Lower Income Employees Are Waiving Health Benefits but Brokers Share an Alternative Solution

Quick look: The cost of healthcare coverage is becoming unaffordable for many lower paid employees. Yet, healthcare still ranks high in what workers want. Though inflation is inevitable, brokers and PEOs are working together to give SMBs better health benefit options.

It wasn’t long ago when full-time employment automatically included the assumption of health insurance benefits. However, a 2023 Employee Benefits and Enrollment Trends Report shows lower paid workers are declining employer-sponsored healthcare due to rising costs. 45% of surveyed employees said they declined coverage because they deemed it unaffordable.

Though, in 2023, the employee medical enrollment rate is 73%, it’s declining every year for employees who earn less than $60,000, and the numbers go down from there. Employees with salaries less than $40,000 have the lowest health plan enrollment rate (56%). Meanwhile, employees earning more than $100,000 have the highest (84%).

Lower incomes in combination with the escalating expense of healthcare coverage forces many employees to pick and choose health plan participation. Being unable to afford healthcare – even as an employee benefit – detracts from the allure of a company’s compensation package. Therefore, brokers are partnering with professional employer organizations (PEOs) to make their clients’ benefits more attractive and affordable.

Inflation affects everything, even healthcare

Employees still want healthcare coverage but feel their options are limited. Inflation has risen costs in every aspect of life, health plans are no exception. The 2023 report reflects an average increase of 3% for single coverage and 4.6% for family coverage across the board.

In terms of dollars, the average annual medical cost to employers increased from $3,684 in 2022 to $3,757 in 2023 for single coverage. And it increased for employees to $1,573, from $1,527. Research also found health plan enrollment was lowest (39%) for those in the 21 to 25 age group, and 57% of employees who earn less than $100,000 don’t participate in the employer-provided health savings account.

Business leaders understand the importance of providing healthcare benefits to their employees. Yet, they, too, are faced with the challenges of inflation as they focus on company growth. Therefore, they welcome broker guidance to help strategize next steps.

How brokers can help SMBs secure affordable health plans

Finding a balance between what small- and medium-sized businesses (SMBs) can afford and are required to provide by law, and what will attract potential employees can be tricky. However, brokers can make the decision easier by clearly laying out options based on employees’ specific needs. When comparing plans, it’s best to consider the following:

Opt for low premiums

Many SMBs prefer high-deductible health plans (HDHPs) due to the lower monthly premiums compared to HMO and PPO health plans. Though there are higher deductibles, employees have access to a large number of in-network providers, as well as the option of out-of-network care (at a higher rate).

Participation in a HDHP also makes employees eligible to enroll in a health savings account (HSA). HSA contributions are not taxed, resulting in savings for both employers and employees. Though not mandatory as part of a HDHP plan, a HSA is valuable for those who wish to set aside tax-free money for healthcare expenses.

Apply for the Small Business Health Care Tax Credit

Qualification for the Small Business Health Care Tax Credit could save SMB employers up to 50% of costs paid toward employee premiums. This applies to businesses with fewer than 25 full-time employees with an average salary of $56,000 or less.

SMBs must also pay at least 50% of employees’ premium costs and offer a Small Business Health Options Program (SHOP) plan. Brokers can work with clients to explore these and other potential tax-saving options as a way to reduce costs.

Improve employee communication

Many times employees bypass benefits because they aren’t aware of what the plan includes. At the very least, employees want to know what medical expenses are covered and what isn’t, and how much they’ll have to pay monthly to receive healthcare coverage.

Their assumption may be they can’t afford it, or it won’t cover their medical needs, but the opposite may be true. Ongoing education and clear communication regarding benefit plans can clear up misinformation.

Managing benefit administration and healthcare compliance takes a full-time effort. Employees range in income levels and medical needs. By extending services to include a PEO solution, brokers give their clients a connection to experienced HR professionals who can provide better health plan options at more affordable rates.

Connecting SMB clients with a PEO

There are several advantages to extending your network and offering a PEO solution to your clients. These include:

Cost-effective benefits

A PEO offers SMBs access to premium benefits at lower rates compared to what businesses could obtain on their own from insurance companies. In addition to lower costs, the value of benefits increases to include premium services, such as workers’ compensation insurance, wellness programs, and 401(k) retirement plans.

Reduced administrative burden

Managing health insurance and employee benefits is a complex undertaking, and SMB leaders often struggle with tackling these responsibilities on their own. Though they understand the importance of prioritizing competitive benefits, handling administrative tasks takes away from focusing on business growth. By delegating benefits and HR responsibilities to a PEO, they alleviate this burden.

Personalized attention to employee needs

Often, a decline in employer-sponsored health plan participation is also a reflection of the benefits themselves. Working with a PEO like ExtensisHR means SMBs are receiving personalized attention to cater to the needs of their respective workforce. Changing benefits without the input of those who will use them does not support the investment or employee satisfaction.

The bottom line is SMBs need affordable benefit solutions and working with a PEO is a way to give them that. In addition to what typical PEOs provide, ExtensisHR maintains over 25 years of industry experience and is in the 1% of credentialing, which includes ESAC Accreditation, IRS-Certified PEO, and Certification Institution (CI) for Workers’ Compensation and Risk Management.

Brokers can feel confident in this type of partnership as they support the continuing success of their clients. Want to expand your offerings with a PEO solution? Contact ExtensisHR today.