By Kerstin Nemec and Tim Norwood
Often under analyzed and underestimated, the size of one’s wages plays a critical role in how health benefits are utilized. Wages are often overlooked in efforts to maintain benefits offering equality. The impact is plans designed that are inefficient for the employer and ineffective for the employee. Managed thoughtfully, low-wage employee health/well-being can have significant impact on business results.
What Do We Know?
- Low wage earners (<$40k annually) make up 62% of the US workforce.
- Low wage earners have the second highest healthcare costs after high wage earners. The difference is high wage earners use the most preventive services while low wage earners use more emergency room and in-patient services.
- The top two determinants of health status are socioeconomic status (40%) and lifestyle (30%).
- Low-wage employees have the highest prevalence of unhealthy behaviors and chronic conditions and the highest proportion of healthcare costs as a percentage of wages. This is primarily due to prioritizations of health concerns relative to other life priorities, health literacy, healthcare consumerism engagement and patterns of healthcare use.
- Wage stagnation and benefit costs growth are making healthcare less affordable for all employees.
- The rise in deductibles has been most significant with 84% of employers offering CDHPs and over 30% that have fully replaced traditional plans with HDHPs.
- More sophisticated services, benefits (HSAs, Catastrophic coverage) and other incentives seem less likely to be useful when provided to low income earners.
- Combined premiums and deductibles are now approaching 25% of earnings for low wage earners.
Current benefits policy/practice directions will only continue to make the situation worse for low wage employees leading to increased stress levels, decreased employee health and workplace performance. So what options are out there for consideration?
- Wage-based premium subsidies
- Wage-based deductibles or OOP maximums
- Gap plans
- Outcome based incentives
These options can take substantial time to evaluate and implement. There is one solution however that can be easily integrated and implemented into a company’s benefit strategy that can greatly impact lower wage employees. The solution is offering education and enrollment services for State Sponsored Health Insurance Plans such as Medicaid.
While these plans were initially created for the disabled, pregnant women and children well below the poverty level, the Affordable Care Act expanded the states abilities to offer these plans to working adults aged 19-64. These plans have now grown to cover one in five Americans – over 74 million people. These plans have also become largely managed by private insurers. In expanded states, State Health Insurance Plans are now a mainstream alternative that provides for the needs of many lower wage earners much more efficiently and effectively than employer coverage. The quality of the coverage is comparable to private coverage, as networks and providers are often the same.
Low wage workers use healthcare differently from other enrollees. Employers need to better understand employee health barriers and opportunities based upon the size of their wages and craft strategies and plans to best address. Doing so could have a profound impact on business performance and employee retention without increasing overall healthcare spending.