As more Americans struggle with medical costs and rising out-of-pocket expenses, more employers are starting to offer deductible-free plans, according to a new report.
Mercer’s “2023-2024 Inside Employees’ Minds” survey results jibe with other reports that some insurers’ fastest growing group health plans carry no deductibles.
Workers covered by these plans often receive more preventive care than those who are in plans with deductibles, and they often pay up to 50% less out of pocket, UnitedHealthcare’s chief operating office, Dirk McMahon, told investors recently. He added that these plans can help their employers reduce the total cost of care by an average of 11%.
Employers understand the increasing financial burden that health insurance and out-of-pocket costs are imposing on some of their employees. Medical debt is a growing problem in the U.S.
Employers are taking a number of different approaches:
- 15% offer free employee-only coverage in at least one medical plan.
- 18% use salary-based contributions, meaning that employees who earn less also pay less for their coverage, while their higher-wage colleagues pay more.
- 39% offer at least one health plan with no or low deductible. These are often known as copay plans.
- 6% make larger contributions to the health savings accounts of their lower-wage staff.
Employers have several types of health plans to choose from when designing their benefits packages. Because attracting and retaining talented staff is a high priority for many organizations, they often look for the best health plan available.
One option that appeals to many employers is the no-deductible health plan. These plans are attractive because they cover health care costs immediately, eliminating high out-of-pocket expenses for employees. But, no-deducible health plans have high premiums, which may make them difficult for some employers to afford.
No-deductible plan trade-offs
No-deductible plans may:
- Have higher premiums to account for the more generous benefit.
- Feature higher copays.
- Have limited network providers,
- Have fewer covered health services.
Depending on your benefits budget and your workforce demographics, no-deductible health plans may be your best option for staff who are high health care users. There are a few issues you should consider when mulling offering such plans. Here are the main pros and cons:
Pros
- These plans can reduce your workers’ out-of-pocket medical expenses.
- The plans are well-suited for people who incur high medical expenses, like those with chronic conditions, who make frequent doctor’s visits and/or who are taking expensive prescription medications or have many prescriptions they regularly refill.
- People who know how much they will pay upfront for care are more likely to access care when they need it, particularly for chronic conditions, and they are more likely to go to annual checkups.
- There is less likelihood of receiving surprise medical bills.
Cons
- These plans typically have higher monthly premiums.
- Copay outlays can add up for high users of medical services.
- Some plans may restrict eligible services and items, perhaps by not including certain drugs in their formularies or by offering a limited provider network.
The takeaway
While no-deductible plans will be attractive to many workers, they are not for everyone and their higher premium may dissuade many people from choosing them, even if you have a generous premium-sharing arrangement. If you agree to pay a set amount towards their insurance premium, these plans can still cost hundreds of dollars more a month for the employee.
People who do not use their health insurance much are not good candidates for these plans as well, since they may end up paying higher premiums for services they don’t use.