BY JOSH HILGERS PRESIDENT HEALTH PARTNERS AMERICA
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hat is the employer’s role going to be in regard to health insurance in the near future? For the better part of 60 years the employer has played an integral role in providing employees with health insurance. Most of us have been a part of that system for so long we may have never stopped to ask “why?” Think about it. Our employer isn’t truly involved in choosing our life insurance, home owners or renters insurance or our auto insurance. Why are they making the decisions, or at least heavily influencing them, on our health insurance? If you trace this current system back to its roots, you find offering health insurance was simply a way around government efforts to stave off inflation concerns. After WWII employers, looking to attract and retain the best and brightest, were not able to do so by traditional means; compensation or bonuses. The government had instituted wage and price controls. As a way around this obstacle, employers went to the insurance companies, who at the time mostly offered catastrophic coverage, and worked out a deal to purchase benefits for their employees. Now one sixth of our economy has been affected by that little work around and created a bigger problem for us now than the little bit of inflation would have been 60 years ago. To add more fuel to this fire, companies began successfully lobbying Congress to treat these benefits as tax exempt compensation for their employees and a tax deductible business expense for the employers. This really created a snowball effect on the plan designs of the insurance offerings. Employers and employees alike quickly realized the huge tax benefits to offering more comprehensive benefit packages versus wages and monetary (taxable) compensation. Insurance carriers were encouraged to include more medical treatment options like chiropractic care, acupuncture and massage therapy. Though these were great additions, they take us away from the definition of “health insurance,” which should really be in place to help us with the medical bills that go into the thousands and hundreds of thousands for severe illness or accidents. One other major factor keeping the employer in the middle of the health insurance process with their employees: underwriting. The 1970s marked the
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beginning of states beginning to allow medical underwriting in the individual market. This meant employees with pre-existing conditions did not have affordable options if their employer didn’t offer coverage. So let’s take a quick look at the pros and cons of the current system and how it is leading to a new role for employers in the near future. Pros t Helps employers attract and retain good employees t Everyone qualifies—guaranteed issue t Benefits purchased tax free Cons t Lack of portability—Employer owns the plan, not the employee t Lack of choice for employees on carrier and plan design t Premiums are expensive t Burden on employer to carry these rising costs However, there is a system beginning to emerge in the market place that addresses all of these issues. It also accomplishes another goal of most employers—get them out of the middle of the relationship between their employees and the insurance carriers. A defined contribution health plan allows an employer to attract and retain employees with tax free dollars that can be used to purchase an insurance plan the employee chooses, owns, and can design to be affordable. We have seen this trend before. The retirement planning industry has almost fully transitioned from a defined benefit (pension) model, to a defined contribution (401k) model. Private exchanges are the perfect vehicle to aid in this transition in the health insurance market. It can educate and inform employees of their decisions, and can be backed by licensed experts to provide one-on-one consultations and service after the sale. Many companies, large and small, have begun making the transition, including Sears and Darden restaurants, and some municipalities. Brokers, employers, and employees should begin to embrace their new roles in the health insurance market and prepare for the future—because it’s here.
www.TheIHCC.com I HealthCare Consumerism Solutions™ I September/October 2012
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