The majority of Americans purchase health insurance through work - for now. However, as the cost of employer-sponsored health insurance continues to rise, employers and employees are scrambling to find more affordable coverage options.
This article takes a look at current trends of how Americans access health insurance, and how they’ll access coverage in the future.
56% of Americans Get Their Health Insurance Through Work
Currently, the majority (56%) of non-elderly Americans get their health insurance through work.
Of the nearly 267 million non-elderly residents in the U.S., 56% are covered through their employer, 18% are uninsured, 21% are covered through Medicaid or another public program, and 6% are covered through an individual or family plan.
So, what does this mean? Americans are slowly making a shift in the way they access health insurance. In fact, the percentage of Americans who get health insurance through work has been declining over the last decade. As such, many economists and industry experts predict that up to 90% of companies will abandon employer-sponsored group health insurance by the year 2020 in favor of individual health insurance and the government marketplaces.
Employer-Sponsored Group Health Insurance Costs are Rising
A large contributing factor to the decline of employer-sponsored health insurance is cost. According to the Kaiser Family Foundation, from 1999 to 2014 the cost to cover a single employee with employer-sponsored health insurance nearly tripled from $2,196/year in 1999 to $6,025/year in 2014.
According to a Mercer survey, employers are predicting the health benefit cost per employee to increase by 3.9 percent on average in 2015 - and this is only if employers make significant changes to their current plans to curb costs.
If this trend continues beyond 2015, what is going to happen to the way Americans access health insurance? Will employers and employees be able to afford employer-sponsored health insurance? The answer is overwhelmingly, no.
46% of Small Businesses Don’t Offer Health Insurance
Because employer-sponsored health insurance costs are rising, and because of the prohibitive eligibility requirements, small businesses are much less likely to offer traditional employer-sponsored health insurance to employees. In fact, 46% of all small and medium businesses (with less than 200 employees) don’t offer employer-sponsored group health insurance - compared to 98% of larger companies who do.
If large companies are unable to maintain employer-sponsored group health insurance, the outlook for small businesses is worse. However, there is a solution - switch employees to individual health insurance and contribute to a premium reimbursement plan.
The Switch to Individual Health Insurance
Considering the majority of Americans get their health insurance through work, and group health insurance costs have become unsustainable, many small businesses are switching employees to individual health insurance. Instead of contributing to group health insurance premiums, businesses are setting up and contributing to premium reimbursement plans to reimburse employees for individual health insurance.
In addition to the cost savings, this shift is happening now because there are new advantages to individual health insurance such as guaranteed acceptance, choice, portability, and tax credits. These new advantages have made individual health policies more attractive to employees than employer plans. As a result, the number of policyholders in the individual market is projected to increase to more than 150 million by 2025.
Over half of Americans still get their health insurance through their employer, but there is a rapid shift happening now. Employer-sponsored health insurance has become unaffordable and unsustainable. As such, it’s estimated 60% of small businesses will eliminate traditional employer sponsored health insurance in favor of individual health insurance and premium reimbursement over the next three years.
How do your employees purchase health insurance? Have you made a change, or are you looking to make a change? Join the discussion below.