Here’s Why 100% Healthcare Coverage isn’t the 100% Solution to Employee Retention

One trend that’s been making the rounds recently in employee benefits and tech circles is the idea of 100% healthcare coverage. That is, the employer pays 100% of their employees’ health plan premiums. No extra payroll deduction or other ongoing costs to worry about.

Sounds like a good deal, and it largely is.

It’s one less budget item for people to keep track of each month, and it’s another potential reason for workers to stick with their employers long-term rather than jump from company to company. After all, 100% healthcare coverage is still a fairly rare benefit in the working world, even as more and more companies look for ways to attract and retain top talent.

As Brandon Rodman, the co-founder and former CEO of software firm Weave (which just went public at a valuation of nearly $2B, by the way) described it recently:

“It’s more expensive to lose people to companies that offer better benefits. I’d rather people focus on collectively building the company than on their healthcare benefits.

“And… people will value that their healthcare is 100% covered when more of their paycheck hits their bank account each month. I want all of the people that work with us to have the best healthcare coverage they can get. Healthcare emergencies can be ridiculously expensive and as an employer, I want to be as helpful as possible during someone’s time of need.

“I believe offering 100% healthcare coverage will make recruiting and retention easier and cheaper, while simultaneously saving the employee money.”

But here’s the thing. Yes, 100% paid healthcare coverage is a great benefit for employees and will result in all of the great things that Rodman mentions above. But there are actually more cost effective ways of doing all of that to achieve the same outcomes.

Because shifting health insurance premiums from the employee to their employer doesn’t make those regular, ongoing expenses go away. It just changes who is paying them. Covering those employees 100% costs just as much in total as it would were the working and their boss splitting the bill. Someone is still paying into an insurance system that is inefficient and overpriced, and for benefits that may never end up being used by anyone.

A more cost effective approach for all involved doesn’t have to include 100% coverage. In fact, a lower cost health plan backed up by as-needed funds in the event of a medical emergency or other need is actually a better way to solve for the employee retention problem. That’s the idea behind the Health Savings Account (HSA) when paired with a high deductible health insurance plan. By paying less in premiums each month, you’re able to set aside tax-free cash in your HSA to make up the difference in what your plan doesn’t cover. It’s a way for individuals and their employers to take ownership of their healthcare spending.

We see a similar solution in what we’re building at medZERO. By giving employees on-demand access to funds to pay their out-of-pocket healthcare expenses over time, at zero interest and with zero fees, we’re able to help address medical spending without paying into the system month after month for services that might never be used. medZERO enhances existing benefits programs to help attract and retain top talent, enabling them to be healthier and more productive, while also easing the stress of paying for healthcare. It’s on-demand, zero interest and is far cheaper than a credit card or payday loan. Employees with an HSA can even save as much as 30% by using pre-tax dollars to pay their bills.

It’s a real win-win, especially for employers looking to better serve their employees’ healthcare needs while hanging onto their staffs. 

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