Case Study: Aflac BenExtend Eases Employee Concerns About a HDHP
Moving to a high deductible health plan can mean savings for both employer and employees, but many employees are worried about the sudden out-of-pocket exposure from a high deductible. Here's an example of how a company used a bundled supplemental benefit plan to address employee concerns and save money at the same time.
XYZ Company was a government contractor with 200 employees participating in two medical plans: A 'Low' option with a $500 deductible and a 'High' option with a $2000 deductible. The company paid 75% of the employee-only cost, or 50% of the family cost, for both plans. Employees felt more comfortable with the low deductible option so, even though the cost was about 40% more, the Low plan had about 3x the participation of the High plan.
XYZ Company's annual cost for the medical plans was $1,218,750
To help employees feel better protected from out-of-pocket costs, and to encourage participation in their high deductible plan, XYZ Company decided to introduce a bundled supplemental plan. They used Aflac's BenExtend, which is a sort of greatest hits of the carrier's accident, critical illness and hospital indemnity plans. For a wide variety of incidents, both minor and serious, an employee would receive a cash payment they could use toward medical or household expenses.
To sweeten the deal even more, and because the math was looking favorable, XYZ decided to offer the plan as a voluntary benefit for participants in the Low plan, but for anyone that chose the High plan the company would pay 100% of the cost of BenExtend. They even gave the program a catchy nickname in their open enrollment messaging: they called it "The Deductible Buster."
A good solution for out-of-pocket costs gave employees the confidence to make the leap to the company's HDHP.
Employee Education is Critical
The final piece was to make sure that employees were properly educated about the new BenExtend program, so that they could feel comfortable with the decision to move to the High medical plan. Most people are unfamiliar with how supplemental benefits work in relation to their medical plan, so if employees aren't properly educated you tend to see low participation; but when employees are well educated you get much higher participation. XYZ Company decided to make their enrollment active and have all employees meet with a benefits counselor, either face-to-face or via call center.
Because XYZ Company gave employees a solution for their concerns about out-of-pocket costs, gave them a financial incentive to move to the high deductible plan and provided thorough education so that employees could feel confident about the change, the company saw a significant increase in participation in their High plan. And, even though they were funding the BenExtend program at 100% for participants in the High plan, they still experienced savings on their annual medical spend.
XYZ Company's total medical cost went from $1,218,750 annually to $1,091,250. At a little over $300 per employee, BenExtend costs XYZ $38,400 annually for their High plan participants.
Total annual savings to XYZ Company: $89,100.
The move to higher deductible plans may be an economic necessity for both employers and employees, but it is still the responsibility of benefit brokers, employers and HR professionals to provide effective solutions for the resulting out-of-pocket exposure. Employees can't afford the financial burden of high deductibles and need to feel confident about their decision to move to a HDHP. When proper employee education is done, Aflac's BenExtend can be that solution for employees and create savings for the employer at the same time.