First of a three-part series
Pinpointing future costs to the company
When you’re buried under the work dictated by the Affordable Care Act’s (ACA) reporting and compliance requirements, it could be difficult to conceive a silver lining. And yet, aggregating data from unrelated payroll, benefits administration and HRIS systems can produce a positive side effect: it can reveal new insights that will help you make better operational decisions.
Here at Health e(fx), we’re able to analyze ACA-related data covering millions of lives at companies ranging from education and healthcare to hospitality and manufacturing. Some unexpected, valuable information emerged from this year’s analysis. The good news is that you can leverage your own ACA data to produce insights that will aid in your organizational decision-making for 2019 and beyond.
Pinpoint cost drivers
It seems like everyone’s talking about the impact of Millennials and Gen Z on the workplace. Their sheer numbers will certainly drive change in a myriad of ways – and employer health care benefits are no exception.
Understandably, workers in these younger generations currently are not huge health care consumers, nor do many take advantage of employer-sponsored health benefits. In fact, when eligible only 26% of Gen Z employees and 68% of Millennials are enrolling in employer-sponsored coverage, versus 75% of Gen X employees.
ACA Eligibility and Enrollment by Generation
Some of these individuals may already be covered through a parent’s plan. In the next five years, however, nearly 20% of employees enrolled in family health coverage will have a Millennial or Gen Z dependent age out of that coverage, driving these younger workers to seek out insurance coverage from their employers. What’s more, as they age and require more and better health care coverage, they will enroll in your company’s richer benefits plans, thus pushing up the costs of your employee health care spend.
Every health insurance plan is assigned a metal level—Bronze, Silver, Gold or Platinum—based on actuarial value (percent of covered medical costs that a plan will pay). Plans with a higher actuarial value (such as Gold and Platinum) pay a higher percent of medical costs, but their premiums are also higher. A higher percent of employees in these two younger generations select a Bronze-level plan (with the lowest actuarial value) than workers in other generations. This means that currently, these younger employees are more likely to have lower premiums for their coverage. As they age and experience more health issues, however, more workers in these generations will begin choosing plans with higher actuarial values.
In addition, both younger generations have lower enrollment in family tier coverage, with only 30% of eligible Millennials and 6% of Gen Z enrolled in family coverage versus 55% of Gen X. As the younger generations age, a higher percentage will opt for family coverage.
Why do these factors matter? Because benefits impact retention – but only if your employees enroll to take advantage of those benefits. According to our analysis, the average tenure overall for employees who are not enrolled in health benefits is 3.1 years, versus 6.7 years for those enrolled in employee-only coverage and 9.7 years for those enrolled in family coverage. On average, length of tenure also increases with better benefits—as the actuarial value of benefits increase, so does tenure.
Questions to ask of your business:
- Does your business strategy rely on the retention of these young employees into the foreseeable future?
- What percentage of your company’s employee base is still covered under a parent’s health plan?
- Are you already seeing an influx of Millennials enrolling in your employer’s individual or family coverage? Can you extrapolate what percent will be seeking richer coverage in the coming years? How will you budget for that increased cost?
Next: Making decisions about wage-based premiums
October 18, 2018