While the Affordable Care Act (ObamaCare) has brought much needed reform to the individual health insurance market, and made coverage more accessible to those without other options, it has in many cases increased the cost of major medical insurance policies for many. But have these costs yet caught up with the exorbitant cost of Group Health Insurance? Let's find out...
How Much Does Group Health Insurance Cost?
The following chart is taken from Kaiser Family Foundation's 2015 Employer Health Benefits Survey:
To put this graph into perspective, employer sponsored health insurance has increased 185% for single coverage, and 203% for family coverage. That is more than triple in the past 16 years for family coverage. With all the wage and profit increases going towards keeping up with the insurance costs, this is an unsustainable model.
How Does Individual Health Insurance Compare?
Many business owners often have the common misconception that they are getting a deal when offering group health insurance. You would think that buying policies in bulk would have a cost saving advantage, however, the opposite is often true with a small business. Also, due to healthcare reform, group health insurance is no longer the only place to get quality, guaranteed coverage. The following table outlines how a individual health insurance will still provide a much better value the employer sponsored plans.
|Individual Rate||Employer Rate||Savings|
|Single Coverage||$3,587 / year||$6,251 / year||$2,664 / year or 43%|
|Family Coverage||$10,739 / year||$17,545 / year||$6,806 / year or 39%|
|Single Coverage W/ Subsidy||$2,497 / year||$6,251 / year||$3,754 / year or 60%|
|Family Coverage W/ Subsidy||$5,589 / year||$17,545 / year||$11,956 / year or 68%|
Marketplace Calculator, 2016—Individual average based on Male, Age 40, non-smoker, family with 2 children.
Subsidy average based on income 255% of federal poverty level. All averages based on Silver-level plan.
The combination of a broken group health insurance model, and public policy increasing the accessibility and coverage standards of individual health insurance market, it seems clear that small business owner will be moving to a defined contribution style solution. After you decide how you will contribute to employees' personal policies, you simply define your contribution.
What questions do you have about individual vs. group health insurance? Please comment below to get answers.