consider the unique needs of their employees.
For a company with mostly young and relatively healthy individuals, it makes a lot of sense to offer a high-deductible health plan (HDHP) that keeps monthly premiums under control. Employees might be on the hook for higher out-of-pocket expenses if they need medical attention, but the monthly savings in premiums can be worth the gamble.
In contrast, an HDHP could cause an employee with multiple dependents or a pre-existing condition to become overwhelmed with medical bills. In these situations, employees would be better off enrolling in a traditional plan such as a PPO, which has higher monthly premiums but lower deductibles when receiving care.
HR leaders must help employees weigh these options based on their individual needs. Regardless of their chosen health plan, there can still be gaps in coverage that exacerbate health disparities among team members. For instance, HDHP enrollees who lack expendable income might end up delaying or skipping care because they cannot afford the associated costs.
Situations like this are why it’s so important to offer accompanying financial wellness benefits. These can include patient-financing tools like Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), and Flexible Spending Accounts (FSAs). Employees can use these tools — or a combination of them — to cover any healthcare expenses they might incur.
Embracing a Healthier Way to Pay
HSAs, HRAs, and FSAs might seem like a jumble of acronyms, but there are key differences between these payment methods. For example, only employees enrolled in qualifying HDHPs can contribute to HSAs, while anyone enrolled in an employer-sponsored plan can participate in an FSA. Employees decide how much they want to contribute to their HSA or FSA, while employers decide how much to contribute to an HRA.
In any case, the right financial wellness benefit varies by employee needs. Another patient-financing tool gaining traction among employers is a Health Payment Account, or HPA. What’s an HPA? Just like HSAs, FSAs, and HRAs, employees can use Health Payment Accounts to cover a variety of out-of-pocket health expenses. Unlike those tools, however, employees using an HPA don’t have to dip into their tax-advantaged savings to cover care.
Instead, HPA participants use an interest-free line of credit to pay their healthcare expenses. They can then repay those charges over time, typically through automated payroll deductions or bank account withdrawals. Either way, those payments are made without any added fees or interest.
Employees can even use HPAs in conjunction with their HSAs or FSAs to build wealth over time. When people don’t have to withdraw money from their HSAs to cover care costs, those funds can continue growing through investments.
Open enrollment is the busiest time of year for HR leaders, who must shepherd their employees through this annual season of change. The best way to do that is by understanding employee needs and then educating team members on the benefits that best address those problems.
Need some help with the education side of things? Download our health insurance guide, which covers everything from copays and deductibles to HDHPs and more.
