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Disclosing the cost of health care

Many American employees are in for an eye opener when they get their W-2 forms this year. For the first time, as a part of the Patient Protection and Affordable Care Act, commonly known as the health care reform law, employers are required to disclose the full cost of health insurance coverage on that document.

Many of my clients have been frantically preparing messages to help employees understand that the information is there only to disclose the cost – and that employees will not be taxed on the amount. However, I think it is also important for employers to consider this a real opportunity to help employees understand just how much their companies truly invest in health care on behalf of those who work for them.

Many employers unintentionally shield this information from their workforce so employees have no idea of the true cost. In 2012, the Kaiser Family Foundation reported premiums for employer-sponsored health insurance averaged $5,615 a year for coverage of just one individual and as much as $15,745 for family coverage.

As I discussed a few weeks ago, the cost of health care benefits really is like a hidden paycheck for employees. Employers are losing a critical opportunity to help employees understand the true value of their total rewards when they fail to disclose this cost.

Another valuable reason to help employees be aware of the cost of coverage is to impress upon them the importance of managing those costs. If employees don’t understand how large the costs truly are, it is hard to motivate them to be responsible health care consumers.

As C. Eugene Steuerle, a tax economist at the Urban Institute, told the New York Times this week, “If we want to control health care costs, people have to be aware of them.”

Employers should use this opportunity, when all employees see the real cost of health care on their W-2 forms, to continue this critical conversation, or launch it if they haven’t already. I’ve personally seen tremendous feedback from different clients whose employees really have their eyes opened when this information is shared.

One client’s employee, whose insurance covers her entire family of six people, saw the total health care price tag was nearly $22,000, when she only paid about $9,000. She said it really did make her aware in a new way of just how much her company is doing to protect her and her family.

Health care coverage is not free. In many organizations it likely affects wages for individuals as well, assuming that if health care costs are high, there is less left over for raises and bonuses. This is definitely food for thought for both employers and employees.

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Michelle Hicks, a senior professional in human resources, is a director in the communication practice of Buck Consultants, a Xerox company. 

About Michelle Hicks

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