Despite ongoing Covid risks, more employees consider cutting back on health-care benefits

Inflation has stretched household budgets near their limit. As a result, most people have reined in discretionary spending, even when it comes to health and wellness.

But just as many Americans want to scale back, U.S. health officials are expecting another pandemic wave this winter and new research underscores the importance of having comprehensive medical benefits.

Although the Biden administration is looking at ending the public health emergency over the next few months, many who get sick but survive Covid suffer from enduring health problems, studies show. And currently, as many as 23 million Americans have what's considered long Covid, according to recent estimates from the U.S. Department of Health and Human Services.

With open enrollment season in full swing, this is an opportunity to reevaluate your coverage, said Gary Claxton, senior vice president at the Kaiser Family Foundation, a nonprofit organization focused on national health issues.

Employees spend 18 minutes, on average, reviewing their benefit selections during open enrollment, according to Rob Grubka, CEO of Health Solutions for Voya Financial. "They spend more time deciding what to watch on Netflix."

But this year brings added uncertainty, he said. "Between rising inflation, Covid and long Covid, we underestimate how different things may look in the future."

At the same time, more than a quarter of employees have postponed wellness visits and screenings and consider cost the most important factor in determining their benefit choices for next year, according to benefits platform Elevate. 

Employees are making choices to keep themselves afloat, said Brian Cosgray, Elevate's CEO and co-founder. Unfortunately, some are engaging in trade-offs — like foregoing needed medical care — that could cause problems down the road, he added.

To balance your overall health and the long-term risks of illness as well as financial constraints, Claxton suggests reassessing your employer-sponsored health insurance during open enrollment, which typically runs through early December.

Almost 159 million Americans rely on employer-sponsored health insurance coverage. Here are four key considerations with open enrollment season underway:

For starters, consider what your health coverage costs you.

Annual family premiums for employer-sponsored health insurance — the amount it costs each year for insurance, often divided into 12 monthly payments — average $22,463 this year, up slightly from a year ago, according to the Kaiser Family Foundation.

On average, workers contribute $6,106 toward the cost of a family premium, with employers pick up the rest.

However, more workers have a deductible — the amount you pay before insurance kicks in — and that deductible is also rising. In 2022, the average single deductible was $1,763, more than double what it was a decade ago.

But "don't just look at the monthly cost of your health insurance," Cosgray advised. "Most employers offer a few health-plan options," he added, such as a high-deductible plan with a health savings account or a more traditional PPO.

"If you expect your health-care costs to be low for the coming year, a high deductible health-care plan paired with an HSA could be a good way to save money," he said. "However, if you have chronic health conditions in your household and typically hit your deductible, a traditional plan paired with [a flexible spending account] may save you more over the course of a year, even if the plan's monthly cost is higher," Cosgray said.

"If you are going to take the high-deductible plan, you have to be able to pay the deductible if someone gets sick," Claxton added. "The plan maybe cheaper but what if you can't afford to use it?" Most people can't even afford a $500 expense, he noted. "If you go to the hospital the likelihood that your out-of-pocket costs are at least $500 are pretty high."

There are often employer-offered resources designed to help pick between benefit offerings, which can include webinars and dedicated benefits professionals. 

"Many health plans now have great tools to help you manage your choices based on what you anticipate your health-care costs to be," advised Thomas Belmont, health and benefits practice leader at Gallagher.

"That will help guide you."

One way to help with health-care costs is to use tax-advantaged accounts for medical expenses — specifically, health savings accounts or flexible spending accounts.

In both cases, you use pretax money to cover out-of-pocket expenses, including doctor visits and prescription drugs.

To be able to use an HSA, you need to be enrolled in a high-deductible health plan, or HDHP. Contributions then grow on a tax-free basis, and any money you don't use can be rolled over year to year.

"The opportunity to save and save efficiently is there," Grubka said.

For 2023, employees and employers can contribute a total of up to $3,850 for individual coverage and up to $7,750 for family coverage, with an additional $1,000 as a catch-up contribution for those 55 and older.

Health FSAs have lower contribution limits — $3,050 for 2023, but you also don't need to have a high-deductible plan in order to be eligible — in fact, you don't need health coverage at all to sign up for one. Although, you may have to use the money by year-end or you lose it, with some exceptions.

To be sure, the pandemic brought a greater awareness of financial risks associated with a critical illness.

Employer-issued life insurance policies typically amount to a year's worth of salary, often less, but that may be a fraction of what you need to protect young children or other dependents.

Consider what's the right amount for you and your family, then weigh whether you want to buy additional coverage, or supplemental insurance, through your workplace group plan or shop for your own individual term life insurance policy, a move many advisors recommend, although this may also require more medical information, including a physical exam and blood work.

The same goes for disability insurance, which can help replace a portion of your paycheck if you get sick and are unable to work.

There are two basic kinds: Short-term disability generally replaces 60% to 70% of your base salary and premiums are often paid by your employer. Long-term disability, which ordinarily kicks in after three months to six months, typically replaces 40% to 60% of your income.

Other voluntary benefits offered through an employer can provide additional protection, including hospital indemnity insurance, critical illness coverage and accident insurance.

"As we go into next year and the additional financial pressures, make sure you are protecting your income," Belmont said.

As a result of the pandemic, many more companies have expanded wellness offerings among the health-care coverage options to help employees deal with work-life stressors and personal issues.

For example, more than a quarter of large employers added mental health providers this year — either in physical offices or virtually through teletherapy — to their plan's networks to expand access, according to the Kaiser Family Foundation.

"We've got a real crisis from an emotional well-being perspective," Belmont said.

Employees should take full advantage of the services employers provide, often at no cost, also including financial coaching, emergency savings support, stress management classes and backup child care, he advised.

With rising prices causing more Americans to feel financially strained, "one of the most underutilized benefits is financial counseling," Belmont said.