This trend is driven by several factors, including rising deductible costs and a post-pandemic fear of being unprepared for a major medical emergency. Employees also have more options these days: As of 2023, around 61% of people worked for a company that offered multiple health care plans.

More important than the reasons, though, are the implications. The decline in HDHPs is evidence that employee health care is at a crossroads, one that benefits advisors must navigate carefully if they hope to succeed in a fast-evolving landscape.

Below, we break down some of the most important learnings that advisors and other benefits professionals can act on in the years to come.

Prepare for increased scrutiny around health care plans

For years, a majority of private-sector employees opted for HDHPs because it was the simplest, cheapest option with the lowest premiums. Now, advisors will need to prepare themselves to address questions and concerns about all kinds of plans.

The table is already set for this trend, with research showing that 73% of employees want more education about their benefits. Plus, companies are welcoming a new generation of employees who want clarity and transparency: Among all age groups, Gen Z is the least likely to report feeling educated about their health plan options.

It’s also crucial to understand why employees may have questions or want to switch health care plans in the first place. Costs will always be a concern, but just as important is the fear of not being able to afford unexpected bills. In fact, nearly three-fourths of Americans are either somewhat or very concerned about affording unplanned medical costs.

An organization’s size also plays a big role. For example, point of service (POS) plans are significantly more popular at small firms than at large ones. Understanding an employee’s most likely needs is the first step to helping address their concerns.

Study up on lesser-known plan types

As mentioned above, POS plans are now somewhat popular with smaller firms. But in general, these plans have grown from just 6% of enrollment in 2018 to 10% in 2023.

POS plans may appeal to both employers and their employees because they offer a middle ground between health maintenance organization (HMO) plans and preferred provider organization (PPO) plans, both in terms of cost and flexibility. Since POS plans allow employees to see both in- and out-of-network providers while maintaining a relatively low co-pay, it’s possible they’ll continue to rise in prominence as HDHPs fall.

But advisors should also be ready for more obscure options to enter the fold. An analysis from McKinsey & Company predicts that by 2030, 12 million Americans will have some kind of “alternative plan.”

These plans could include everything from 100% co-pay plans to reference-based pricing (RBP) plans to employees receiving a prepaid health care card with a set amount of funds. As of now, the frontrunner is unclear — but the important thing is that advisors keep an ear to the ground as newer and less conventional ideas emerge.

Understand when HDHPs still make sense

Of course, there are countless kinds of employees for which an HDHP is still the best choice, ongoing trends aside. Employees who are generally healthy or want to contribute to their health savings account (HSA) will benefit greatly from a plan where they pay low premiums and use a pre-tax account to cover what few medical expenses they do have.

That last point is a major one, as HSAs have risen in popularity over the last decade-plus, even during the recent years in which HDHP enrollment fell.

Plus, any employee who’s able to pay their medical bills upfront may want to stick with an HDHP, too. As employees consider the switch, advisors should explain that paying upfront can lead to a lower cost, as they’ll likely pay a negotiated rate between the insurance company and their health care provider.

There are also some demographic factors to consider. While HDHP enrollment is declining nationally, it is sharply increasing in a few key states. In South Carolina, Vermont and Utah, HDHP enrollments grew by over 9% from 2022 to 2023. So, it’s critical for advisors to understand their environment and the factors that may be driving those employees.

Get ready for an uncertain future

Above all, it’s worth remembering that no one can predict the future. Although it seems like HDHPs are on the decline, it’s possible they could bounce back someday soon.

Cost will play a big role here. HDHP premiums have risen over each of the last four years, with rates rising in 42 states this year. Overall, any changes in HDHP enrollment will have a massive impact on employee health care at large, so it will be a consistent issue to watch in the coming years.