Currently, employer-sponsored health insurance is the foundation of America's health insurance system. The Affordable Care Act (ACA) has introduced new changes that greatly benefit the individual, consumer-driven health insurance market. Now, having health insurance is no longer contingent on employment.
New research from the Employee Benefit Research Institute (EBRI) raises the question “Are employment-based benefits facing a ‘crisis’ or merely an uncertain future?”
Health Insurance Coverage Is No Longer Based on Employment
Paul Fronstin, head of the Health Research and Education program at EBRI, stated that the ACA “levels the playing field like it’s never been before,” now that health insurance coverage isn’t dependent on employment.
Most people are familiar with employer-sponsored health insurance due to the fact that in the past, most people had coverage through employer-sponsored health insurance. Since coverage is dependent on an individual's (or family member's) employment, when an employee leaves the company, the employer-sponsored health insurance coverage ends. While there are ways for employees to extend coverage if employer-sponsored coverage ends (through COBRA), it is expensive and temporary.
Fronstin also points out that “One could argue workers won’t need their employers any more for health benefits once the law is fully implemented and health exchanges become a viable option to employer-sponsored health benefits. That raises real issues about the future of employment-based health coverage.”
Aside from the fact that it isn’t contingent on one’s employer, individual health insurance plans offered on the ACA’s exchanges cost less than, similar employer-sponsored plans. Additionally, most exchange shoppers have a wider variety of plans than the typical employer-sponsored offering.
EBRI’s research parallels what other industry experts are saying about the dilemma, and demise, of employer-sponsored health insurance.
For example, Dr. Ezekiel J. Emanuel, in his recently published book, “Reinventing American Health Care,” predicts that by 2025, “fewer than 20 percent of workers in the private sector will receive traditional employer-sponsored health insurance."
S&P Capital IQ, a division of McGraw Hill Financial, came to a similar conclusion. S&P Capital IQ predicts that by 2020, 90 percent of American employees who currently receive health insurance through their employers could be shifted to individual health insurance and government Exchanges.
In a recent Whitepaper we discuss how the shift will first start with small businesses, predicting that 60 percent of small businesses will eliminate traditional employer-sponsored health insurance in favor of an employer contribution to individual health plans by 2017.
What About Employers Who Still Want to Provide Benefits?
With employer-sponsored health insurance rates on the rise, some employers are choosing to pay the employer shared responsibility fee rather than paying the increasing premiums. However, many employers still know the value of offering health benefits to recruit and retain key employees.
Employers are looking for an easier, less expensive way to provide their employees with a health benefit, without having to pay the increasing employer-sponsored health insurance premiums. Employers can provide their employees with a valued health benefit, while offering all of the benefits and flexibility that individual health insurance policies offer by:
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Not offering traditional, employer-sponsored health insurance. Just offering employer-sponsored health insurance disqualifies employees (and often their families) from premium tax credits
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Implementing a defined contribution health plan to reimburse employees for individual health insurance premiums
Employer-sponsored health insurance is undergoing a dramatic transformation. Employers are switching to individual health insurance and defined contribution because this solution allows employers to get out of the business of purchasing health insurance while offering better health benefits.
Do you agree or disagree that health insurance is undergoing a dramatic shift? Leave a comment below.
