Have the Texas Municipal League (TML), Texas Association of Counties (TAC) and the TRS ActiveCare (TRSAC) health plans become obsolete in today’s market?
Smart money says yes.
All are relics of the past, spawned in a different era when health insurance was not guaranteed and incorporated pre-existing conditions limitations. Back in the day TML, TAC and TRSAC provided a relatively safe harbor for employers seeking refuge from ever increasing health insurance costs.
But that has changed. It’s a new era. Health insurance is a lot different in today’s world.
Individual health insurance is no longer the bastard child of the industry. With the passage of the Affordable Care Act (ACA) this once second-rate alternative has been legislatively upgraded to a level on par with group health plans.
Individual health insurance policies are subject to the same government benefit mandates as group plans. Pre-existing conditions, once a reality, are no longer allowed. Guarantee issue, lacking before, is now mandated.
Group health plan members now have another viable choice whereas they didn’t before. They can choose their group “one size fits all” plan or purchase their own individual health plan.
More and more are doing the later.
That’s happening more than you think. A large Texas school district has found that 25% of their full-time employees have taken out individual health insurance policies in lieu of their group plan. More employees remaining on the group plan are putting family members on individual plans for significant savings. As a result dependent participation in group plans is at an all-time low.
Group health plan sponsors are slowly realizing there is a better alternative to providing and funding employee health insurance, something their plan members have already figured out. Despite pervasive company sponsored motherhood nurtured by HR departments employees are not stupid people and can think and act for themselves.
Instead of sending millions of dollars to insurance companies and third party administrators, these employers are gifting those monies, tax free, directly to plan members to spend towards health insurance plans of their choice, empowering them for the first time to fulfill their individual medical needs. This gets the employer out of the health insurance business while giving employees more choices. Everyone wins .
What about cost? Individual plans are often less expensive than group plans since members are pooled together for scale. In Texas the individual health insurance risk pool has over 3 million members. TRSAC on the other hand has less than 450,000 members and TML and TAC have less than that combined. Federal tax subsidies are sometimes available for purchasers of individual policies under certain circumstances and are often much higher than employer contributions.
We have noticed more than one instance where a city, county or school district can save millions of dollars by offering subsidies for individual health insurance policies instead of funding their group plan.
The Eagle Pass Independent School District is good example. Replacing their current (and expensive) health plan in favor of guarantee issued individual policies would lower taxpayer expense by millions while maintaining ACA government mandated benefits, with an added bonus of potentially bringing in millions of federal dollars for the benefit of community members at the same time.
Eagle Pass probably has no idea this option exists. That would not be surprising since insurance consultants and traditional group health insurance brokers view this new era option the same as Superman views kryptonite. They understand and fear the risk of losing relevancy and perceived value once clients become better informed.
This new era health care financing strategy is made possible by establishing Individual Coverage Health Reimbursement Accounts (ICHRA) for participating employees. A new cottage industry has been spawned with numerous third party administrators with advanced technology capabilities to managed and service ICHRA’s for sponsoring employers.
TML, TAC and TRSAC would be wise to offer their clients an ICHRA alternative by adding ICHRA administrative services to their product offering. But they won’t until competition starts taking their business. Traditional group health sponsorship can be a lucrative source of revenue for a multitude of third-party intermediaries whereas individual market revenue eliminates many of those financial opportunities, a long overdue byproduct birthed under today’s new era of the American health care financing and delivery system.
TML, TAC and TRSAC would be wise to understand that………
“The challenge facing successful business ventures is to understand the necessity to continuously respond to market forces in a proactive manner since competition will certainly become a factor to consider at some point. To ignore this basic business premise by remaining complacent is business suicide.” – Bill Rusteberg
