The Problem – Group Health Insurance Is Broken

paradigm

Due to recent reforms to the individual health insurance market, it no longer makes financial, logical or social sense for employers to continue offering group health insurance plans to employees.”

Editor’s Note: The following article is provocative. Individual plans are not underwritten and are guarantee issue. Group plans for groups of 50 or more are underwritten and not guarantee issue. PPACA has caused a 180 degree shift in paradigm.

Source: Zane Benefits

Health insurance is the single most important consumer financial product Americans purchase today. One wrong step can bankrupt even the most affluent family. Yet, most Americans don’t get to pick their own health plan or doctor network. Rather, they get a one-size-fit-all group health insurance plan chosen by someone else. Due to recent reforms to the individual health insurance market, it no longer makes financial, logical or social sense for employers to continue offering group health insurance plans to employees. This is because group health insurance:

  1. Is unaffordable,
  2. Limits employee choice, and
  3. Has become socially irresponsible.

 

1. Group health insurance costs are unaffordable

The average cost to cover an employee with group health insurance has increased from $2,196 per year in 1999 to $5,884 per year in 2013. For family coverage, the cost has increased from $5,791 per year in 1999 to $16,351 per year in 2013. This is not sustainable for employers or employees.

On average, individual health insurance plans cost 20% less than traditional group health insurance, and special “discounts” are now available for plans purchased in the Health Insurance Marketplaces. These discounts, called “premium tax credits,” will help eligible employees buy individual plans at a greatly reduced price.

2. Group health insurance limits employee choice

Group health insurance is broken because you have an employer picking a one-size-fit-all plan for employees and families with very different needs. As a result, most employees have NO idea what their health insurance plan is, what it really costs, or what it covers.

With individual health insurance, employees choose the coverage and doctors that best fits their family’s needs. Individual plans are categorized by four standard levels of coverage called “metallic tiers” to make it easy to compare options.

3. Group health insurance has become socially irresponsible

When an employee terminates employment, their family loses coverage unless they elect COBRA, which is often unaffordable. Moreover, when an employer offers employees a qualified group health plan, their employees become ineligible for federally-subsidized coverage which typically offers the same or better coverage to employees for a fraction of the price.

Individual health policies are superior to group coverage for all employees because they are permanent and portable, independent of their employment. As a result, there is no more need for expensive, temporary COBRA

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