Why Employers Need Different Messaging for HDHP and PPO Members
Comprehending the complex world of health care is not for the faint of heart.
There’s acronyms galore, many different provider options and according to a 2019 published study, the majority of U.S. adults (51%) reported having inadequate health insurance literacy as measured by knowledge of basic insurance terms. Perhaps even more concerning is that close to one-half (48%) had low confidence in using their insurance to access health care.
Employers can empower — and engage — their employees by educating them about their health care benefits, especially when it comes to navigating the health care industry and finding the right cost-effective care. In a survey conducted by Kaiser Family Foundation, only 51% of consumers could correctly calculate how much they would have to pay for a hospital stay based on their deductible and copay. Only 16% could calculate how much they would have to pay for an out-of-network lab test. Three in 10 incorrectly believe that receiving care at an in-network hospital means that all the providers delivering services at that hospital are in network. Employers can fill this knowledge gap by providing tools and resources for employees to shop for the right health care option.
Take PPOs and HDHPs for example, the two most common type of plans offered (acronyms, see?). If you offer these options – and with open enrollment around the corner – are you confident that your team members understand the difference – and know how to make the choice that suits their individual health care needs?
The takeaway we’d like you to have after reading this post? Employers are a conduit to increasing health care literacy (and health care use, for better health outcomes) and messaging matters. Consider the following tips:
Start with a straightforward explanation of HDHPs and PPOs
Start by providing resources with straightforward explanations, and even illustrations, to aid in comprehension. This glossary of terms simply defines a HDHP (high deductible health plan) as a type of health insurance plan that offers lower monthly premiums in exchange for a higher deductible (the amount you pay out of pocket before insurance kicks in) shifting more cost onto the individual. A preferred provider organization (PPO) is a plan type with pre-approved doctors, hospitals, and other providers. This type of plan typically has higher premiums than a high deductible health plan, but also a lower deductible and it covers more services pre-deductible.
Beyond the definitions, the data from the 2019 benchmark KFF Employer Health Benefits Survey, also tells a story. PPOs continue to be the most common plan type, enrolling 44% of covered workers in 2019. Thirty percent of covered workers are enrolled in a high deductible plan with a savings option (HDHP/SO), 19% in an HMO (Health Maintenance Organization), 7% in a POS (Point of Service) plan, and 1% in a conventional (also known as an indemnity) plan.
Talk frankly about costs
While PPOs are the most common, HDHPs continue to gain in popularity. And cost may be an indicator as to why. Annual family premiums for employer-sponsored health insurance in the U.S. rose 5% to average $20,576 this year, according to the 2019 benchmark KFF Employer Health Benefits Survey. The average annual premiums for employer-sponsored health insurance in 2019 were $7,188 for single coverage and $20,576 for family coverage. The average single premium increased 4% and the average family premium increased 5% over the past year. Workers’ wages increased 3.4% and inflation increased 2%.
Further, the average premium for family coverage has increased 22% over the last five years and 54% over the last ten years, significantly more than either workers’ wages or inflation. However, and importantly, KFF reports that the average premiums for covered workers in high deductible health plans with a savings option (HDHP/SOs) are considerably lower than the overall average for all plan types for both single and family coverage, at $6,412 and $18,980, respectively.
While both PPOs and HDHPs have a deductible, how they affect your team members differently, and the cost differential may be very important to them. How it works for a PPO: If your plan's deductible is $1,500, your team member will pay 100 percent of eligible health care expenses until the bills total $1,500. After that, they share the cost with your plan by paying coinsurance. For a HDHP: there is no coinsurance after a deductible is met, the health care services are paid by the plan.
Illustrate the benefits of HSAs as a way to pay for care now
Also, HDHPs offer a savings option, known as Health Savings Accounts (HSAs), which allows individuals to save money pretax for qualified health care expenses, such as doctor visits, prescription drugs and dental and vision care, now or in the future. The money in the account is owned by the individual and stays with them even if they change jobs or health plans or retire.
Although often marketed as a pretax investment vehicle, it’s notable that in a Further study a little less than a third of respondents reported tax benefits as a key factor in their decision to purchase a HSA. Knowing this, employers may want to focus on the benefit of leveraging a HSA for future health care needs instead. Here’s why: as health care costs continue to rise, employees are forced to find new ways to pay. In fact, when employees were asked if they primarily use their HSA to pay for health care now or if they primarily use it as an investment tool, 65% report that they are using their HSAs for spending, with 23% stating they use the account for equal parts saving and spending. Yet employers have a much different perception. Over 66% of employers associate HSAs with savings and as a long-term investment tool, leaving a gap in how employees are actually perceiving and leveraging these powerful accounts.
Our advice: use powerful scenarios to help your team members understand the benefits of HSAs in terms of dollars and sense, as our survey findings show that employees want to be active participants in their health care. In fact, when asked why they selected an HDHP paired with an HSA, over half said they want to put away money not as an investment but to have funds available to pay for health care expenses that might arise now or in the near term.
There is a window of opportunity for employers to take action before the 2021 open enrollment period to message differently to HDHP-selecting employees than PPO-selecting employees. Using this time now to update enrollment messaging to educate and empower employees to fully leverage the benefits of HDHP with an HSA to help pay for care today, will pay dividends to employer and employees alike.
