I heard a new one about options available to employees during open enrollment. In this case, it was a Millennial, employed by a high-tech, fast-growing company who was not eligible for a tax credit. His employer provided him with four health plan choices for this year: an HMO, a PPO, a High Deductible Health Plan (HDHP) that is Health Savings Account (HSA) qualified and (the new one) an increase in his gross compensation by $250 per month, to use in purchasing his own policy on the individual market.
The $250 figure was likely not arbitrary: $250 is the price of a basic plan in the individual market and also happened to be the premium amount for the other options, plus or minus a few dollars. And, the employer paid the full premium amount. From a pricing perspective, there was no real difference among the different plans, and on the surface, the cash sounded appealing.
This situation had some surprises for me. First, I thought immediate changes in benefits were going to be limited to smaller employers and employers operating with thin margins (independent of size). This example – offering cash to have the employee opt-out of the group plan – suggests that a broader universe of employers is experimenting with benefits, and not always to their benefit. Nor was this employer’s benefit strategy clear – incenting people to move to a less rich plan or off the group plan all together. The HDHP and cash option didn’t offer a financial advantage over the other two plans, even though they were less rich.
Second, it would help if they had a clear benefits strategy that reflects their corporate goals and makes financial sense. For example, we’re seeing some small employers – those with fewer than 50 employees – that had previously not offered group coverage now offering an increase in compensation paired with access to an individual plan marketplace. In this instance, an increase in compensation makes sense and it’s generous.
Finally, what struck me most was the missed opportunity to affect real change in this young and talented population. Millennials are practiced shoppers. If the employer had offered a marketplace with a range of products at different benefit levels and price points, they may well have found that employees would select less rich plan options with lower premiums, when given a choice. As it was, none of the plans particularly appealed to the Millennial and, truth be told, his ideal product would probably be an HDHP with some sort of account to take the edge off any deductibles (if needed).
Offering a cash option with no adjustment for the additional tax the employee would pay alongside plan options that are fully paid by the employer doesn’t make sense. And the Millennial in question did the math and did not take the cash.
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