This article was originally published with co-author George Kalogeropoulos, CEO of HealthSherpa, on LinkedIn.
If ever there was a topic and industry that doesn’t benefit from binary thinking, it’s the U.S. healthcare system. Far too often, we find ourselves treating multifaceted issues as if there are only two available paths: employer vs. government; eligible vs. ineligible; public vs. private. The list goes on, like nested dolls that keep opening to smaller and smaller versions of the same unwinnable argument.
In this installment of HealthSherpa Research, we seek to demystify two of the more common traps of binary thinking in health and benefits: benefits-eligible vs. non-benefits-eligible employees and employer-sponsored vs. government-subsidized individual health insurance.
Here is our call to action for employers: Guide employees of any eligibility status to health coverage, whether employer-sponsored or government-supported, because it will benefit both employees and your company.
Demographics of Hourly Workforce Coverage Options
According to data from the Kaiser Family Foundation, 49 percent of Americans receive health coverage through their employer, while 35 percent are covered by Medicare and Medicaid, 7 percent by “non-group” coverage (individual with/without an ACA subsidy) and 9 percent uninsured/uncovered. These data mean that, at most, half of the nation is dependent upon their employer for coverage.
From there, it’s insightful to classify employees by their coverage status to understand both at what rate they’re covered by an employer and, as a result, at what rate they’re dependent upon non-employer coverage. The latest data from the Bureau of Labor Statistics show that 85 percent of full-time workers are given access to medical coverage and 63 percent participate in that coverage, while a drastically lower 19 percent and 11 percent of part-time workers have the same access and participation.
While those numbers show a clear distinction between full-time and part-time, there is another statistic that is equally, if not more, important. Only 3 in 10 of the lowest 25 percent of wage earners, regardless of employment status (full-time or part-time), have access to employer-based benefits, and just 20 percent participate in those benefits. By contrast — and it’s a stark contrast — 9 in 10 of the highest 25 percent of wage earners have access to employer-based health insurance, with 72 percent participation.
While the data don’t indicate why there is such low participation, affordability has shown up in other studies of low-wage workers as a key reason for not getting health insurance, employer-sponsored or individual. Along those lines, traditionally low-wage hourly workforce industries like services, retail and hospitality lag behind high-income, salaried industries like finance and professional/technical services in employer-sponsored health insurance participation. Looking at firm size, small companies offer their employees health insurance at 20-40 percent lower rates than their larger counterparts.
There is also the question of spousal coverage as an explanation of differences in both offers and participation among all workers and among comparable numbers between full-time and part-time employees. The Kaiser Family Foundation’s survey shows that the vast majority of employers offer spousal benefits. What’s harder to pinpoint is what percentage of workers’ spouses are actually participating in their spouse’s employer’s benefits and furthermore if those spouses are otherwise classified as full-time, part-time, high-income or low-income.
With that said, three variables have impacted spousal coverage rates in our experience: 1) age/marital status of the employee being offered the benefit as well as the general age/marital demographics of the company’s workforce, 2) income, and 3) cost of insurance for individual vs. spouse/family. Large companies tend to be more generous in paying for spousal coverage than small employers. Furthermore, there’s the “family glitch,” which likely keeps some spouses from getting coverage because the employer offer is too expensive for the employee and spouse but the offer itself deems the spouse ineligible for ACA-subsidized coverage.
All in all, spousal coverage accounts for some of the variance in participation at a minimum, but it does not account for all, and possibly not even the majority, of discrepancy between offers, participation and employment status.
Unfortunately, even in the current competitive job market, growing employer-based coverage is unlikely. An article from CBS MoneyWatch from last August had this headline: “America’s job problem: Low-wage work is growing fastest.” The article reports on a study by CareerBuilder claiming that low-wage jobs will make up the majority of the 5-percent job growth through 2022, while middle-wage jobs will decline over the same period. If that observation holds true and current BLS statistics are indicative of future trend, fewer employees will be offered health insurance by employers as a percentage of all employees.
Which begs an important but simple question for employers: Most of you haven’t guided employees to public assistance as a strategy, so why start now?
The answer: All of your employees need coverage and would benefit from your help, even if you’re not footing the bill.
Gainfully Employed, Publicly Covered
Employees who do not get coverage through an employer frequently get it through some form of public program — most commonly Medicare, Medicaid, or ACA-subsidized individual coverage. This distinction is important because employers may want to convince themselves that employees are covered through another member of their household. While such a scenario is more common for workers under age 26 who are eligible for coverage through their parents, low-wage workers over age 26 are more commonly members of low-wage households and either do not qualify for coverage through a spouse or do not have a spouse through whom they can qualify — specifically, many are single parents working multiple jobs.
A 2015 study by the UC Berkeley Labor Center cites nearly four decades of wage stagnation combined with an overall decline in employees being offered health benefits leading to more workers turning to public assistance to meet their needs. In fact, the study found that nearly $153 billion is spent each year on “public support for working families.” This number includes health insurance but also other forms of public assistance, such as temporary assistance (TANF), supplemental nutrition support (SNAP), and childcare services. The study also runs counter to recent efforts at the state level to have work requirements for those wishing to receive Medicaid — most people who get Medicaid are already working.
“Workers turn to public assistance in order to meet basic needs,” concludes the study.
How Meeting ‘Basic Needs’ Equates to Workplace Productivity
Where such arguments tend to fall into the binary trap is that the mention of public assistance may cause some to shut down, while others may see employers as “dumping” their employees to public assistance as justification for not raising wages. Indeed, the UC Berkeley report was primarily covering the topic in support of increasing hourly worker pay — commonly seen in the recent debate over increasing the minimum wage to a “living wage” (i.e. one in which workers are able to meet their “basic needs”) at the state and federal levels.
However, going beyond the public-vs.-private debate, research has shown that a balanced, inclusive approach has a net positive impact not only for low-wage individuals but also for the companies that employ them — and help them meet their basic needs.
In the book Scarcity, Scarcity: The New Science of Having Less and How It Defines Our Lives, authors Sendhil Mullainathan and Eldar Shafir cite decades of research and their own experiments to articulate how poverty (i.e. a scarcity of basic needs) causes mental stress that forces us into poor decisions and taxing our ability to perform at our full potential in the workplace.
Likewise, a report by the Peterson Institute for International Economics cites numerous studies showing that higher wages equates directly to lower absenteeism, less turnover, and fewer needs for both discipline and supervision — all of which have significant employer costs associated with them. One cited study, by UC Berkeley’s Institute for Research on Labor and Employment, found that the San Francisco Airport Authority reduced turnover by 34 percent by raising wages, which resulted in $6.6 million in aggregate personnel cost savings.
There are other benefits as well. From the Peterson study:
Other mechanisms by which higher wages can yield offsetting benefits include:
- Higher wages are associated with better health—less illness and more stamina, which enhance worker productivity.
- Greater job satisfaction can result in less conflict between employers and labor groups.
- Enhanced reputation with consumers.
For retail, hospitality and food service employers, the last benefit should be of particular interest.
Breaking the Binary on Health Coverage
While research regarding workplace productivity primarily focuses on wages, employer-based health coverage can and should be seen as having a direct impact on real income. If I am offered health insurance through my employer that costs me and my family $476 per month, which is the average cost to employees cited in the Kaiser Family Foundation’s 2017 Employer Health Benefits Survey, that may mean more total compensation for me but effectively $476 less I have to spend on other basic needs. For low-wage workers, that amount can drive their decision to participate in employer-sponsored coverage — which, in turn, drives their overall stress and workplace productivity in ways that have additional impacts on company HR, benefits and compensation budgets.
It is an issue that the Affordable Care Act sought to address with three primary programs:
- Employer Shared Responsibility (AKA the “Employer Mandate”) stipulating that 30-hours per week became the new “full-time” threshold for providing health coverage, which was meant to increase the number of individuals eligible for employer-based coverage.
- Advanced Premium Tax Credit (APTC) subsidies across a range of incomes for individual health insurance, which was meant to help individuals not eligible for employer-based or other public-based coverage to defray some of the high premium costs.
- Medicaid expansion for those on the lowest end of the income scale, which is frequently both full-time and part-time hourly workers.
Yet there is confusion from employers on what is permissible under the ACA and what is not — and many lack the time and resources to figure it out. Plus, a politicized environment in which both sides have increasingly entrenched views on the responsibilities of individuals vs. companies vs. the government has shut off a great deal of employers from helping employees in these areas of regulatory ambiguity, and has made consumer advocates shy away from some cooperative approaches with employers on behalf of employees.
What should employers do?
First, let’s dispel the myth that it is illegal to guide your employees to public sources of health coverage (and other public assistance, for that matter). Law professor and policy expert Timothy Jost told the Washington Post “You are just helping [employees] get something they are entitled to” in relation to companies that help identify Medicaid-eligible employees for companies.
There are, he continued, issues companies should resolve internally about the expectation of what employers give to employees as opposed to what they get from public sources. And, of course, employers need to abide by the ACA’s ESR requirements (in addition to HIPAA and ERISA requirements) but the end-result remains the same — employers are free to guide employees to public sources of coverage.
Even with legal issues resolved, some employers may ask why would they provide that guidance? After all, there has traditionally been line of demarcation between benefits-eligible employees and non-benefits-eligible employees. Yet these distinctions are largely artificial and, as the research cited in this article have shown, frequently detrimental to both personal and financial health and to workplace productivity. The bottom line is that individuals need coverage and employers have the ability to help them with minimal effort and cost for a comparatively major benefit.
Three key reasons:
- Employees often don’t know their options. The same Washington Post article referenced above notes that many employees simply are unaware of their eligibility for public assistance. Likewise, the Trump administration made major cuts to the marketing and advertising budget for ACA coverage and annual open enrollment, so a significant number of workers may have no idea they’re eligible and, if so, how much they might save on coverage. The net result is what may be called a lack of “peace of mind,” which ultimately can cause stress and financial hardship for individuals.
- Employers have a built-in annual window of opportunity. The majority of employers have an annual open enrollment period, and it has become both more common and more feasible for employers to offer expanded voluntary benefits to employees and to offer those benefits to more than just traditionally benefits-eligible employees. That provides employers with a natural window in which to communicate the availability of public sources for health insurance. It’s not perfect and there is still much room for improvement on this method of communication, but having a consistent annual event is a major advantage that can drive additional individuals to the coverage and financial security they and their families need.
- ‘Soft benefits’ of health coverage provide employees with peace of mind. While data related specifically to offering public health coverage options through the private sector are limited, HealthSherpa’s own research has shown substantial cost savings for employees at companies that guide their employees to ACA coverage and/or Medicaid (see table below). One large national retailer saved its employees an average of $5,268 annually in premium costs, positively impacting their real income position. Such a service also combines data-driven decision support with personalized human support — consulting services that further enable them to feel they are making the right decision. (Full disclosure: HealthSherpa’s business is guiding individuals to health coverage, but with the exception of the table below, the extensive research cited in this document is from studies unrelated, but corroborating, HealthSherpa’s own research.) At the same time, providing an enrollment service to its part-time workers saved the company hundreds of thousands of dollars with fairly small enrollment numbers in the first years, combined with a 20% increase in tenure for part-time employees that elected ACA coverage vs. those that did not.
Succeeding by Communicating
It’s no secret that benefits enrollment communication geared toward employees is a challenge. It’s hard enough to explain to traditionally benefits-eligible employees what they’re getting. How do you do the same for non-benefits-eligible employees without confusing them and without adding administrative burden to already taxed HR and benefits teams?
The best first step is to just do it. In most cases, the unit cost to you as an employer will be minimal in exchange for the value you will provide your employees and your companies — and the majority of those costs will be on communication efforts or may be able to fold into other HR/benefits budget areas and resource expenses.
Here are a few places to start:
Pick your venues for communication. More specifically, if you know how your employees typically like to receive communication, that’s your best first channel. And don’t be afraid to think creatively. One large employer with a largely male, largely mobile, low-wage workforce found that their wives were most likely to make the benefits decisions in their household, and they were frequently on Facebook. So they started communicating about open enrollment through their Facebook group and saw greater engagement and participation as a result.
Pick the right partners. Again, HealthSherpa has a vested interest in this area, but the point remains important: If you partner with entities (vendors, brokers, nonprofit groups) that are committed to breaking the binary by caring about your employees’ needs and well-being, regardless of their eligibility status, your results will be greater than if you partner with entities that appear to be checking a box based on your requests.
Fold it into OE. It’s becoming more common for HRIS and benefits enrollment platforms to support part-time workers as well as full-time workers, which enables you to have a single platform for managing employees of all eligibility statuses. But even if they don’t, certain vendors may be able to assist you with your part-time (ineligible) populations directly, taking on the important task of providing your employees with guidance to the right coverage for them and providing you with metrics, data, communication tools and more to help expand your OE to part-timers without expanding your workload. (Remember, you are not providing the health benefit, so you are not responsible for ensuring the file gets from you to the carrier of record.)
Link it with new-hire orientation. Probably the only other time besides OE that employees think about their benefits for any more than a few seconds is when they start a new job. Part-timers in particular have extremely low uptake on employer benefits because they are largely ineligible. By guiding them to their options during the new-hire process, employers are communicating at the most receptive moment, which may lead more part-time employees to getting health coverage, which in turn may activate the 20-percent increased tenure we have encountered among those who elect coverage through HealthSherpa.
Link it with your EAP. Employee assistance programs (EAP’s), which have traditionally provided financial and legal advice to employees, have thus far been underutilized channels for guiding employees to public sources of assistance. We encourage employers to think of their EAP’s — and to talk to their EAP vendors — about expanding their offerings in an area that would quickly lead to measurable, meaningful results for employees, employers, and vendors alike.
The examples, like the data, have been mostly focused on different areas. But as we continue to expand our understanding of the interrelationships between various aspects of the healthcare system and our own personal health and well-being, we find that binary thinking is almost always an artificial limiter. Once you start thinking in multiple choices, you’ll be dreaming in color about a better reality for all people, regardless of the labels we used to give them to determine what we should do for them.