The survey by Justworks and The Harris Poll found that the youngest workers experience the greatest stress during open enrollment, lean heavily on AI tools and social media for guidance and rarely ask their employer’s HR team for help.

For employers, the findings highlight a widening generational divide in how workers research, understand and engage with health benefits. Employers will need to account for this new generation in their communications and support services.

Research habits are changing

Despite their concerns, nearly 60% of Gen Zers spend an hour or less reviewing benefits.

Their methods also differ sharply from older generations.

• 62% have used AI tools, including ChatGPT, to help interpret plans.
• 30% turn to TikTok and other social platforms for advice.
• Younger Gen Zers are more likely to call a parent than consult HR.
• 11% ask a benefits manager for help.

This contrasts with Millennials, who rely more on Google and Gen Xers and Boomers, who tend to use employer resources. The report also found that zillennials value quick, tech-first explanations and tools that compare plans in simple terms.

Lack of understanding

According to the survey, about 26% of Gen Z workers say affordability is their biggest concern when choosing a plan. That angst is compounded by the fact that many are making these decisions for the first time as they roll off their parents’ coverage.

Here’s what the survey found about the oldest Gen Zers and youngest Millennials:

• 52% say they don’t know much about choosing an insurance plan because they’ve never had to do it before.
• 20% say they aren’t confident about picking a suitable plan.
• 44% don’t put much thought into the process.

The oldest Gen Zers and youngest Millennials also report uncertainty about which questions to ask during open enrollment or who to approach for answers.

This further pushes them toward AI, online communities and social media, where health insurance advice is often incomplete, biased or incorrect.

What employers can do

As more Gen Zers enter the workforce, they will likely have the same habits as those identified in the survey. The stakes are even higher as rising medical costs make it more important for workers to choose appropriate plans.

The survey suggests several steps employers can take to help the youngest workers make better decisions:

• Provide short, simple explainers rather than long benefits guides.
• Use clear comparisons that highlight key differences between plans.
• Offer examples tied to situations younger workers understand, such as renters or auto insurance.
• Ask workers directly whether they are consulting TikTok, Instagram or AI tools for guidance and what kind of advice they’ve gotten.
• Correct misinformation before open enrollment begins.
• Encourage employees to bring questions to HR instead of relying solely on outside sources.

Because social platforms contain a significant amount of inaccurate benefits content, it’s useful for HR teams to check in early and clarify what is and isn’t true. Employers may also want to incorporate AI-enabled tools into their own communication strategy, giving staff a trusted version of technology they already use.

The oldest members of Gen Z are signaling that they want simpler information, faster answers and digital guidance that matches how they already learn. Employers that adjust their communication to meet these expectations can help younger workers feel more confident in their choices — and reduce costly mistakes during open enrollment.

According to a new study by GoodRx, a website that helps people find discounts and rebates on prescription medications, Medicare Part D insurance companies in 2024 cover 54% of all drugs approved by the Food and Drug Administration, compared to 75% in 2010.

During that same time, the percentage of drugs that Medicare drug coverage plans put restrictions on rose to 50% from 25% of all FDA-approved drugs.

GoodRx notes that the statistics are likely worse for group health plans because they are not subject to the same regulations as Medicare plans are.

This trend makes it vitally important that your employees review formularies of covered medications during open enrollment to ensure they choose a health plan that covers drugs they may need for a chronic condition, or which they need to take regularly for other issues.

It’s also important that they understand how much of a certain drug their health plan will cover and what their estimated out-of-pocket costs will be, so that they can budget accordingly.

Formularies explained

The list of drugs that an insurance plan will cover or pay for is called a formulary. Pharmacy benefit managers, which health insurers contract with to manage drug costs, set these formularies, which determine how much a patient will pay out of pocket for their medication.

PBMs regularly add and remove drugs on their formularies based on their effectiveness, price, demand and available alternatives.

These formularies also dictate copays and coinsurance — the patient’s out-of-pocket costs for each drug.

Getting squeezed

The title of the GoodRx report — “The Big Pinch” — reflects the trend of the past 14 years that’s resulted in patients being pinched between high drug costs and their health plans’ limiting coverage through prior authorizations.

First, copays and coinsurance have been increasing since 2010, usually after PBMs move certain drugs from one tier to another, according to the report. As well, more American workers are now in high-deductible health plans, which require more out-of-pocket layouts in exchange for lower premiums.

Also, a growing number of people have a separate deductible applied to prescription medications. This is referred to as a pharmacy deductible. These deductibles can be anywhere from $134 to $465 per month.

On top of it all, pharmaceuticals are getting more expensive.

Meanwhile, prior authorization rules imposed by PBMs and health plans require doctors to not only prescribe, but also justify why they are prescribing a medication, which may cause delays and make it more difficult for patients to receive drugs. In some cases, prior authorization may dissuade people from filling their prescriptions.

Eight in 10 doctors surveyed by the American Medical Association said that prior authorization leads to patients abandoning treatment.

Also, if patients encounter too many problems trying to fill a prescription, they may opt for paying out of pocket, which means absorbing the exorbitant cash price of the drug.

Help your staff pick the right plan

For workers who are healthy and young, these increasing restrictions may not have a great effect on their pocketbooks and quality of life. But for individuals with chronic conditions and other health problems that require certain medications, it’s vitally important that they are diligent and do their homework during open enrollment to ensure continued access to the medications they need.

If they want to stay in their existing plan, they need to review the formulary every open enrollment to make sure their drug is still covered. And if they are looking to change plans, they’ll need to do the same homework.

If an employee is struggling to pay for their medications, they may need to scale up to a more generous health plan, but it will likely cost them more in higher premiums in exchange for a lower deductible and/or lower copays and coinsurance. That’s the trade-off.

The worst thing is for someone to choose a plan that doesn’t cover medications they’ve come to rely on, or if their plan drops their medication.

As the light at the end of the pandemic tunnel gets brighter, more health insurers are ceasing to offer cost-sharing waivers for COVID-19 treatment.

After legislation was enacted in 2020 that required health insurance companies to cover COVID-19 tests and vaccines, many insurers voluntarily waived all deductibles, copayments and other costs for insured patients who fell ill with COVID-19 and needed hospital care, doctor visits, medications or other treatment.

Not all health insurers extended these waivers to their enrollees, but many did.

Insurers are still required to provide free COVID-19 testing and vaccinations to their enrollees. That’s because federal guidance requires them to waive such costs.

Also, guidance issued in February after President Joe Biden assumed office, reinforced the Trump administration rule about waiving cost-sharing for testing. Biden’s guidance took an extra step, saying that it applies even in situations in which an asymptomatic person wants a test before traveling or seeing a relative.

Almost 90% of individual and group health plans enrollees were in plans that waived cost-sharing for COVID-19 treatment, according to the Peterson-KFF Health System Tracker.

What insurers are now doing

However, starting in late 2020, more and more insurers have quietly been dropping those waivers. For example:

• UnitedHealthcare started curtailing its waivers in November.
• Anthem stopped its cost-sharing waivers on Jan. 31.
• Cigna stopped offering cost-sharing waivers for COVID-19 treatment on Feb. 15.
• Aetna ceased offering deductible-free inpatient COVID-19 treatment waivers on Feb. 28.

Not all insurers are doing this though. Blue Cross and Blue Shield of Minnesota extended eligibility for telehealth benefits and COVID-19 treatment waivers through the end of 2021.  Humana, meanwhile, has left the cost-sharing waiver in place for Medicare Advantage members, but dropped it on Jan. 1 for those in job-based group plans.

A study by the Peterson Center on Healthcare and the Kaiser Family Foundation released in November 2020, found that 88% of Americans who have health coverage — including employer-sponsored health plans and individual plans purchased on exchanges — had policies that waived cost-sharing for COVID-19 treatment.

Despite the fact that vaccines are rolling out quickly across the country and in light of a significant percentage of people who are hesitant to get vaccinated for COVID-19, the coronavirus is expected to be a presence in society for some time to come. And that means people will contract it and get sick.

There are also concerns about mutant strains that have developed in South Africa and Brazil, and possibly in India during the massive outbreak in April.

The takeaway

You may want to check with your group health plans to see if they have waived any cost-sharing for COVID treatment, and have since dropped or are planning to drop it.

You should meet with your employees or send them a memo explaining any impending changes for them if they have a health plan that is ending or has ended waivers.  

• Drop out of their health insurance if they have another option,
• Sign up for insurance if they have not done so,
• Add family members to their plan, or
• Switch to a different health insurance plan.

The takeaway

But any changes that are made must be followed up by amending the plan and communicating the changes to the enrollees.

Under the Employee Retirement Income Security Act, all health plans are required to deliver a Summary Plan Description (SPD) to enrollees to inform them of the full spectrum of coverage and their rights under the plan.

Whenever a plan sponsor makes a material modification to the terms of the plan or the information required to be in an SPD, they must amend the plan and let participants know about the change through a Summary of Material Modification (SMM).

Material changes

To qualify as “material,” a change must be important to plan enrollees. Examples include adding or eliminating a benefit, changing insurance companies, or changing rules for dependent eligibility.

Plan changes related to the COVID-19 pandemic that would have to be included in the SMM and SPD could include:

• Offering continuing coverage to staff who would otherwise lose coverage due to a furlough, layoff or reduction of hours.
• Changing eligibility terms to allow workers who may not have been eligible for coverage before to secure coverage (this could include part-time workers).
• Covering a larger portion of an employee’s premium share.
• Adding an employee assistance program to provide counseling for workers who may be undergoing unusual stress.
• Adding telemedicine coverage.
• Using funds in health savings accounts (HSAs) and flexible spending accounts (FSAs) to purchase over-the-counter medications.
• Covering COVID-19 testing with no cost-sharing.
• Covering COVID-19 treatment without cost-sharing.

Some of the above changes are required by new laws and health plans must respond accordingly by changing their SMMs and SPDs. For example, the Families First Coronavirus Response Act requires that group health insurance and individual health insurance plans cover coronavirus testing with zero cost-sharing.

And the Coronavirus Aid, Recover and Economic Stabilization Act reverses an Affordable Care Act rule that barred policyholders from using funds in HSAs and FSAs to pay for over-the-counter medications.

When the plan sponsor adopts these changes, it must also amend its plan summaries.

And SMMs must be delivered to plan participants within 60 days after a change has been adopted. You can deliver the SMM by mail, e-mail or posting it on your company’s intranet site. It’s recommended at this time that you opt for e-mail delivery.

One of the issues that may come up with any changes implemented in response to the COVID-19 outbreak is that some of the changes may be temporary.

If that’s the case, the plan needs to include the termination date of any benefits that are adopted on a temporary basis.

However, if you don’t know how long the temporary benefits will be in effect, their temporary nature must be communicated in the SMM. Employers need to issue another SMM when the temporary benefit or coverage term ends.

The takeaway

This is an unusual time and unusual times call for unusual measures. It’s unusual for changes to be made to a plan in the middle of a plan year but because of the way the pandemic crash-landed, many plan sponsors have had to make changes.

That said, you should work with us and your carrier on ensuring that the amended documents are sent out to staff.

As the employer, you should be aware of all the changes that have been made in response to COVID-19 so you can discuss them with any employees that have concerns or questions.

Far-reaching costs

Addicted workers have been found to have:

• Lower or lack of workplace productivity;
• Higher health care costs;
• Increased absenteeism and presenteeism;
• Diminished quality control;
• More disability claims;
• Increased workplace injuries;
• Lower morale;
• Higher job turnover; and
• Employee theft.

Some employers have tried to help employees tackle their addictions or abuse problems by implementing workplace prevention, wellness and disease-management strategies. These programs improve health, which lowers health care costs and insurance premiums and produces a healthier, more productive workforce. Under the ACA, anybody covered by a health plan has access to substance-abuse treatment. That’s because the law makes such treatment one of 10 benefits insurance plans must offer. The ACA requires health plans to pay for prevention and early intervention. Health care plans also have to comply with a “parity” law, which requires them to treat mental health issues the same way they do physical diseases.

What else can you do?

• You can start by adding addiction to your prevention, intervention, treatment and disease-management strategies.
• Use confidential screenings and assessments. There are a number of screening, brief-intervention and referral-to-treatment modules available to help people confront their drinking or drug use and get the help they need.
• Review your policy for coverage. If you have coverage for substance-abuse treatment, employees with addictions will be more apt to seek out help knowing the cost is at least partially covered.

And, importantly, make sure your substance-abuse benefit is robust, and that it covers a full continuum of care. A strong benefit would include:

• Inpatient care;
• Residential treatment programs;
• Outpatient care; and
• Continuing care for those in need of treatment.

The Centers for Medicaid and Medicare Services, IRS and the Department of Labor issued the final rules in late 2019. They reverse one of the major pinch-points of the Affordable Care Act, which bars employers from paying employees to buy their own health insurance either on publicly run health insurance exchanges or on the open market.

The fine for breaching this part of the law is a hefty $36,500 annually.

The rules continue to receive pushback from small business groups, insurers, regulators and others, who say that employers who want to go this route are facing a bureaucratic nightmare.

And one of the biggest concerns is that employers will use the opportunity to move older and sicker workers from their group health plans to exchanges, in order to reduce the cost burden on their plans.

Complexity a major issue

The National Federation of Independent Business has said that small businesses that want to offer workers an HRA integrated with an individual-market health plan are facing a lot of complexity.

“NFIB recommends that your departments plan to release… a publication that explains in plain English, step-by-step, how small businesses can establish, administer, and comply with the rules,” the group wrote.

HRAs are tax-sheltered accounts funded employers that typically are offered to reimburse employees for out-of-pocket medical expenses. This rule expands how those HRAs can be used. HRAs have been tax-advantaged only if they are coupled with an ACA-compliant group health plan. They cannot be used now to pay premiums for individual-market health insurance.

Under the rule, employers could provide an HRA that is integrated with individual health insurance coverage. The rule does include provisions to prevent employers from steering workers or dependents with costly health conditions away from the employer group plan and toward individual coverage.

Employers also could offer a different type of HRA, funded up to $1,800 a year, that could be used by employees to pay premiums for short-term plans that don’t comply with ACA consumer protections.

Employers could not offer the same employees the choice of either a traditional group plan or an HRA-funded individual-market plan. But they could offer a group plan to certain classes of employees, such as full-time workers under age 25, and an HRA plan to other classes, such as part-time employees.

Fears many may be shunted from group plans

Other concerns that are being raised include those by the American Academy of Actuaries that self-insured employers, in particular, may use the rule to shunt less healthy employees out of their group health plans, which in turn could result in worsening the ACA individual-market risk pool.

The Federation of American Hospitals expressed concern that the proposal would shift people out of the employer group market into the less stable individual market, which offers thinner benefits and less support for consumers.

The conservative National Federation of Independent Business supports the new rule but is concerned that it will be a complex process to set this type of arrangement up, especially for small businesses.

The liberal Center on Budget and Policy Priorities said the proposal to let a special type of HRA be used to buy short-term plans could be challenged legally, because the ACA and the Health Insurance Portability and Accountability Act (HIPAA) prohibit group plans from discriminating based on health status, as short-term plans are allowed to do.

• Any employee covered by the ICHRA must be enrolled in health insurance coverage purchased in the individual market, and must verify that they have such coverage (as mentioned above, that coverage must be ACA-compliant);
• The employer may not offer the same class of workers both an ICHRA and a traditional group health plan;
• The employer must offer the ICHRA on the same terms to all employees in a class;
• Employees must be allowed to opt out of receiving an ICHRA;
• Employers must provide detailed information to employees on how the ICHRA works;
• Employers may not create a class of employees younger than 25, whom they might want to keep in their group plan because they’re healthier;
• A class cannot have less than 10 employees in companies with fewer than 100 workers. For employers with 100 to 200 employees, the minimum class size is 10% of the workforce, while for employers with 200 or more staff, the minimum size is 20 employees;
• While benefits must be distributed fairly to employees that fall within each class, each class can be broken down further by age and family size. That means employees with families can be offered a higher amount per month and rates can be scaled by age.

Self-funding, however, can be costly and risky and is usually only done by larger organizations with thousands of employees. But there is a hybrid model that can help small and mid-sized employers provide their staff with affordable health coverage: partial self-insuring. 

To understand how partial self-insuring works, we should start with the basics of what a self-insured plan is. In a fully self-insured plan, the employer bears the risk of all costs incurred under the plan for claims and administration.  

In essence, the employer acts as the insurer and pays claims from a fund that it pays into along with employees, who pay their share of premiums into the fund. 

Also, the employer will usually contract with a third–party administrator or an insurance company to process claims and provide access to a network of physicians and other health care providers.  

 How partial self-insuring works 

Partially self-insured arrangements provide some of the benefits of being self-funded but without all the risks, while plans will have the same benefits as insured plans have. Here’s how they work: 

• Employers and their employees still pay premiums, a portion of which goes into an account that will be tapped to pay the first portion of claims that are filed. That means that the employer is acting as the insurer for those claims.  
• The other portion of the premium is paid to an insurance company. This is sometimes known as a stop-loss policy. 
• Plans have an aggregate deductible for all claims filed by employees, meaning that once that deductible is reached an insurer starts paying the claims instead.  
• Premiums are calculated to fund the claims to the aggregate deductible amount. In other words, the employer and employees are paying for the worst-case scenario in each policy year. 
• It is possible for the employer to get a refund at the end of the policy year if the total claims come in at a level that is less than expected. The employer can either be reimbursed for this amount or use those funds for the next policy year. 

Lower risk than fully self-insured plan 

Typically, an employer should have at least 25 workers if it is considering a partial self-funded arrangement, but we’ve seen plans with fewer enrollees. 

Many employers will opt for a partially self-insured plan to save money, but these types of plans also allow an employer to design a more useful and valuable plan for its workers.  

The key to making this work is cost control, without which claims can spiral and drive up premiums at renewal.  

Knowing exactly how much to set aside for reserves and how much you should set your employees’ premiums, deductibles and other cost-sharing can be complicated. 

But with the right mixture of benefits, plan design and education, you can control behavior, which drives claims, in order to keep renewal rates from increasing too much each year.  

The fine print 

That said, there are some reasons partial self-insuring isn’t for all employers: 

• There is additional responsibility, as the employer basically becomes an insurer or sorts.  
• There is additional paperwork for these plans since the employer also becomes a payer. 
• There are compliance issues that the employer needs to consider (ERISA and the Affordable Care Act, for example). 
• There is some additional risk to the employer, as it is paying claims.  
• If you have too many claims, you could face a non-renewal by your stop-loss insurer. If you are cancelled, it may be difficult to seamlessly enter the insured market. 

2018 short-term health plan medical outlays*

• $1,000 per day for a hospital room and board
• $1,250 a day for intensive care
• $50 a day for doctor visits while in hospital
• Total benefits are often capped at little more than $100,000 per year.