Are Employer Sponsored Well being Plans On The Approach Out?
The story of why we get our benefits from employers dates back to World War II when companies used healthcare as a means of attracting talent, especially women. While employer-sponsored health insurance has been the norm since then, it is clear that consumer needs have shifted. Consistent reporting may no longer be sufficient for Americans with elevated expectations and diverse health concerns. In the future, we could see employer-sponsored health insurance take the path of retirement plans. Consumers show that they are ready for change. Data shows that 41% of consumers believe that health insurance should be decoupled from employment. As executives look to the next few years, we have an opportunity to meet the moment and reconsider what health insurance looks like and what incentives companies should offer to attract the best talent.
Much has changed in the lives of American workers in recent years. One thing that has remained constant over the past 80 years is the way employees get health insurance – more than 156 million Americans are covered through employer-sponsored programs. But will that always be the case? Maybe not. Here’s why.
The story of why we get our benefits from employers dates back to World War II when companies used healthcare as a means of attracting talent, especially women. To fight inflation, the Stabilization Act of 1942 was passed to restrict an employer’s ability to raise wages to attract workers when the labor pool was scarce. The actual outcome of the law, however, was for employers to turn to alternative incentives such as health insurance. Because health benefits could be considered part of the compensation but not counted as income, workers did not have to pay income tax or wage tax on these benefits.
While employer-sponsored health insurance has been the norm since then, it is clear that consumer needs may have shifted. Consistent reporting may no longer be sufficient for Americans with elevated expectations and diverse health concerns. In the future, we could see employer-sponsored health insurance take the path of retirement plans. Here are five reasons why:
1. Today’s workforce is very mobile
Employees often switch from job to job and change employers after just a few years instead of staying with the same company for decades. According to Visier, younger workers are statistically twice as likely to leave their jobs in search of better deals. They make these changes for a variety of reasons – advancement, compensation, cultural fit, and more. Health insurance considerations may not always be a top priority when navigating job changes, but their impact on employees is more than trivial.
If employees change jobs mid-year, even if they have already completed their health insurance, which is deductible from their previous employer’s plan, they must effectively start over under their new employer’s plan. There are also other downstream effects, such as possible changes in network providers and coverage. These factors can lead to increased, unexpected out-of-pocket responsibilities and sometimes affect people’s ability to access the care they need.
In this regard, decoupling insurance from employment can make a lot of sense so that job changes do not disrupt health care consumption or create unexpected (sometimes significant) costs for consumers – especially for these younger and highly mobile populations.
2. Consumer expectations have evolved
In other areas of our life we no longer accept “one-size-fits-all” solutions. Why should healthcare be any different? Consumers’ needs and perspectives on health insurance cover vary widely in many dimensions, including intergenerational differences.
As the father of four children, including a new-born son, I’ve seen firsthand how different younger generations think about their insurance options and experiences.
Younger generations have only experienced one digital age – and therefore have high expectations in terms of flexibility, convenience and personalization. They’re generally in good health, so they’re far less likely to have anything to do with chronic conditions, specialized doctors and treatments, or expensive prescriptions. Many are single and have not yet started families, which simplifies their considerations when choosing cover. Younger generations are great users and competent users of technology. They are therefore likely to be more receptive to change and at the forefront of adopting new technologies and experiences.
It is inevitable that the demand for more personalization in healthcare will reach a tipping point – and employer plans will either have to evolve to deliver that experience or consumers can take matters into their own hands and reevaluate where to get their health insurance .
3. Technological advances make it easier to tailor plans to meet individual needs
Technology has unlimited potential to bridge the gap between supply and demand in new and creative ways. It happens everywhere. Netflix has changed the way we think about television and movies. Amazon has changed the way we think about shopping. The list goes on and on, with new names being added every day.
Healthcare will be no exception – traditional health experiences will also be disrupted. There are consumer vulnerabilities everywhere in healthcare. And where there are weak points, there is a demand for new solutions. The technology has great potential to improve the health experience, improve language skills and help consumers make health care decisions. It provides personalized recommendations that help consumers save money on coverage and care.
But we have only scratched the surface of the possible.
4. Employers, especially those with younger executives, fail to see the logic of health care
If you didn’t grow up in this system, it doesn’t make a lot of sense. Health insurance is important and affects people’s ability to access the care they need for their specific family and health situations. Why should something so personal and important be tied to your place of work?
When employers make decisions about the design of health insurance plans, they balance the needs and desires of a diverse workforce — with a few limited, uniform options.
Every year employees have to go through the often confusing open registration process. As the total cost of healthcare has increased, so has the cost of the worker. Often times, when employees receive benefits, they feel like they are spending more of their income on insurance policies that no longer offer as much value as they used to. This can have a negative impact on employee satisfaction.
Providing health insurance to employees also places a financial burden on employers. The cost sharing rests primarily with employers. A report by the Kaiser Family Foundation found that in 2019 the average employer paid $ 7,188 per employee for individual insurance and $ 20,576 per employee for family insurance.
5. Regulatory changes have opened up new opportunities
With the introduction of the ICHRA (Individual Coverage Health Reimbursement Arrangement), we recognized the need for greater flexibility in terms of health benefits. ICHRAs are designed to enable employers of all sizes to give pre-tax dollars to employees to purchase the insurance coverage that best suits their individual needs, rather than offering group protection under the Affordable Care Act (ACA). With a defined contribution to coverage, employers can control rising health costs and avoid the administrative burden of managing health programs. At the same time, employees are given more flexibility by being able to choose their coverage from a much wider range of options. This is very similar to the shift in retirement benefits from pension funds to 401,000.
The above factors have all fueled increased discussion about moving away from employer-sponsored health insurance. And consumers are showing that they are ready for change. Data shows that 41% of consumers believe that health insurance should be decoupled from employment. When executives look to the next few years with their employees as a guide, we have the opportunity to meet the moment and get an idea of what health insurance looks like.