Understanding the impact of the decline in medical plan enrollment — and finding solutions
Over the past three years, there has been a noticeable decline in medical plan enrollment among low-wage employees in large organizations. Across Alight’s book of business, there has been a steady three-year decline in medical plan enrollment amongst those earning less than $60,000 per year. This trend raises significant concerns for benefit leaders who are tasked with providing their employees access to affordable, essential healthcare coverage.
The tradeoffs faced by low-wage workers
When making their annual enrollment elections, low-wage workers must balance immediate financial needs with longer-term health benefits of medical coverage. Many of these workers opt to forego enrolling in a medical plan entirely to allocate their limited resources towards housing, food, transportation and other necessities. This decision, while financially necessary, can have detrimental effects on health and well-being since delays in routine check-ups and preventative care can become the norm. Aside from an increase in undiagnosed conditions, an increase in long-term healthcare costs are the result for the employee and the employer.
The shift to high-deductible health plans (HDHPs)
For low-wage employees who do enroll in medical coverage, high-deductible health plans (HDHPs) are often the most affordable option. These plans typically have a reduced monthly premium and come with higher deductibles and out-of-pocket costs. While HDHPs can provide access to necessary medical care, the high deductibles can deter employees from using their coverage.
Even though HDHPs usually cover preventative care services at no cost, as required by the Affordable Care Act (ACA), low-wage employees may still avoid seeking medical attention due to the fear of incurring out-of-pocket expenses for non-preventative care. This reluctance to utilize their health benefits can lead to a cycle of worsening health conditions and increased financial strain.
Strategies to improve benefits affordability and access
To address the issue of declining medical plan enrollment among lower-paid employees, large employers can implement several strategies to make healthcare coverage more affordable and accessible.
- Salary-based contribution tiers
One effective approach is to introduce salary-based contribution tiers. By adjusting the employee contributions based on salary levels, employers can ensure that low-wage workers pay a smaller percentage of their income towards medical premiums. This approach helps to balance the financial burden and makes medical coverage more affordable for those who need it most. Our data shows that clients who use a salary-based contribution pricing structure have a tendency for higher enrollment rates in lower salary bands compared to a more traditional pricing structure. - Subsidies and assistance programs
Providing subsidies and financial assistance programs for lower-paid employees can also alleviate the burden of high medical costs. Employers can offer subsidies to cover a portion of the medical premiums or establish assistance programs that help employees with out-of-pocket expenses. These initiatives can make a significant difference in the affordability of healthcare coverage for lower-paid workers. - Employer contributions to Health Savings Accounts
High-deductible health plans can have different impacts on employees depending on their income level. A deductible of several thousand dollars has varying effects for individuals earning $20,000 annually compared to those earning $100,000.
Research shows that more Americans are not seeking treatment for health issues due to the high cost of healthcare. This trend suggests that avoiding necessary care may lead to more costly medical treatments in the long run, contributing to chronic illnesses and extended time off work.
Employers can help address the impact of high deductibles and encourage necessary care by:- Providing employer contributions to a Health Savings Account for lower-paid employees, or
- Using an HSA advanced feature that allows employers to loan employees HSA funds before their contributions are deposited into accounts.
- Expanded preventative care and wellness programs
Employers can also invest in expanded preventative care and wellness programs that encourage lower-paid employees to take advantage of free or low-cost health services. These programs can include routine health screenings, vaccinations, and wellness education initiatives that promote healthy lifestyle choices. By emphasizing preventative care, employers can help reduce the long-term healthcare costs for both employees and the organization.
Next generation medical plans as an emerging strategy
As employers continue to face the challenge of cost growth while striving to keep healthcare affordable for employees, many employers are turning to creative solutions through alternative medical plans. These innovative approaches aim to bridge the cost gap and offer viable options for managing expenses.
Over the past three years, we have observed a steady increase in the number of employers offering alternative medical plans. These plans take various forms, from high-performance networks to variable copay plans and alternative reimbursement models. These alternative medical plans strive to offer consumers price certainty for healthcare services.
Interestingly, of the clients offering an alternative medical plan, 40% added a new plan in 2025. In addition, lower-paid employees are migrating from the traditional plans to these alternative medical plans at a higher rate than those employees who are higher-paid.
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This trend highlights the growing interest and adoption of these solutions as employers seek to balance cost management with providing quality healthcare options for their employees.
Enhanced communication and education
Effective communication and education about available health benefits are crucial in encouraging enrollment and utilization of medical plans. Employers should ensure that lower-paid employees are fully informed about their healthcare options, the benefits of enrolling in a medical plan, and the available financial assistance programs. Clear and accessible information can empower employees to make informed decisions about their healthcare coverage.
Healthcare strategies that drive meaningful impact
The decreasing level of medical plan enrollment among low-wage employees is a pressing issue that requires immediate attention from benefit leaders. By understanding the tradeoffs that lower earning employees are forced to make and implementing strategies to improve the affordability and accessibility of healthcare coverage, employers can help ensure that all employees have access to the medical care they need. Salary-based contribution tiers, expanded preventative care programs, subsidies, alternative medical plans and enhanced communication are just a few of the strategies that can have meaningful impact on productivity and engagement.
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