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Redefining “Robust” Benefits

by Essential StaffCARE

As a recruiting tool, employers in hourly wage industries commonly compete by offering what health insurance marketing headlines refer to as robust or rich plans. The term “robust” has always carried an implied meaning in insurance-industry terminology: major medical insurance coverage with small co-pays for doctor's office visits, emergency room visits, inpatient surgeries, dental, vision, and other common ancillaries.

This traditional definition of robust implied a carefree, valuable and comprehensive experience when receiving medical care and subsequently filing a claim. It meant that employers truly cared for the health and well-being of their workers, investing their own time, effort, and dollars to ensure their employees would be protected medically and financially in case of any health-related catastrophe.

Over the last half decade, however, the Affordable Care Act (ACA) has drastically changed the insurance landscape and the role of the employer. The new regulations brought sweeping change to health insurance plan design, most notably the elimination of pre-existing condition limitations, followed by the removal of limits on claims liability and loss ratio parameters.

These changes were constructed to help those with the greatest needs receive care, no matter their health condition or ability to pay, but consequently changed the fundamentals of the risk formula insurance designers use to derive the price of a policy. This upward pressure on cost has predictably translated to rising premiums, higher co-pays, and soaring deductibles.

The new reality in today’s healthcare marketplace are expensive plans that require stiff monthly premiums and a lofty four-figure deductible from the patient before any medical services will be reimbursed. These high deductibles helped offset the new cost of unlimited healthcare and kept premiums from spiking out of the realm of affordability. But another, perhaps unintended aspect of new ACA rules was the homogenization of coverage under any qualified plan.

Because claims liability was mandated to be unlimited, qualified ACA plans have to cover any and all treatment - the only difference between bronze, silver, and gold level plans is whether the premium is higher and deductible lower, or vice versa. In the end, qualified major medical plans cover all costs once a patient’s deductible/out-of-pocket maximum is met. For perspective, in 2020 the average bronze deductible was $6,419 and the maximum out-of-pocket limit was $7,131 according to ehealthinsurance.com.

The ACA had rendered qualified health care plans homogeneous; all plans now fit the traditional definition of robust, at least in the unlimited sense.

In reaction to this upheaval, insurers and their resellers have attempted to rediscover value in a landscape where plans are unilaterally required to have the same unlimited coverage aspects. In other words, how to redefine the concept of “robust” benefits.

Because qualified plans are now designed to provide unlimited catastrophic coverage, a new gap emerged in day-to-day healthcare needs. The majority of qualified plans that employers and lower-paid workers can afford require a very large deductible and lopsided co-insurance with no help for more common expenses such as routine doctor’s visits, lab-tests, x-rays, and other outpatient treatment. The vast majority of workers never reach their deductible or satisfy the OOP max that would trigger reimbursement for their more common medical expenses.

One answer to fill this gap (and also provide a new configuration of what a robust plan should include) is the addition of a voluntary medical benefits policy for smaller, day-to-day claims. Limited indemnity voluntary plans are indeed valuable additions to an employer’s healthcare offering. The right plan can help the most vulnerable in the workforce with the common medical expenses they need most, benefits that the ACA essentially pushed out of reach.

But here is where the distortion begins. With the premise that workers are demanding choices, the word robust has been broadened to encompass dozens of voluntary offerings, purportedly to satisfy worker demand. Gym memberships, commuter reimbursement, pet insurance, financial counseling programs, and other similar offerings have quickly been inserted as workplace benefits to give the appearance of choice and value.

Suddenly this is becoming the definition of a “robust” benefits plan. What we see today is an expansion of the definition of core benefits to include products and services that dilute the importance and impact of employer-sponsored medical and healthcare insurance. This new approach ignores the effective communication, implementation, and fulfillment of valuable benefits to employees. There is a clash of proven enrollment, implementation, communication, and fulfillment with current technology, in the administration of what we call non-essential benefits.

The proliferation of voluntary non-essential benefits are presented like an all-you-can-eat buffet, with something for everyone. The key here is that some advocates would have employers stack the deck with off-the-shelf ancillary options in hopes that the employees may see all the “dessert” on the buffet and not realize the main course is missing. True value in benefits is created when an employer leverages their buying power to deliver a needed service or program at a cost an employee could not get on their own. The worst deception is calling a plan robust, when it is not.

Adding non-essential voluntary benefits such as pet insurance, identity theft protection, and gym discounts do not counterbalance for a lack of benefits that employees find usable, valuable, and affordable. Your benefits strategy may be the biggest difference between business success and failure. That is why it is imperative not to be led astray by a sudden focus on adding new products and services to your employer-sponsored benefits offering strategy.

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