No-Cost Health Insurance: Arriving or Leaving?

First it was work-from-anywhere policies and increased mental and emotional wellness benefits. Then it was signing bonuses and four-day workweeks. Now, the latest major perk to catch on could be no-cost health insurance.

A new survey finds that half of midsize firms, in a bid to attract and retain workers, are promoting health benefits with no premiums. Far from mom-and-pop shops, the firms range in size from about one hundred employees to several thousand. Options for coverage vary by company. Some offer the no-cost option only to employees who are in a certain income bracket or meet certain wellness criteria, for instance. Some cover the costs only for employees, while others cover both employees and their families. 

Experts say it’s a sign of the times: both the labor shortages of the past two years and a renewed emphasis, post pandemic, on wellness have refocused attention on corporate health plans. “Organizations vying for in-demand talent pools have to get more creative with their benefits packages to compete,” says Brian Bloom, vice president of global benefits for Korn Ferry.

The value employees place on healthcare benefits, amid an intensifying battle for properly skilled talent, could lead more and bigger organizations to consider offering a no-cost option, experts say. Across industries and demographics, the vast majority of employees still rank health-care benefits alongside compensation as the top reasons for taking a job. When choosing between two jobs, for instance, nearly 90% of people view health coverage as a deciding factor.

One of the things employees value most in health-care benefits is choice. The days of a blanket health-care offering for all employees expired long ago. But Bloom says even basic tiered offerings—such as those with different levels for co-payments and deductibles—are table stakes now. He says organizations have been moving towards customized and personalized options for different groups of employees. For instance, some companies offer younger employees the option of buying health-care insurance or, if they can get coverage elsewhere, using the money to pay off certain kinds of debt, like student loans. 

But no premiums doesn’t necessarily mean no cost, cautions Steve Kapper, head of Korn Ferry’s National Health and Welfare Benefits practice. In fact, it might mean employees actually pay more in out-of-pocket expenses. “It may be zero dollars out of your paycheck, but you still have to pay deductibles, coinsurance, and co-payment fees that could be higher than the premiums you would pay,” he says. Kapper points to research showing that some employees would rather have larger deductions from their checks if it meant cheaper deductibles, co-payments, and prescription fees. 

How widespread an employer-paid premium option becomes is directly related to how cost-effective it can be for the organization. The two biggest costs to any business are compensation and benefits—and right now both are soaring. With talent being offered increases of as much as double their salaries, companies that can’t compete on pay could see a no-cost health-care option as a nice enticement to compensate for a lower base salary. At the same time, however, insurance premiums paid by companies have increased around 6 percent annually on average. Kapper advises organizations to look at their overall benefits plan costs—including dental, vision, and prescription costs—and devise options that create as much flexibility as possible for employees while also generating savings that improve the bottom line. 

The rapidly changing economic environment could shut down the trend toward no-cost health insurance before it even gets started, however. Historically high inflation, spiking interest rates, and a swooning stock market are leading to recession speculation. Hiring has not only slowed, but some companies, particularly those in the tech sector, are already laying off employees. Employees and prospective new hires feel less powerful in job negotiations than they did a year ago. “The possibility of a recession is cooling everything off,” says Bloom.