Reigning in Insurance Costs by Transitioning Employees from Group to Individual Coverage
May 28, 2020
Premiums for employer-sponsored health insurance coverage are once again on the rise, up 42.4 percent for employee-only and 57 percent for family coverage between 2005 and 2013. That's according to “State-Level Trends in Employer-Sponsored Health Insurance: A State-by-State Analysis,” an analysis published in January 2015 by the Robert Wood Johnson Foundation (RWJF).
Health insurance is a significant cost—and in fact is the largest uncontrollable expense most must deal with in their business budget. According to TriNet, medical insurance costs an average of $9,300 per employee per year, with employers paying about $6,700 of the costs.
As premiums rise, the percentage of large and small companies offering employer-sponsored insurance has been dropping, falling 8.8 percentage points between 2000 and 2013. The decrease for smaller employers was more than 11 times larger than their bigger counterparts.
This has led to predictions that the majority of employees will ultimately wind up on the federally facilitated marketplace (FFM) or state-based exchanges (SBE). A recent study by S&P Capital IQ predicted that 90 percent of workers currently covered by their employers will transition to SBEs or FFMs by 2020. Further, in a survey conducted by Grand Valley State University, 68 percent of the small businesses that indicated they were dropping group coverage had plans to send their employees out to a public exchange for individual coverage.
However, rather than drop employer-sponsored coverage altogether, a growing number of employers are seeking out new and mutually beneficial solutions to a costly problem. One of the first stops for many is an examination of the potential benefits their employees could derive from acquiring individual coverage through a private exchange.
The Best of Both Worlds
Private health exchanges enable employees to shop, compare and purchase medical, Medicare, and other insurance products on their own. Introduced into the marketplace as a flexible alternative to traditional health plan models, an exchange can allow offerings to be customized to fit the needs of a particular group, providing access to a platform of fully-vetted health plans (under-65 and over-65) as well as dental, vision, life, and ancillary products.
One of the greatest myths about private exchanges is that they exclude individuals from receiving the subsidies available to those who go directly to the FFM or SBEs to purchase coverage. In fact, private marketplaces can and many do provide access to on-exchange benefits.
This means that those who seek out private exchanges as a way to transition employees to individual coverage can still deliver the significant benefits they'd realize by purchasing Qualified Health Plans (QHPs) on the public exchange. This includes the direct government subsidies that are available to those earning less than 400 percent of the poverty line wage and who are not eligible for employer or other public assisted healthcare such as Medicaid or Medicare. In general, subsidies are available for individuals making up to $45,960 in annual income and up to $94,200 for a family of four—which means low- and moderate-income employees in particular may be able to get better coverage at a lower price that they could from their group plan.
Additionally, leveraging a private exchange to switch from group to individual coverage gives employees access to a broader choice of plans, both QHPs and commercial products, as well as multiple carriers and their varying provider networks.
Private exchanges also provide employers with another option that is growing in popularity, that of shifting greater responsibility for coverage selection to employees. They can allocate to each employee a fixed amount of money to purchase individual health insurance through the private exchange. The contribution is usually added to the employees' paycheck and allows them to choose their own provider and plan based on their individual needs, while enabling the employer to control costs and still be viewed as an active participant in the benefit decisions of their employees.
Partnering for Success
When it comes to leveraging private exchanges to provide employees with access to individual coverage, the key is to connect with an agent or association that has established a relationship with a partner capable of providing the technological infrastructure and advanced consumer tools that are crucial to a successful experience.
The best private exchanges will feature a full suite of top-name products from leading insurance providers designed to meet both employer and employee needs. They will also deliver high quality sales and customer support.
The latter is especially important the first year of the transition, as many employees faced with shopping on the exchange are purchasing insurance on their own for the first time. This means an increased need for experienced agents to answer questions and provide education and guidance on evaluating plans to identify the one that is best suited for the customer.
Thus, it is important for businesses to identify partners who offer a private exchange that is backed by agents who are licensed in health and life, certified as FFM agents and Medicare-certified. Access to that support is also crucial. The ideal exchange solution will provide multiple access points, including easy-to-navigate web tools, telephone and ‘click to chat' support. It will also provide convenient and comprehensive information, research tools and personalized guidance to help employees secure the most appropriate coverage.
When properly planned and executed, transitioning to individual coverage can be a win-win for the employer and employee, addressing serious cost issues while providing a scope of coverage options not typically available under standard group policies.
About the Author
Jay McLauchlin is Senior Vice President, Consumer Sales, for HealthPlan Services, the nation's leading technology, sales, retention and administrative services provider for the insurance and managed care markets.
