Why is Employee Demand for these Coverages Rising?

There are a number of factors at play in terms of rising demand for supplemental benefits. Among them are:

Rising Costs

Heading into 2020, medical cost trend remains stable yet unsustainably high as healthcare costs continue to rise according to PWC. HRI projects 2020’s medical cost trend to be 6 percent. This is consistent with the previous five years, which have seen trends between 5.5 and 7 percent. Efforts to cut utilization have run their course and prices have continued to grow. This has put significant pressure on employer sponsored health insurance plans.

Rising Deductibles

Over the past five years, the average annual deductible among all covered workers has increased 53%. Forty-two percent of covered workers in small firms and 20% of covered workers in large firms are in a plan with a deductible of at least $2,000 for single coverage, similar to the percentages last year.

Soaring Out-of-Pocket Maximums

Most workers also face additional cost sharing for a hospital admission or outpatient surgery. After any general annual deductible is met, 68% of covered workers have coinsurance and 14% have a copayment for hospital admissions. The average coinsurance rate for a hospital admission is 20% and the average copayment is $326 per hospital admission. The cost-sharing provisions for outpatient surgery follow a similar pattern to those for hospital admissions. While almost all (99%) covered workers are in plans with a limit on in-network cost sharing (called an out-of-pocket maximum) for single coverage, there is considerable variation in the actual dollar limits. Twelve percent of covered workers in plans with an out-of-pocket maximum for single coverage have an out-of-pocket maximum of less than $2,000, while 20% have an out-of-pocket maximum of $6,000 or more.

  • 6 in 10 Single Plans have a $3,000 Out-Of-Pocket Max
  • 1 in 5 Single Plans have a $6,000 Out-Of-Pocket Max
  • $4,065 is the Average Out-of-Pocket Max
SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2019

Who Would Benefit From Having Voluntary Benefits?

In a 2017 study, the Federal Reserve surveyed more than 5,000 people and found that about 46% of Americans said that they did not have enough money to cover a $400 emergency expense. When considering the Deductible and Out-Of-Pocket Maximums just mentioned, this situation puts a significant number of employees in financial jeopardy. What is surprising is the extent to which insured individuals have trouble keeping up with their medical bills. In 2017, The New York Times reported that 20% of Americans under 65 with health insurance had trouble paying their medical bills over the past year. Of those, 63% claim to have used up all or most of their savings to tackle their healthcare expenses, while 42% took on an extra job to cover their costs. These medical financial pressures will strike approximately 4 in 10 of employees each year, but pre-existing health conditions, current health status and age demographics do not accurately predict who that will be.

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About 4 in 10 Americans get unexpected medical bills. Pre-existing health conditions, current health status, and age are not clear indicators of who will be affected.

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A Federal Reserve Study found that about 46% of Americans did not have enough money to cover a $400 emergency expense.

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Medical bills are the leading cause of personal bankruptcy. Of those who filed, 78% had insurance.

Further evidence of the need for voluntary benefits:

The majority of Americans are worried about being able to afford surprise medical bills.

How worried, if at all, are you about being able to afford each of the following for you and your family?

On average, 18% of emergency visits result in at least one out-of-network charge, but the rate varies by state.

The percentages shown are among people with large employer coverage, the share of emergency visits with at least one out-of-network charge, 2017.

Four in ten (39%) insured nonelderly adults said they received an unexpected medical bill in the past 12 months, including one in ten who say that bill was from an out-of-network provider. Of those who received an unexpected bill, half say the amount they were expected to pay was less than $500 overall while 13 percent say the unexpected costs were $2,000 or more.