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Poorly Designed Employer Health Insurance Plans: A Threat to Employee Financial Wellness

As companies strive to attract and retain top talent, the spotlight has increasingly fallen on the benefits they offer, with health insurance playing a pivotal role. However, while the provision of health insurance is commendable, the design and execution of these plans can sometimes leave much to be desired. Inadequately designed health insurance plans can inadvertently compromise the very financial wellness they aim to protect. Let's explore how.


The Primary Culprit: High Premiums


An immediate red flag in poorly designed health plans is exorbitant premiums that are inequitably distributed across the employee population. Fixed contribution models favor higher-income workers. Regardless overspending on premiums is a direct threat to employee financial health, particularly for any lower wage earners (58% living paycheck-to-paycheck) this results in:


Strained Monthly Budgets: Elevated premiums consume an oversized chunk of an employee's income, constraining their monthly financial maneuverability and reducing or eliminating opportunities to save for broader life events or unexpected emergencies.


The Dilemma of Risk: Faced with high premiums, some choose to risk going without coverage, a gamble that can lead to catastrophic financial outcomes should they face health issues.


The majority of workers drop, or do not buy, coverage because of the high premium costs
The majority of workers drop, or do not buy, coverage because of the high premium costs

The misunderstood: Deductibles and Out-of-Pocket Expenses


After premiums, deductibles have the next biggest impact on employees. However, what is misunderstood is that for most healthy workers a higher deductible plan is often the best strategy since overall healthy workers spend less than $1,000 per year on healthcare out-of-pocket.

Overall healthy workers spend far less on healthcare out-of-pocket than expected so high deductibles are not the issue it is the high premiums consuming all of their financial resources.
Overall healthy workers spend far less on healthcare out-of-pocket than expected so high deductibles are not the issue it is the high premiums consuming all of their financial resources.

This brings us back to the first section above, the primary culprit again is the high premiums tied to a poorly designed plan because it is "one-size-fits-all" vs. personal choice. This results in the employee contributions consuming all of the financial resources leaving employees struggling with a means to pay for the deductible and out-of-pocket expenses.


Employee contributions to premiums is growing exponentially
Employee contributions to premiums is growing exponentially

If you give the employees control and allow them to reduce their premium contributions enabling them to acquire the coverage they require. In exchange you not only allow for personalized choice, but you free up money for them to then cover any expenses, if and when they occur.


Gaps in Employee-Valued Coverage


Employer group health plans are one-size-fits-all, but workers are individuals and each of their needs are unique and specific. Traditional plans are generally poorly designed and do not account for this issue. The lack of choices and lack of personalization create unforeseen financial pitfalls.


Inaccessibility and non-personalized options: Areas such as mental and emotional health, financial wellness programs, and/or preventative medicine programs might face limited coverage or be generic so employees do not utilize them.


Limited financial wherewithal: Employees bear the brunt of costs for these crucial services, so if employers do not make changes to plan design or provide specific financial allocations for these types of programs/services employees generally cannot afford them.


The Broader Implications on Financial Wellness


When health insurance inadequately addresses medical expenses, the ripple effect on an employee's financial landscape can be profound:


Debt Accumulation: Faced with insurmountable medical bills, many are forced into debt cycles, using credit cards or loans.


Siphoned Savings: Funds earmarked for retirement, housing, or children's education might be redirected to cover medical expenses.


Reduced Workplace Morale and Productivity: Persistent financial stress can manifest in reduced job performance, higher absenteeism, and overall decreased job satisfaction.


Rethinking Employee Benefits Design - Its not just Health Insurance


Employers need to consider how to foster a holistic employee benefits program that is designed around total life wellness, a to do so shift in perspective is required:


Employee-Centered Design: Looks for ways to leverage the milestone legislative changes that now enable employees to personalize choices and select health plans based on genuine employee needs that balance with their total financial picture.


Transparent Communication: Keeping employees informed about the nuances of their plans can equip them to navigate and utilize their benefits more effectively.


Periodic Re-evaluations: Regularly assessing your plan, evaluating new market models, and challenging your broker on design strategy can help your organization to stay aligned with the evolving needs of the workforce.


Conclusion

While offering health insurance is a commendable step toward enabling employee well-being, the design intricacies of these plans hold the key to genuine financial wellness. Employers stand to gain not only in the form of a healthier, happier workforce but also in the enhanced loyalty and productivity that inevitably follows. Recognizing and rectifying the pitfalls in health insurance design is not just a corporate responsibility—it's an investment in the company's future.


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