Is Employer-Sponsored Health Insurance a Thing of the Past? Here's Why the Answer is Yes - and What You Should Do About It Right Now
Whether you're an employer, employee, insurance broker, or other type of trusted adviser, it's time to leverage the opportunities that come with this new reality
05 Dec, 2014, 11:01 ET
SALT LAKE CITY, Dec. 5, 2014 /PRNewswire/ -- U.S. companies can no longer afford to provide group health insurance to their employees. In 2013, as a group, Fortune 500 companies spent more on health insurance than they earned in profits.
"Facing double-digit growth in health insurance premiums, companies have either eliminated health benefits or redesigned the plans to include higher deductibles, larger copayments, and greater premium sharing by employees," says Rick Lindquist, coauthor along with Paul Zane Pilzer of The End of Employer-Provided Health Insurance: Why It's Good for You, Your Family, and Your Company (Wiley, 2014, ISBN: 978-1-119-01211-5, $25.00, www.zanebenefits.com, www.healthinsurancerevolution.org/book).
"For many, it's been a struggle," says Pilzer. "In fact, since 2000, more than 10 million Americans have filed personal bankruptcy due to their employers' failed health insurance plan."
But the Affordable Care Act has changed the game. And the solution is obvious: most companies should terminate their group health insurance in favor of defined contribution employer-funded healthcare and individual insurance policies purchased by employees.
"Making this switch will allow companies and employees to save up to $12,000 per employee per year, while offering a better employee health benefit program for recruiting and retention purposes," says Lindquist.
This paradigm shift in how Americans get their health insurance has huge implications for employers, employees, insurance professionals, and trusted advisers. Here are the steps each should take right now:
If you're an employer…
Cancel your group insurance. Every hour you spend managing your employer-provided health insurance is another hour you are not spending managing and improving your product or service.
Develop a defined contribution solution. Basically, employees purchase their own individual policies on the open market (a purchase frequently offset by government subsidies), and employers reimburse them.
"Regardless of the defined contribution approach you decide to take, your company should utilize third-party administration software to ensure compliance," says Lindquist.
If you're an employee…
Ask your employer to cancel your insurance. "There are many downsides to employer-provided health insurance," says Pilzer. "It's overpriced, unreliable -- you can lose your coverage if you're sick and unable to work -- and limits you to a certain group of medical providers and facilities, just to name a few."
"Consumers can migrate from employer-provided group policies to employer-funded individual plans at a total cost that is 20 to 60 percent lower for the same coverage," says Lindquist. "That's $4,000 to $12,000 in savings per year for a family of four for the same hospitals, same doctors, and same prescriptions."
Research and calculate the most cost-effective plan for you and your family. Take into account your premium amount (the amount you will pay to the insurance company for your plan, usually monthly) and "out-of-pocket" costs (the amount you will pay when you receive medical care), such as deductibles, copayments, coinsurance, etc.
If you're an insurance professional…
Develop the components necessary for becoming a health insurance concierge. Licensed health insurance brokers or service providers can play a valuable role for employers by helping employees select and purchase individual health insurance plans.
Partner with a defined contribution software provider. "For health insurance brokers and agents, a defined contribution solution offers a tool to increase individual health insurance policy sales and retain clients who are dropping group health insurance," says Lindquist.
If you're a trusted adviser (CPA, attorney, tax professional)…
Become a compliance expert. When providing tax-free reimbursement of individual health insurance policies through a health reimbursement plan, employers must ensure compliance with federal regulations, including but not limited to, legal plan documents, summary plan descriptions, and new market reforms required by the Affordable Care Act.
Help small business clients handle the tax implications of moving away from a group plan. The Affordable Care Act requires CPAs, tax advisers, and accountants to be experts on the key provisions of healthcare reform. As a result, tax advisers will now be the "go-to" for all health insurance decisions.
"Millions of Americans are already flooding the Health Insurance Marketplace, and as employers change the way they provide healthcare coverage, that number will only increase," says Lindquist. "Whether you're an employer, employee, insurance professional, or other kind of trusted adviser, you stand to benefit from this time of great opportunity."
About the Authors:
Paul Zane Pilzer and Rick Lindquist are the coauthors of The End of Employer-Provided Health Insurance: Why It's Good for You, Your Family, and Your Company (Wiley, 2014, ISBN: 978-1-119-01211-5, $25.00, www.zanebenefits.com, www.healthinsurancerevolution.org/book)
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SOURCE Paul Zane Pilzer/Rick Lindquist
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