In recent years, high-deductible health plans (HDHPs) emerged as a prevalent choice for employers seeking to manage healthcare costs. It became an attractive option for both the organization and its employees — lower premiums in exchange for higher out-of-pocket costs. However, many employees discovered that this option did not deliver the expected benefits. Instead, they found that the higher deductible not only caused them to rack up medical debt but also start making healthcare-related decisions based on finances rather than medical needs.

 As a result, there has been a small, but noticeable decline in HDHP enrollment. According to a recent report from ValuePenguin, while HDHP enrollment soared between 2013 and 2021, it dropped by 2% in 2022. The findings showed that “53.6% of private-sector employees were enrolled in HDHPs in 2022, down from 55.7% in 2021 — the highest on record.”

In reviewing the results, Employee Benefit News (EBN) interviewed Divya Sangameshwar, an insurance expert at ValuePenguin, who stressed that “HDHPs can ultimately be a harmful financial decision for both employers and employees.” 

The problems employees experience with HDHPs, ranging from financial strain and lack of immediate coverage to the complex, confusing deductibles, co-pays, and out-of-pocket maximums, can be overwhelming, leading to frustration and dissatisfaction with the plan. For example, according to research by Arizent, employees with HDHPs are 30% less confident they will know what their healthcare costs will be, at least most of the time, compared to employees with preferred provider organization plans, or PPOs, which usually have lower deductibles. 

Today, employees are seeking more comprehensive and less financially burdensome alternatives. At the same time, employers are also recognizing that HDHPs may not be the best fit for their workforce, particularly in the current economic climate where financial security is a top concern for many. Additionally, we have an aging population that needs more care as time go on.

To successfully transition away from HDHPs, employers should:

Conduct Employee Surveys and Assess Needs: Gather feedback from employees to understand their healthcare needs and preferences. This information can guide the selection of alternative plans that better align with employee expectations and financial capabilities.

Educate Employees on Plan Options: Provide clear and comprehensive information about the available health plan options, including the benefits and potential costs of each. Education is crucial to helping employees make informed decisions about their healthcare.

Evaluate the Total Cost of Ownership: Consider not only the premiums but also the out-of-pocket costs, coverage benefits, and long-term health outcomes associated with different plans. A holistic approach to evaluating healthcare options can lead to better choices for both employees and employers.

Leverage Technology and Data Analytics: Utilize technology and data analytics to monitor healthcare utilization, identify trends, and make data-driven decisions about plan offerings. This can help in designing plans that are both cost-effective and responsive to employee needs.

Conclusion

The declining enrollment in high-deductible health plans highlights a critical need for employers to reassess their healthcare offerings. By understanding the frustrations employees face with HDHPs and exploring alternative options, business leaders can design health plans that not only manage costs but also enhance employee satisfaction and well-being. Embracing a strategic and employee-centric approach to healthcare benefits is essential for fostering a healthy, productive, and loyal workforce.

Your insurance broker doesn’t have the training or the motivation to align your benefit plans with your long-term business objectives or consider how the healthcare options you offer your employees impact your productivity and retention. More importantly, healthcare has become too complicated and expensive to just accept increasing costs and declining care as a part of doing business. Talking to a healthcare consultant who has the knowledge and desire to build better solutions that benefit everyone can make all the difference. Schedule an appointment, it's time.

To get insights on how to start the conversation with your broker, download The Top Power Questions to Ask Your Broker & Insurance Company.