The Case For Employer-funded Supplemental Health Insurance

by
Mike Zarrillo
Updated
April 22, 2021
6
min

By Mike Zarrillo, Chief Revenue Officer, Brella Insurance | April 21, 2021

Since 1995, according to the Kaiser Family Foundation (KFF), health insurance deductibles have surged nearly 800%, while premiums have risen by over 300%. Alarming, right? But what’s even scarier is that household income has increased only 18% during the same time period. Yet, far too many employers lack supplemental health protection to bridge the gap.

For years, supplemental health benefits have been an afterthought for benefit advisors and employers who have been focused on coping with skyrocketing health insurance premiums. On top of that, our industry hasn’t delivered a comprehensive supplemental solution to aid in solving the cost crunch. As a result, when supplemental health benefits are offered, they’re left to the employee to buy on a 100% voluntary basis. 

Saddled with multiple outdated, complex, and narrowly-scoped options, enrollment rates in voluntary supplemental health benefits continue to be a challenge. Can the employee afford them? Will the employee understand them? And maybe most importantly, how lucky will the employee be in guessing which one they may actually be able to use in a given year? 

Given the global COVID-19 pandemic, years of rising premiums and cost-sharing, and employee fear of the unexpected, we can no longer afford to treat supplemental health benefits as a voluntary option. If we do, we’ll miss the opportunity to build benefit programs that fulfill their mandate to boost employee retention and productivity. Even worse, employers who offer supplemental health on strictly a voluntary basis may even be undermining their overall health benefits strategy. 

Here’s why it’s time for employers to support and fund a supplemental health solution:

#1: Most of your employees can’t afford today’s health plan cost-sharing. 

The harsh reality is that 60% of Americans in a recent study said they would have to borrow to cover an unexpected $1,000 expense. Meanwhile, the average deductible for an employer-sponsored health plan is $1,644, and the annual out of pocket maximum is over $4,000. Families fare even worse. And a 2020 survey showed that individuals earning $130,000 to $160,000 were just as likely to be financially stressed as those earning $15,000 to $25,000 per year. 

The math simply doesn’t work. Any deductible can feel like a high deductible if your employees don’t have savings to cover the cost of an unexpected health issue. They need a supplemental health solution, and an employer contribution will certainly make it more affordable.

#2: Look beyond traditional supplemental products for new plans that work.

Employers should be choosing benefits that deliver real peace of mind and benefits that keep employees happy and productive in their jobs. Voluntary benefits, like today’s supplemental health options, with complex rules, limited coverage, and unfriendly claims processes are going to give the few employees who actually use them a poor experience. 

Yet according to a recent survey, 76% of benefit advisors endorse a combination of Accident and Critical Illness plans. Did you know that Accident and Critical Illness policies combined only cover 23% of the conditions that typically require emergency medical attention?* There are simply too many common medical conditions that don’t result from an accident or aren’t deemed dangerous or life-threatening. Think kidney stone, appendicitis, a benign tumor, etc. The bottom line is we need to look beyond the traditional plans to find solutions that are worth the investment.

#3: HSAs alone aren’t solving the problem

Don’t get me wrong, HSAs are a terrific financial tool. But they’re most valuable because they defer tax on dollars that can be used to cover medical expenses in the future, ideally after retirement. The “S” in HSA stands for savings, yet a report in 2019 estimated that nearly 75% of HSA contributions were withdrawn. So if health events keep draining their HSA accounts, employees may never build up the kind of balances that can sustain them later in life. 

The average annual employer contribution to an HSA was $870 in 2020. There’s no doubt this helps soften the blow of an unexpected medical event for employees, but depending on the type of condition or how many conditions the employee or their family experiences in a given year it may not be nearly enough. The fact is $870 won’t go very far for most employees. Employer dollars are precious and stretching them as much as possible is where we find meaningful value and return on their investment.

#4 Asking employees to pay is like pouring salt on the wound

Employers have been forced to make some tough decisions when it comes to their healthcare dollars. As a result, employees have seen the value of their health benefits eroded by rising premiums, deductibles, and annual limits. Asking employees to fully pay for the gaps in their health coverage, when they’re already paying more and more every year, may be adding insult to injury.

Importantly, employees understand that employers contribute to the most important benefits in their program. Voluntary benefits are usually at the bottom of a long list where they are starved for attention. Employees can’t be expected to care about plans that the employer signals are not valuable. There may not be a more important benefit than supplemental health to help solve the biggest fear most employees have today. Contributing to a supplemental health plan sends the message that this coverage is important and the employee should take the time to learn how it works. 

Why employer contributions to Brella supplemental health benefits work

Let’s be clear. Employer contributions to a supplemental health plan work wonders but only if the plan is like Brella -- wide-ranging coverage and easy to use. Up until now, there hasn’t been a product that amplifies the value of an employer contribution. Rather than pour dollars into low utilization benefits or those with virtually no tie-in to the health benefits strategy, employers can invest in a Brella plan that covers 13,000+ conditions and uses game-changing technology to simplify the claims process and minimize the financial hardship caused by unexpected medical events.

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Look it up and you’ll see that supplemental means “provided in addition to what is already present or available to enhance or complete it.” Brella was built to do just that -- enhance or complete the overall health plan strategy. And an employer’s contribution is a surefire way to signal its value, peak employee interest, and boost enrollment rates. This in turn drives satisfaction with their health benefits and lets employees focus on doing their best work.

* Statistics aggregated based on Agency for Healthcare Research and Quality annual reports on emergency room diagnoses for working-age adults in the U.S.

Founded in 2019, Brella is modernizing supplemental health benefits to build a world where health hardship doesn’t mean financial hardship. Brella’s simple supplemental plan covers 13,000+ conditions and pays cash on diagnosis that you can use for anything you need on the road to recovery. Learn more at joinbrella.com and follow @brellainsurance.