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Small Business Employee Benefits and HR Blog

Employer-Provided Health Insurance is Slowly Dying

For years, the common way of thinking was that employer-provided health insurance was the way to get health insurance. However, since the Affordable Care Act (ACA) has gone into effect, people are beginning to see that employer-provided health insurance is no longer the only way. Which begs the question, what will happen to employer-provided health insurance?

This article is a brief overview of where employer-provided health insurance is now, where it used to be, and what will happen to it given its current path. Additionally, we’ll discuss how individual health insurance has stepped in to change the landscape of health insurance.

Is Employer-Provided Insurance Really Dying?What Happened? Employer-Provided Insurance is Dying

Yes. In fact, it’s estimated that 60 percent of small businesses will eliminate employer-provided health insurance by 2017.

But let’s look at the trends in order to better understand why employer-provided insurance is dying. In 1999 the cost for single-coverage premiums was $2,196/year. By 2006, just seven years later, the cost had increased to over $4,000/year. Finally, by 2014, the cost increased to $6,025/year for single-coverage premiums -- the cost nearly tripled in 15 years (source).

Unfortunately, the story holds true for family-coverage premiums as well. In 1999, the cost for a family-coverage premium was $5,790/year. By 2014, the cost had also nearly tripled to $16,834/year.

Why?

Employer-provided insurance premiums are unaffordable. Simple as that. When you take into account real wage growth in the United States has not increased, but has been stagnant over the last 50 years, it becomes clear that employer-provided insurance is becoming less affordable with each year.

Furthermore, small business employers struggle to offer employer-provided health insurance to their employees. And when 62 percent of the United State’s workforce has 0-9 employees, many individuals are going without health insurance due mainly to cost.

Individual Health Insurance Is on the Rise

There’s no sign of it stopping. And as previously mentioned, 60 percent of small businesses will drop employer-provided health insurance by 2017. Why?  For individual health insurance.

Although the majority of Americans still get their health insurance through work (56 percent), small business employers are beginning to see that options such as individual health insurance are more affordable. In fact, individual health insurance costs 20 to 60 percent less than employer-provided insurance. In 2014, the average individual health insurance premium purchased was $346/month, before tax credits were applied. And with premium tax credits, individual health insurance costs are 84 percent less than employer-provided health insurance. Individual health insurance is on the rise.

Why?

It’s affordable. With the Affordable Care Act in full effect, health insurance is no longer unaffordable to Americans and for small business employers to provide employees. The shift toward individual health insurance means more Americans will be covered and will be able to afford premiums even though real wages have been stagnant for years.  

What Does It All Mean?

There is a shift in the way Americans are getting health insurance and the way small businesses are offering health insurance. If the trend continues, employer provided health insurance will eventually become something few businesses offer.

Where do you think employer-provided insurance is going? Do you think it will eventually be gone? Comment below and let us know!