Employers Offering “100% health plans”

There’s nothing like a pandemic to get Americans focused on their healthcare – and how to pay for it. More people began taking advantage of Affordable Care Act Health Plans as a result. According to eHealth, only eight percent of the US population remained uninsured in 2022 – a new record low.

And yet, employer-sponsored plans are still the crème de la crème of health insurance. In recent years many have strengthened benefits and picked up more of the cost – also in response to the health concerns and competitive labor market brought on by the pandemic.

In fact, more employers have begun offering 100% health plans in an effort to attract talent and retain key workers. With a 100% health plan, an employer pays the entire premium for eligible workers, so that there is no deduction from their paychecks. According to the Kaiser Family Foundation 2021 Employer Health Benefits Survey, while only five percent of large companies offer a 100% health plan, 29 percent of eligible small businesses do. They are largely  represented by high-net entrepreneurs such as independent business consultants, financial advisors, attorneys, mobile app developers, etc.

In 2023, the average annual premium for individual plans was $8,435 and $23,968 for family coverage. Those numbers combine both employer and worker payments. The average annual premium payment for workers was:

• $1,401 (17%) for single coverage
• $6,575 (29%) for a family plan

The higher costs of medical care during the pandemic, and rising prices for medical equipment and prescription drugs, have increased healthcare expenses over the past several years. However, the annual rise in health insurance premiums has remained notably low, hovering between three and four percent.

This is largely because financial contracts between insurers and health systems, facilities, and providers are negotiated every few years, so they do not reflect those rising costs. We can expect this to change moving forward, affecting both group and individual markets. To wit, 2023 average premiums represented a seven percent increase over last year, and another 6.5 percent increase is projected for 2024.

100% Paid vs Shared Premiums

One hundred percent plans have been a small but growing trend in employer benefits. However, this trend could backfire in coming years as premiums are on an upward trajectory. While a 100 percent plan is the ultimate luxury for a worker, it can cause marked disappointment if cost-sharing is introduced later. For those who were enticed to the job by not having to pay health insurance premiums, it can feel like a bait-and-switch.

Furthermore, fully paid premiums are just one aspect of healthcare coverage. Some 100 percent plans may feature a deductible or co-insurance obligations. Depending on the amount of medical care needed and how much the plan covers, some workers may end up spending more out of pocket than expected.

On the other hand, premium-sharing employer plans can keep workers aware of healthcare costs, so they are more likely to shop wisely when they need care. There are other features employer health plans can utilize to cover a large portion of worker expenses but require some “skin in the game” via shared premiums.

Zero Percent Coinsurance

Many health plans feature a co-insurance strategy. For certain services (e.g., ER visit or hospital stay), the plan participant pays a percentage of the cost and the plan pays the rest. For example, a common split is 80%/20% (i.e., plan pays 80%; participant pays 20%). Another variation is for employers to offer a 100%/0% split, where insurance company pays the entire claim.

By requiring workers to pay a larger share of premiums, the cost of offering the plan is reduced. But by paying 100% of claims, the plan is on the hook only when medical benefits are used. This strategy is most likely to appeal to self-insured employers, organizations with a relatively healthy workforce, and offered in concert with a comprehensive wellness program and incentives for healthy lifestyles.

Stop-Loss Feature

The stop-loss feature is basically an annual maximum out-of-pocket limit. Once a worker reaches the spend limit, the health plan pays 100 percent of eligible expenses. This strategy is particularly appealing to workers with high healthcare needs, such as older workers, the disabled, and large families with children. Note that the typical stop-loss policy also features an 80%/20% co-insurance split to limit plan obligations.

High-Deductible Plans

One of the most prevalent cost-sharing strategies in recent years is the high-deductible health plan. It enables a plan to charge lower premiums, which appeals to workers, who pay out-of-pocket for non-essential healthcare services until they reach the plan deductible. After that, additional expenses are either paid 100% by the plan, or may be subject to a co-insurance split.

High-deductible plans also may offer the option to open a health savings account (HSA) or flexible spending account (FSA), in which workers or employers may contribute tax-advantaged income earmarked specifically to pay for healthcare expenses. Between low premiums and these types of savings plans, workers can better manage their expenses.

Among Fortune’s 2023 “100 Best Companies to Work For”, only 17 offered 100% health plans. This was up from just 10 the previous year and zero from the year before – so clearly there is a rising trend for this benefit. The question employers should consider is whether they can sustain such a generous strategy, because the fallout for subsequently charging premiums could be contentious among workers.

It is important to stay current with what today’s labor pool is seeking in terms of benefits – which is in itself a constantly moving target. For example, the Employee Benefit Research Institute’s 2022 Workplace Wellness Survey found that nearly 20 percent of workers would rather be paid less in return for more health benefits. But do not put too much stock in that statistic: the same study found that approximately the same number of workers would be happy to give up some health benefits in return for higher wages.

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