3 ways to overcome the high hurdles posed by high deductibles
During open enrollment, most employees probably don’t think beyond the next 12 months to decide which health plan to choose. In fact, some employees don’t even think clearly about the current 12 months. A recent voya paper and SAAVI Financial notes that confusion and inertia drive employees to choose suboptimal health plans, which reduces their ability to save effectively for retirement.
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Using data from the U.S. Agency for Healthcare and Quality Research’s Medical Expenditure Survey, SAVVI found that in 2018, nearly 60% of employees had claims less than $ 2,000, which makes the premium savings of a high deductible health plan more compelling than a preferred provider organization. .
In all age groups, the majority of employees would have saved money by choosing an HDHP over a PPO. Here’s how the annual savings break down:
- Almost 70% of older workers, between 55 and 64, would have spent less with an HDHP, saving an average of $ 326.
- Just under 45 to 54 would have saved money, at 67%. They reportedly saved more than their older counterparts, with an average savings of $ 395.
- Gen X cuspers saved a lot more, averaging $ 481 for 78% of the population aged 35-44.
- The savings are the most important for young workers. Voya found that 84% of people aged 25 to 34 would have spent less with an HDHP, with average savings reaching $ 566.
“Over time, if this amount were to be saved for retirement, it could have a significant impact,” Voya noted. For example, a 40-year-old who invests their premium savings in a pre-tax account can save almost $ 28,000 with this additional contribution.
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Voya recommended three steps to help employees overcome barriers to choosing the most optimal plan for them and their families:
- Avoid naming the plan “high deductible”. Voya found that employees were almost twice as likely to choose a PPO over another plan that had a “high deductible” in the name. A 2020 study by Voya asked employees to choose between identical plans with different premiums and deductibles. They have always chosen the suboptimal plan.
- Encourage employees to consider changing needs each year. Regardless of what type of plan they choose, most employees stick with the same they had last year, including 94% of those with a PPO and 80% of those with HDHP. . Decision support tools can help them imagine how their decision will affect them later.
- Illustrate the long-term impact of current savings. It’s not enough to show employees how much they could save if they don’t put them to good use. Of course, one of the significant advantages of an HDHP is the ability to use an HSA to save and invest. Showing participants how investing the difference in premiums between an HDHP and a PPO can impact other long-term goals can also help the 63% of participants who simply choose the plan with the lowest deductible without thinking about it. how it affects their goals.
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