There are many factors to consider when it comes to selecting health insurance. One of the biggest factors is how high your out-of-pocket costs will be.
One option that appeals to many employers is the zero-deductible health plan because it means the insurance company will start accepting claims from the very beginning. There’s no need for employees first to meet a specific dollar amount.
However, premium costs and deductibles are inversely related, so a plan with no or low deductibles means higher premiums. And with the cost of group health insurance premiums growing higher and higher, fewer and fewer organizations can afford a zero-deductible plan.
To lessen the blow of these costly premium spikes, more employers are making the tough decision to switch to a higher deductible plan.
In this article, we’ll go over what you can do if your zero-deductible health plan becomes unaffordable, including ways you can supplement your group health insurance plan.
We’ll also define the following health plans and supplemental benefit options:
- Zero-deductible health plan
- Low-deductible health plan
- High-deductible health plan
- Group coverage health reimbursement arrangement
- Taxable stipends
What is a zero-deductible health plan?
A zero-deductible plan means that your employees don’t have to meet a minimum balance before your insurance company will contribute to their healthcare expenses.
These plans offer coverage that is payable immediately, at time of service, with a fixed out-of-pocket cost for coinsurance and copays. This means your employees know exactly what their cost will be before they receive healthcare.
Zero-deductible plans typically come with higher premiums, but they allow your employees to avoid some out-of-pocket expenses and may help them save money on overall medical expenses. This type of plan is particularly appealing to those who experience high medical expenses, make frequent visits to their doctor, or take several medications.
What to do if my zero-deductible health plan becomes unaffordable?
If your favorite zero-deductible health plan increases its premium, you do have a few options if you can’t, or don’t want to, pay the new rate.
Switching to a low-deductible health plan (LDHP) or a high-deductible health plan (HDHP) is likely your best bet. Simply speaking, high-deductible plans generally charge a lower premium than low-deductible plans. But it can be tough to determine which one suits your organization’s needs.
A good place for employers to start determining the best health plan is considering how much you can afford to pay for the monthly premium by assessing your budget. You should also consider the age and health of your workforce, as these are important factors when deciding coverage options.
To help you decide, let’s dive a little deeper into how the two plans work so you can understand precisely how LDHPs and HDHPs compare.
Low-deductible health plan (LDHP)
The major draw of an LDHP for employees is the potential to save on out-of-pocket medical costs. Employees may not have to pay much or anything after meeting their policy’s out-of-pocket annual maximum.
LDHPs also make healthcare costs more predictable since employees are more likely to meet their deductible and only pay the coinsurance and/or copays. Due to rising healthcare costs, budgeting and planning for healthcare expenses is key for many workers.
If you have a lot of employees with many dependents or have a tricky medical history because of a chronic or pre-existing condition, an LDHP may work best for them. However, if you have a generally healthier workforce, the next option, an HDHP, could be a more cost-effective solution for you.
Highlights of an LDHP:
- Higher monthly premium
- Helps manage out-of-pocket expenses
- Designed for those who need regular healthcare
High-deductible health plan (HDHP)
If you’re looking for even bigger savings on your premium, then you may prefer an HDHP. HDHPs are health insurance plans with larger deductibles for medical expenses but lower monthly premiums.
However, the trade-off for spending less on monthly premiums is that your employees are 100% responsible for out-of-pocket costs until the deductible is met—and that takes longer with an HDHP.
To help offset these costs, employers can contribute additional funds toward employees' healthcare costs with a health reimbursement arrangement (HRA), health savings account (HSA), as long as your HDHP is HSA-qualified, or a taxable health stipend.
You may find HDHPs appealing if you have a generally healthy workforce and isn’t anticipating costly medical expenses. Employees can save money on premiums if they know they’re only going to use the plan for preventive care rather than more serious procedures.
Highlights of an HDHP:
- Lower monthly premium
- Higher deductible must be met before the insurer begins to pay
- Designed to provide coverage for unexpected costs from medical treatments
Options to supplement your group health insurance plan
You may be worried that switching from a zero-deductible plan to a low or high deductible plan will negatively impact your workplace’s culture and morale. A common drawback of LDHPs and HDHPs is that, in an emergency, meeting the deductible could be a financial burden. Other people might skip doctors’ appointments or postpone necessary treatment to avoid spending money—risking their health along the way.
Luckily, the following options offer an excellent way for employers to supplement their group health insurance plan to control costs while enhancing the quality of their benefit.
Group coverage health reimbursement arrangement (GCHRA)
Your first option is a GCHRA, also known as an integrated HRA. A GCHRA is a health reimbursement arrangement between employer and employee designed to reimburse employees for eligible out-of-pocket costs that aren’t fully covered in their group health plan.
If you’re deciding to go with an LDHP or HDHP, the higher deductible can be difficult for your employees to manage. In these cases, a GCHRA can help bridge the gap between the group plan and the deductible, all while lowering premium costs for you.
Employers can use a GCHRA with either an LDHP or an HDHP, and their GCHRA can remain in place if they change insurance providers. The GCHRA is also customizable for employers since they can set an allowance cap. Once the allowances are set, employees can’t exceed them, making it a budget-friendly and flexible benefit option.
Another great option to supplement your group health insurance plan is a taxable health stipend. With a stipend, employees receive a fixed, taxable amount of money to pay for out-of-pocket costs that aren’t fully paid for by their group plan. The employer's contributions are typically added to the employees’ paycheck as wages and employees pay income taxes on the amount they receive.
Stipends also come with some unique advantages. Besides health insurance benefits, there are many ways an employer can offer a stipend as an incentive. Stipends can be used to cover a variety of items, including transportation, home office costs, wellness, communication or internet services, professional development training, and more.
Because of their flexibility, stipends are on the rise with employers looking to improve workplace culture and motivate their employees.
Understanding health insurance costs, including deductibles and out-of-pocket expenses, is crucial to managing your company’s overall health benefit. If your zero-deductible plan has become too costly, it’s essential to take the time to research and compare plans, including supplemental health benefit options.
While a GCHRA or taxable stipend may not be able to save you from having to switch to an LDHP or HDHP, they’re vital considerations if you’re looking to boost your overall group health insurance plan. If you’re on the hunt for a personalized benefit for your organization, PeopleKeep is here for you. Contact our team and we’ll make sure you find your perfect health benefit match.