Are Free Health Plans an Emerging Trend?

Where did you first notice that noncontributory plans were beginning to surface in the workplace?

We fielded a new survey from mid-April to mid-May this year specifically focused on employers’ benefits strategies through 2023. We felt like the labor market was still really tight, and even though we had done a big survey of 2,000 employers at the end of last year, it felt like the market was still moving. We wanted to ask questions so we could have more current information. So we did this survey, and there were 450 organizations that had 500 or more employees respond.

What did you find in the survey?

We asked how many companies were planning to enhance their benefits in 2023 to attract, retain or better meet the needs of their employees over the next year. We were surprised to find out that 70% said they were planning to enhance their benefits in some way. Sixteen percent said they were not going to but only because they already did it in 2022. We asked if they were planning to prioritize any groups, and most [64%] said no, it would be an overall improvement. Of those that said they were targeting certain working groups, 20% said they would focus on hourly employees, 15% said low-wage workers, 14% said they would do it for highly skilled workers, and 13% said they would use benefits to attract or retain entry-level staff.

The biggest jump we saw was for employers wanting to offer health plans with low or no deductibles—41% said they were offering those. Last year we saw employers wanting to add more choices to their benefit plans. That seemed like the major theme, to bring more choice. Other trends we saw were 24% of respondents looking at narrow-network or high-performance-network-based plans to give low-cost sharing for employees; 16% of companies were already offering these. Another 17% were offering salary-banded plan contributions [premiums based on a percentage of salary, often with higher-salaried employers paying a larger percent than low-wage workers], and another 17% were offering telehealth coverage for people not on their benefits plan. And finally, 17% of respondents were offering onsite or near-site health services.

What did you see regarding noncontributory plans?

In terms of free plans for employees, only 11% said they already have those in place today, and another 11% said they were planning or considering those plans. The interesting thing we have noticed, though, is that these plans are prevalent in the high-tech area. We do surveys with high-tech employers—both traditional and emerging—and we did see more of that.

Why do you think the tech industry has a higher percentage of employers offering these plans?

It’s a slightly different industry. It’s well funded because they are often startups. Those companies tend to have more financial support to put toward medical options. But when it comes to healthcare, the affordability issue is real. I think that’s true no matter how much money you make. Even just the fear of needing some kind of healthcare and not being able to afford it for your family—a lot of people have that fear. The pandemic raised the healthcare affordability fear issue with people; that has been a constant.

But there may be more playing into it as well. I think that cost fear has been included with the current war for talent. Everyone needs high-tech talent, not just specifically high-tech companies. Even a grocery store has a digital presence now to take online orders. Everyone needs some tech-savvy workforce, and there is lots of competition for it out there.

Did you see different benefit offerings among high-tech employers?

The high-tech industry has been known for having rich benefits, and it seems like, when talking with the people who work with that industry, we were seeing an increase in free health plans anecdotally.

We did a closed survey for high-tech employers, and they gave us permission to disclose some of the results. With this survey, we looked at a whole variety of benefit issues, and we found that about half of the employers offered at least one plan [in 2021] that was noncontributory for the employee; about 10% offered a noncontributory plan at all levels of coverage.

There is so much competition for high-tech talent, I thought it was something worth blogging about. Since my blog came out on the topic, I’ve had a manufacturing client contact me about it as well. They said there were two other trucking companies who were their competitors that were offering free medical benefits and that they recruited away some of their truck drivers. We are seeing companies do this that are in really competitive job classes.

But the larger industry survey showed that only a small number are offering these kinds of plans now, correct?

Typically, we look at survey data from jumbo employers as a harbinger of what’s going to happen going forward. We are starting to see it a bit in the broader employer category; 11% said they currently offer a free medical plan today.

It has fluctuated. We had never asked before if they were planning to do it, and the fact that 11% said they were considering it as well, that’s a lot in terms of survey numbers. I looked back at three years of data to find a comparison. I looked at 2010 because it was the year the Affordable Care Act passed, 2018 because that was pre-pandemic, and 2021. What we found was that, for HMOs, in 2010, 13% had a plan that was noncontributory for employees only, 11% had one in 2018, and 8% had one in 2021. It will be interesting to see if that goes back up to pre-pandemic levels.

Are there other employee classes where you are seeing these kinds of plans being offered?

We are seeing that competition for truck drivers is intense, so we are seeing it a bit there—especially at companies where they are trying to recruit drivers for cross-country transport where they can work anywhere.

We are seeing a lot of competition for low-wage workers right now. Companies are having trouble attracting this group of workers. It’s the people working for minimum wage and thinking about their choices of places to work. They could work at a lower-level job in a hospital versus fast food versus Amazon. These companies could all pay almost the same, so employees are looking at benefits. Free insurance is a sweetener employers can mention to try and offer a bigger enticement. Some states, like California, Maryland and Washington, are starting to require employers to disclose salary ranges publicly. Some employers are adding that free medical is available—even if “free” only applies to self-only coverage in the lowest-cost plan.

Do employers typically offer noncontributory options for the lower-cost health plans?

These noncontributory plans tend to be a network-only plan or a plan with a very high deductible and out-of-pocket maximum. These are low-cost plans for the employer because they have either a limited network or high costs for employees. Most employers that offer noncontributory plans do it in the least-costly plan available. For those types of plans, employees will be making a trade-off. Employers have to determine if people are willing to have limited choice in their benefits to lower the money that comes out of their paycheck.

What factors should employers think about when deciding whether to offer one of these kinds of plans?

Employers really need to think about how many people who are currently paying for their benefits would switch to a free plan and, on top of that, people who aren’t enrolled, if it’s free, would they take it and switch to your free plan? If a company has a really high opt-out rate today (on average, we see about 15% to 17% opt-out), would the plans be encouraging people to come back into the program, because that could drive costs up. Also, if you have a program where you default people into the plan, it could make costs go up; whereas, if people have to enroll, there might not be quite as much uptake.

Businesses should be very thoughtful about how to go about making that change. If you are offering it just to some groups, there may be nondiscrimination rules and other compliance concerns that could apply depending on your decision. Or if you have a plan today that charges $80 per month, do you really have to offer a free option, or could you offer one that is $25 per pay period? It might be that a company can make adjustments to their current low-cost plan or offer other, more affordable medical plan options.

Employers need to weigh and decide what they need most and whether they will get their return on investment. What if there is a whole shift they can’t staff, so they have lost production? They need to think about whatever metrics they use to quantify the impact on their business. Is the cost of noncontributory insurance less than the revenue they will be losing if they can’t staff shifts appropriately or if they are having to pay people overtime because of high turnover? A lot of companies know exactly how much it costs to hire one person.

Are there times when these insurance plans aren’t appropriate?

Employers really have to know their audience and who they are trying to attract—what those employees value the most. We have a client we are working with, and their employees want an enhanced 401(k) match, so an employer needs to know that. People may want richer time off or more benefits or an 8% match to their 401(k) plans. These are very different strategies, and all have different price tags associated with them. If an employer is investing their money, they need to make sure to put it in the right place. Employers are putting everything out they can to try to attract people in this job market.