As employers look for ways to address their potential exposure to the excise tax, many have turned to high-deductible health plans as a way to create employees who are better “shoppers” for health care.
In some cases, the employer will help to mitigate the higher deductible by making a contribution to a health savings account (HSA), which is problematic in 2018 since HSA contributions are counted in the excise tax calculation, or by offering accident/critical care coverages. However, emerging experience is showing that in many cases, employees are underutilizing HSAs or are not electing the critical care coverage when they might benefit from it. Too many employees are one high-deductible event away from wiping out any savings that they have, and then some. On the other hand, some employees buy a higher level of medical coverage than they need, tying up money that might be better allocated to a 401(k) plan to build retirement savings.
We are now at a point where it is incumbent upon employers to engage their employees in health care and other benefit enrollment decisions in a way that actually results in employees’ electing the suite of benefits best aligned with their needs. Employees are overwhelmingly reporting that increases in their medical plan costs are obstructing their ability to save — not just for retirement, but for everything else. If employers are going to reduce excise tax exposure and continue to have productive, healthy employees, they need to find ways to better curate the benefits experience so that their employees are able to more easily elect the combination of programs that best support them, where they are.
Employers that look beyond the averages of their workforce and delve into segment-specific needs can achieve benefit utilization that is better aligned with each individual’s needs. It doesn’t need to be intrusive — you don’t have to mine all available data on the financial and/or health situation of each employee. It just means recognizing that different segments of the workforce need different types of support. And, if an employer is willing to be more directive in order to build engagement with the programs offered, employees will be able to make better choices. At the very least, some of the friction of decision making will be eliminated.