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How Health Insurance and Plan Choices Are Key for Retention, Controlling Costs

June 6, 2022

Employee benefits have become a key part of the hiring and retention of employees in today’s hiring market. There is increased stress on compensation as demand for higher salaries and pay rates come from potential hires and the existing workforce.

An employer’s willingness to put the time and effort into their employee’s benefits outside of wages may make the difference. At a high level, total compensation and employee benefits includes, but is not limited to, health insurance, wellness programs, life insurance and retirement or defined benefit plans.

Health Insurance

Health insurance can provide employees compensation in the form of reducing out of pocket exposure when it comes to their healthcare needs and access to providers.

Health insurance typically accounts for one of the largest Profit & Loss (P&L) expenses for an employer outside of payroll. Typically, there is a cost share for this expense (the insurance premium) between the employees and the employer. Benchmark data from the Kaiser Family Foundation (KFF) stated that in 2020, the average employer share of this expense fell between 60-70 percent, leaving the employees with 30-40 percent of the premium responsibility deducted out of their payroll. Companies could argue that they are essentially compensating their employees by covering a larger percentage of their healthcare premium on top of what they pay them through payroll.

However, these figures have shifted somewhat throughout the pandemic. As companies have found it more difficult to create higher payroll, some have decided to take on more of the premium burden, leaving employees with more payroll to spend on other things such as living expenses. However, as we have come out on the other side of the pandemic (somewhat), health insurance premiums have gone up significantly – raising more than seven percent on average. From 2021-2022, renewal increases reached up to 40 percent. This has created cost share shift in the opposite direction, resulting in employers deducting more out of payroll to accommodate the increases.

These renewal increases are driven by a couple primary factors. The first is that during the pandemic, many “non-essential” procedures (or non-emergency procedures) were delayed, as providers did not have the capacity to perform such procedures during the height of COVID-19. The result was that claims for companies went down substantially, therefore, smaller premium increases were given by health insurance underwriters during the 2021 renewals. However, going into 2022, underwriters took on a much more conservative outlook – knowing that claims would rebound and increase as many delayed procedures would occur during this year, resulting in higher claims projections and higher renewals.

PPO Vs. HSA Plans – Your Choices May Impact Employee Retention

The receipt of such unfavorable increases has driven companies to reconsider the plans they provide to their employees. Preferred Provider Organizations (PPO) plans offer broader network, copays for doctor’s visits (primary care), as well as specialists covered under the network and prescriptions. Health Savings Account (HSA) plans are high deductible health plans (HDHP: exceeding $1,400 for individual deductible and $2,800 in family deductible) and require the user to cover the deductible expense out of pocket before the plan contributes to the healthcare expenses at a coinsurance. PPO plans typically charge higher premiums but require less out of pocket expenses because of their copay structure. HSA plans typically charge less premium but require more of a up front out of pocket expense to reach the deductible limit. Additionally, they offer the user a pre-tax way to put aside money for qualified medical expenses, defined by the plan.

When faced with such material increases, companies look to transition to plans with cheaper premiums – i.e. higher deductibles, more narrow (smaller) networks (i.e. HMO, EPO, etc.) – and migrate their employees to plans that may create less expense for the company. However, employers often overlook the headache that such a change may cause for their employees. For instance, if you are an employee used to paying a $30 copay for a doctor’s visit under a PPO plan, but now must foot the entirety of the doctor’s visit bill until you reach your deductible under an HSA plan – that may cause some stress. Further, if an employer moves to a narrower network to reduce premium, which causes a major local hospital system to be considered out-of-network and not covered by the plan, the HR director will be facing some tough conversations with employees.

These changes, which seem like the right thing to do on the surface, cause more employees to seek other places of employment. Even more so than higher wages. Therefore, before making changes in your benefits offerings – carefully analyze your options and potential outcomes. The use of an experienced insurance broker will help do just that.

Many HR professionals have experience with their own population of employees, payroll and benefits at some level. However, the vast differences in health insurance carriers, networks, plans, and benchmarks requires the use of an objective third-party with extensive employee benefits knowledge.

For 129-years, Oswald has done just that, provided expertise in the areas of health insurance/employee benefits, commercial P&C insurance, life insurance and retirement plans to our clients. We work with our clients to make informed decisions that can be tough at times – but are backed by data, analysis and market information. We serve thousands of clients nationwide and are among the largest privately held, employee-owned and independent brokerages in the country.

By partnering with a broker such as Oswald, not only is the company getting the advice that they need to make decisions at the leadership level, employees are getting the assistance they need from a service team to enroll in the right plan for them.

For more information, please contact me directly:

Brian Stovsky
Business Development Leader



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