ACA & The New Normal

Consumers In The Drivers Seat

Employees are struggling with understanding critical benefits

by Gene Lanzoni

Mr. Lanzoni is Assistant Vice President – Thought Leadership, Group & Worksite MarketingThe Guardian Life Insurance Company of America®. Visit

The vast majority of working Americans continue to believe their employee benefits are an integral part of their financial security. But three years into the implementation of the Affordable Care Act — and the ensuing push to provide consumer-driven and high deductible health plans (HDHP) — there are signs that these plans are leaving employees in unexpectedly vulnerable positions.

Guardian’s 4th Annual Workplace Benefits Study suggests that more American businesses are offering their employees HDHPs but not always providing education and support needed for employees to understand their options and to mitigate long-term health risks.

Advisors can play a significant role in bridging this gap by providing recommendations on health savings accounts (HSA) and by ensuring that complementary, supplemental health insurance products are available to fill the void.


The State of Workplace Benefits

More than half the employees surveyed in the Guardian study say that their benefits provide an important source of financial preparedness. Many believe that without them they would face financial hardship.

However, this year’s survey reflected that Americans’ perceived value of employee benefits has decreased. For example, two years ago, 70 percent of those surveyed reported high satisfaction with their overall benefits package. But in 2016, only 65 percent claimed high satisfaction. Fewer workers say they value their benefits more than they did five years ago, and only one in ten employees feels their benefit package will be more generous in the next few years.

Health Plans Are Likely Cause of Dropping Value

The perceived decline in the value of employee benefits may be a reaction to changes in the way these benefits are delivered given changes in health care insurance.

The continued implementation of the ACA, the introduction of healthcare exchanges, and efforts to share the cost through consumer-driven health plans and high deductible health plans have had a significant impact on employees’ out-of-pocket costs, and therefore the sense of value they’re receiving from their employer.

Perceptions about the value of employee benefits vary by sub-groups. Generation Xers (ages 36 to 50) and middle-income workers, those with household incomes between $50,000 and $100,000, place less value on their workplace benefits than in prior years. However, other groups, such as single parents, workers at large companies, those earning more than $100,000 annually and Hispanic and African-American workers, greatly depend on their employee benefits.

Medical Insurance Costs Are a Key Driver in Employee Benefit Perceptions

Study after study consistently shows that medical insurance is by far the most valued employee benefit among working Americans. Yet, workers are being asked to shoulder a larger share of the cost of health insurance than ever before. More employers are making plan design changes, increasing cost sharing, and moving toward HDHPs to help control benefit costs.

The effect of these changes is to increase out-of-pocket costs through higher premiums, co-payments and deductibles. Given that cost is the single largest driver in benefits satisfaction, these changes are causing financial and emotional stress for many households.

Higher Out-of-Pocket Costs Threaten Financial Security

The increase in medical deductibles is causing some employees with HDHPs to take risks with their health. A third have ignored medical advice or neglected their care, and one in five have actually skipped doctors’ appointments

More important than just impacting perceived value of benefits, however, the higher out-of-pocket costs are affecting health behaviors and the financial security of working Americans and their families.

Approximately 60 percent of workers in the Guardian survey reported medical deductibles greater than $1,200, with 25 percent having deductibles of at least $3,000. The $3,000 medical expense deductible creates significant hardship on many employees. Three in five workers don’t have the funds available to pay for such an expense and would need to resort to their credit card or work out an extended payment arrangement with the provider. Some would even be forced to tap into retirement savings and college education savings to pay for necessary medical care.

The increase in medical deductibles is causing some employees with HDHPs to take risks with their health. A third have ignored medical advice or neglected their care, and one in five have actually skipped doctors’ appointments. Others have delayed surgery or other recommended procedures.

Workers with HDHPs are less likely than those with more traditional plans to feel their medical insurance is enough to cover a major medical event. While employers using HDHPs may reduce their medical costs in the short term, it may be at the risk of catastrophic medical and disability claims in the long term if workers continue to neglect their own health care.

Tools for Combating the Out-of-Pocket Cost Burden

HDHPs and rising out-of-pocket medical costs are here to stay. So what can employers — and advisors — do to help ensure that employees take appropriate actions for their health without threatening their financial wellness?

For starters, advisors should encourage employers to offer an HSA with their HDHPs. The majority of employers don’t offer HSA plans to complement their HDHPs. While approximately 75 percent of large companies offer their employees HSAs, less than a third of small companies (fewer than 50 employees) do so. The lack of having an HSA contributes to the stress that employees are experiencing. Thus, there’s an opportunity for advisors to educate the marketplace about the need to offer an HSA.

For employers who already offer HSAs as part of an employee benefit package, advisors can encourage employee participation in HSA plans. By setting aside pretax dollars for medical care expenses that hit early in the year, employees will have funds to draw against, helping them withstand some of the financial stress associated with out-of-pocket medical expenses.

Many workers who have access to HSAs don’t understand them or how to best utilize them. They require assistance when planning HSAs and for selecting the appropriate options during open enrollment. There’s a clear opportunity for advisors to provide better education about HSAs to employers and employees.

Another way that advisors can help employers reduce the financial stress their workers may experience from unexpected medical costs is to offer supplemental health benefits. These products, offered by only a small minority of employers, can include hospital indemnity, critical illness or accident insurance. Employers who offer supplemental products as part of their employee benefits often do not adequately explain how these products can help employees offset out-of-pocket costs associated with HDHPs.

As more and more employers look for ways to share the cost of health insurance through consumer-driven health plans and HDHPs, it’s imperative that they offer employees the tools they need to withstand the impact of unexpected out-of-pocket medical costs and to ensure they’re taking the proper steps with regard to their personal health decisions. Not only will it help the health and financial wellness of their employees, but it will also ensure their employees place a high value on the employee benefits they receive. ◊