The Role of Healthcare Literacy in Shaping Health Plan Enrollment Trends
Quick look: For the second year in a row, data reveals a decline in employers offering high-deductible health plans (HDHPs). In a post-pandemic world, people are seeking ways to balance essential healthcare coverage with budgeting for the rising costs of daily expenses. While the lower premiums associated with HDHPs are favorable for some, it may not be the right solution for others, which is why healthcare literacy has become increasingly important.
In 2023, employees enrolled in HDHPs had decreased 53.6% from the year prior, with another 33% tumble as of 2024. Experts say, during the years of the pandemic, employees were focused on preparing for unexpected medical emergencies, with a need to access both primary and specialty care through their in-network providers.
For many, HDHPs continue to be a cost-effective choice, especially among those in good health who mostly require annual physicals and preventative screenings.
So, why the decline?
Economic shifts are inevitably going to affect healthcare demands and the accessibility of health plans available. While HDHPs continue to be a practical option for many, health plans and medical needs change, causing employees to explore other options.
The question is how can brokers guide their clients toward a feasible solution which works in everyone’s best interest? Here is where a professional employer organization (PEO) partner can bridge the healthcare literacy gap for small- and medium-sized businesses (SMBs) so they can get the information they need to feel confident in shaping their health plans moving forward.
Let’s explore this latest trend in HDHP enrollment, including common misconceptions about this type of plan, and how increased healthcare literacy can provide sustainable solutions for broker clients even as the industry continues to shift.
Why HDHP enrollment is on the decline
Extreme industry shifts are inevitably going to affect healthcare demands and the interest in health plans available. HDHPs continue to be a practical option for many employees but for others, exploring other options have become the trend. A few of the drawbacks which may have contributed to the decline include:
Higher out-of-pocket costs
While HDHPs offer lower monthly premiums, there is higher out-of-pocket spending before insurance coverage begins. Those facing financial burdens and/or chronic health conditions may find this option too steep for their budget, particularly as the cost of living increases.
HSA contributions are capped
A health savings account (HSA) allows employees to save pre-taxed dollars for qualified medical expenses if enrolled in a HDHP. However, HSA contribution amounts are capped, and in 2024, the maximum amount equaled $4,150 for individuals and $8,300 for families, which may not sufficiently cover employees and their dependents who have higher medical expenses.
Need for healthcare literacy
Many employees may be aware of the option of a HDHP but unsure of the full scope of benefits or have misconceptions about what it offers, focusing only on the higher out-of-pocket costs when making a decision. This provides an opportunity for brokers to work with a PEO partner to provide explanations about options available.
Common misconceptions about HDHPs
Each person requires different types of coverage, which often changes over the course of their employment. Therefore, comparing valuing and dispelling myths help employers and employees make a more informed choice when choosing a health plan.
Myth #1: HSA money stays with the company
HSAs allow employees to set aside pre-taxed dollars for qualified medical expenses and use it wherever they work. While flexible spending accounts (FSAs) can mean a loss in savings if the money is not spent, an employee enrolled in a HSA keeps their funds year after year, regardless of whether they switch employers or do not use their full amount.
Myth #2: HDHPs are more expensive than traditional plans
Because HSAs can only be linked to HDHPs, assuming a higher deductible may seem more costly. However, once the deductible is met, HDHPs often provide better coverage than other health plans and provide the pre-tax contributions of the HSA, which may present a greater overall value.
Myth #3: HDHPs don’t make sense for someone who has regular doctor visits
While in some cases higher out-of-pocket costs may not be the most feasible for those with chronic health conditions or for families with young children, it’s important to account for the cost-effectiveness from lower monthly premiums, HSA tax savings, and employer contributions. When compared side by side, the expense of a higher out-of-pocket cost may only have a slight difference when compared to other plans.
Making healthcare literacy part of the plan
Costs are a common reason for employers and employees wanting to switch their health plans. However, research shows 85% of employees are confused about their benefits, which often leads to a decline in benefit enrollment and utilization.
A PEO’s HR experts are available to answer questions about healthcare plans as well as provide one-to-one support to boost engagement among employees.
Fulfilling this need for healthcare literacy also results in:
Optimization of preventative care
Without a full understanding of the benefits available, employees often forgo critical preventative care, such as routine screenings and vaccinations, which could limit bigger health problems and more costly medical visits in the future. Healthcare literacy allows employees to maximize their benefit use and greater appreciate the value of what their health plan provides.
Increased understanding of treatment plans and medication
The average person likely isn’t well-equipped to understand the technical jargon regarding their medical prognosis or treatment. Plain language explanations and simplified cost breakdowns help employees evaluate coverage and make informed decisions about their health plans.
Improved health outcomes
Knowing how to manage and afford regular healthcare can prevent larger health costs associated with prolonged hospital stays and development of chronic conditions. It also encourages a more open discussion about medical concerns with providers to initiate preventative treatment plans.
Maximizing value for SMB clients through a PEO partnership
Brokers who partner with a PEO give their clients access to premium benefits and HR expertise to manage healthcare costs effectively while adapting to changing employee preferences.
With a PEO like ExtensisHR, SMB employers receive a dedicated SHRM-certified HR manager, HR consultations, employee relations guidance and support, and more. This expert assistance combined with flexible HR solutions help guide broker clients to the best options for their business while mitigating their stress and keeping them positioned for sustainable business growth.
Learn more about how our comprehensive PEO services can benefit you and your clients. Contact ExtensisHR today.
