Open Enrollment: Does Tiered Health Insurance Make Healthcare Costs Even More Confusing?

If going through your open enrollment package hasn’t made your eyes cross yet, we’ve come across one more wrinkle that is increasingly common among employers that you should be aware of, tiered health insurance. As employers continue trying more creative ways to pass on rising health insurance costs to their employees, some employers are experimenting with passing a greater share of those health insurance costs to their higher-salaried employees and minimizing the hit to lower-salaried folks.

How does tiered health insurance really work? As The New York Times explains:

A worker’s share of a family policy is approaching $4,000 a year on average, and is most certainly going to keep rising through the next few years. For lower-salaried workers, those costs have only compounded their struggle in a brutal economy.

More and more companies in the last year or so have begun signaling their recognition of the added burden shouldered by workers in low- and middle-income jobs by varying the premiums they pay based on salary. Consultants say the trend is likely to continue, as employers devise various ways of spreading increased health care costs among their staff and balancing that side of the ledger against fewer raises and other compensation.

Vanderbilt University, for instance, has adopted a wage-based benefit program for 2011 under which premiums will remain the same for employees who make $50,000 or less, while everyone else will pay up to $75 more a month. “We’re trying to help those lower-paid employees cope with hard economic times,” said Jerry Fife, a vice chancellor. Even as companies warily eye the uncertain landscape of the new health care law, especially with the Republican midterm election gains at the federal and state levels, they also are seeking novel ways to deal with year-after-year increases in health care, because the share-the-pain era is coming to an end.

Some Companies Shift Costs to Better-Paid

While this inevitably raises questions of fairness (Why should better-paid workers have to pay more for the same health insurance? What about higher-salaried workers who have to support aging parents? What about lower-paid workers who have a highly-paid spouse? etc.), as a practical matter, tired health insurance is one more thing that gets in the way of trying to understand exactly how much you might be paying for different health insurance plans. How can you get an accurate idea of how much you might be paying for health insurance when it could depend not only on which health insurance plan you pick, but how much you make a year?

Until we see more of these tiered health insurance plans, we can’t give you a one-size-fits-all answer, but we do caution you again to read your open enrollment materials carefully. If you do have any questions, you should not hesitate to go to your human resources department and ask them to walk through the costs of the health insurance plans being offered to you.

Remember, you will be stuck with whatever health insurance plan you pick for the next year, so now is the time to ask any questions you may have about your health insurance costs or coverage!

Have you started reading your open enrollment package yet? Tell us about it!

Related posts:

1. Open Enrollment Season Is Coming! Can You Move To a More Affordable Health Insurance Plan?
2. Open Enrollment Season: 5 Details in Your Health Plan’s Fine Print Which Can Screw You
3. Healthcare Reform: Even the AARP Has to Raise Employee Health Insurance Premiums
4. Employer Health Insurance and Coverage Costs to Jump by 9%, PriceWaterhouseCoopers Reports
5. Cartoon of the Day: Rising Employee Health Insurance Costs