While the number of U.S. workers choosing high-deductible health plans has leveled off during the last two years, uptake has been growing rapidly among one segment of the working population: Gen Z employees.
The 2024 “State of Employee Benefits Report” by benefits administration provider Benefitfocus found that 45% of Gen Z workers and 43% of millennial workers surveyed were enrolled in HDHPs. The report notes 84% of employers offer both HDHPs and traditional health plans to ensure that they can met the needs of a multi-generational workforce.
It emphasizes that employees often choose health plans that will end up costing them more than it should in terms of out-of-pocket expenses or premiums, and that employers should help by providing assistance and education.
Study findings
The trend of more Gen Z workers gravitating to HDHPs makes sense, since these plans are best suited for younger individuals who are generally healthier and have fewer health problems than their older counterparts — Gen Xers and Baby Boomers.
HDHPs feature higher deductibles and more out-of-pocket expenses in exchange for lower premiums upfront. The plans are typically tied to a health savings account (HSA), which employees can fund with pre-tax dollars to reimburse for health-related expenses.
But employers are cautioned against offering just HDHPs as they are not a good fit for everyone, particularly those who are regular users of their health plans or have chronic conditions that require more doctors’ visits, medical procedures and medications.
The study suggests that employers should offer a mix of plans that will meet the needs of their workforce. It found that:
- 64% of health plan enrollees selected a traditional plan in plan year 2024, compared to 69% in 2022.
- Across generations, higher-salaried individuals choose HDHPs over traditional plans.
- Generation X has the highest premiums compared to other generations, across all plans.
- The average employer covers 78% of their employees’ health insurance premiums, up from 74% in 2022. Despite the increase, employees are still facing higher premium outlays.
- Participation in HSAs and flexible spending accounts fell 20% from 2022 to 2024, indicating that employers are not doing enough to educate their staff about these tax-advantaged accounts.
One of the keys to a successful employee benefits program is to ensure that your workers are all choosing a plan that is best for their life situation. Choosing the wrong plan could end up costing them more in either:
- Upfront premiums for an unnecessary expensive plan with strong benefits that the employee may not use because they are young and/or healthy, or
- Out-of-pocket expenses if they choose a plan that has a high deductible when they are frequent users of medical services, either due to pre-existing conditions or other issues that crop up later in life.
What you can do
The report recommends that employers:
Focus on assistance and education — The study found that 70% of workers want help from their employer to better understand the employee benefits they are enrolled in or are considering.
To help your staff choose the plan that’s going to give them the most bang for their buck, your guidance and advice can be crucial. During your educational sessions, provide scenarios of how choosing the wrong plan can financially burden an enrollee. Provide tools that can help them ascertain which plan is right for them.
Offer a mix of plans — To ensure that employees have access to the health plan that is best for their health circumstances and budget, you should offer a mix of HDHPs and traditional health plans like health maintenance organizations and preferred provider organizations.
You can tailor your employee benefits educational sessions to each generation. Make sure not to overgeneralize, as there are instances when a younger person should be in an HMO or PPO.
Offer voluntary benefits — Not all voluntary benefits are created equal, and some add more value than others. These plans complement an existing health insurance plan by providing a financial backstop when faced with an unexpected medical emergency. They include:
- Accident insurance
- Critical illness/specified disease insurance, and
- Hospital indemnity insurance.
As well, benefits that help with other unexpected expenses that life deals increasingly burdened employees, are growing in popularity:
- ID theft protection,
- Legal insurance, and
- Pet medical insurance.
