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Dear Workforce How Could We Reward Employees Who Decline Our Health Coverage

Dear Equitable Solution Needed:


The broad answer is that it depends on the company.

Some employers (often smaller ones) provide no incentives and allow “opt-outs.” The employee avoids any payroll deduction for coverage and for some employers that is fine. Other employers may provide cash or credits for opting out.

Any cash incentive to opt out should be set so that the incentive is less than the plan cost would be for the “healthy” individual who is likely to elect the opt out.

In our experience, some companies set up catastrophic plans (high-deductible plans) as an inexpensive plan, offering very low employee contributions for those participants who may opt out to save money. These lower-cost plans are designed to prevent employees from making the poor choice of waiving coverage by structuring the plans to be economical, but not very comprehensive in coverage (e.g., they protect against the high cost of an accident). Typically, most of those who opt out are employees who believe they do not need health coverage and do not want their compensation reduced by the cost of health care premiums.

We have also seen organizations that allow employees to opt out only if they can prove that they have coverage elsewhere: for example, through a spouse’s employer. This helps ensure that all employees have health insurance and allows employees to reduce their contribution costs when it makes sense to do so (e.g., working married couples with double coverage).

The choice that an employer makes about whether and how to cover all employees through its health insurance plan will depend on the organization’s view of its workforce—what employees most value and what the employer can best afford.

SOURCE: Dean Hatfield, Sibson Consulting, New York

LEARN MORE: Employers are increasingly using principles of behavioral economics to craft health benefits that can save employees from their own bad health care decisions.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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