Health Insurance: Is it time for employers to throw in the towel?

It’s hard to look at the results of this year’s Kaiser Family Foundation/HRET Employer Health Benefits Survey and not ask yourself whether this is just a losing battle for business owners. For the annual survey, nearly 3,200 non-federal public and private firms with three or more employees were interviewed, and the results are a bit depressing.

Here are some of the stats, as summarized by The Motley Fool:

  • Nationally, 48% of people have health coverage through an employer
  • “Between 2005 and 2015 the average annual insurance premium for workers rose by 61% to $17,545 from $10,880.”
  • During that time, “workers’ contribution rose at an even faster clip, increasing 83% to an average of $4,955 per year.”

Perhaps most importantly, health insurance premiums “outpaced the rate of inflation and worker wage growth since 2000.” That means that, each year, health insurance becomes more and more unaffordable for employees.

From a company’s standpoint, the primary reason to offer health insurance and other employee benefits is because they help to attract and retain quality employees. However, as the costs for employees and their family members—both the monthly premium and the out-of-pocket exposure—continue to increase, health insurance is becoming less and less of a benefit. In fact, due to the controversial decision by the IRS to block the entire family from a premium tax credit in the individual market if coverage is affordable for the employee, employer-sponsored health insurance actually harms a number of workers.

For larger employers, who are required to offer health insurance or face significant penalties, dropping coverage may not be an option. But for smaller employers, rising premiums and decreasing employee satisfaction is leading some to re-think their benefits offering.

Another survey, this time by the National Small Business Association, found that the number of small companies offering health insurance to their employees fell 5 percent over the past year, and the “vast majority” of small employers expect to pay even more for health insurance next year. While the survey also found that most small business owners still “believe offering health insurance is important to recruit or retain top workers,” we can’t help but wonder how long that will last. As costs keep going up, and because employees and their family members now have other options in the individual market, it may not be as important as it once was.

So what’s the answer? First, we need to recognize that “health insurance” and “employee benefits” aren’t necessarily the same thing. Even employers who don’t offer group health coverage need to recruit and retain talented employees, and there are a lot of benefits that will help them do that. For those that no longer see the value in offering employer-sponsored health insurance to their workers, the employer can still provide a benefit by facilitating the purchase of individual policies through a branded online marketplace. This solution allows employees to compare their options online—not just subsidy-eligible plans offered through the state and federal marketplaces but “off-exchange” plans as well—and then talk to a licensed agent in a national call center to get one-on-one assistance to help them select a plan, enroll in coverage, and apply for a premium tax credit if eligible.

An online marketplace is a win-win for employers and employees. Both tend to save money with this option, and the employer can use the money that was formerly budgeted for group health coverage on other benefits like dental and vision insurance, life and disability insurance, and more.

Brokers who currently market to small employers also have the option of setting up a branded “virtual storefront” to offer to their small employer clients who are fed up with continually increasing group health premiums. This solution allows agents to continue to work with business owners and provides employees the support they need to choose the right plan for themselves and their families.

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