Replacing group health with individual-market plans benefits everyone

view original post

Roughly 50 million employees will be quitting their job this year to find one that pays more, provides more advancement opportunities and is a better fit to their lifestyle. Very soon they likely will be demanding that their employer lets them choose their own health insurance plan. They don’t want their job to dictate their life. And a large part of that is what insurance they get access to and how much it costs them each month. 

To the 50% who rarely use insurance, an expensive platinum plan is not a benefit. But they need insurance, so they take whatever is offered at whatever cost. To them it feels like taxation without representation, and I am pretty sure we fought a war to put an end to that 250 years ago. Yet, 160 million people still get their health insurance from their employer without having a say in what they get.

Why is this a big deal? In addition to the belief that having personal control over your health insurance plan and premium cost is simply better than not having control, there are some major problems with the current system. 

For the past six decades, tax laws have made group insurance the only competitive market for businesses. Leaving out the entire individual market during this time resulted in group insurance carriers starting to compete for business by paying brokers large bonuses and extremely high commissions for placing business with them. Brokers who advise businesses are being held hostage by a compensation model that incentivizes maintaining the status quo, which means high costs and limited options. The individual market did not need to compete for business that way, so commissions are generally very low or nonexistent. 

Read more: Advisers in conversation: This father-son duo predicts a shift to healthcare consumerism

Two years ago, the tax laws finally changed — giving individual-market plans the same tax-advantaged status for businesses as group health insurance. The individual market is already cheaper than the group market in more than half the country, and it’s getting better each year. Now the only things standing in the way of employees having complete agency over their insurance plan are brokers who are incentivized to keep their clients in the group market.  Abandoning their current model means risking their own jobs and the ability to put food on their own table. 

Under these new tax laws, employers can simply give employees the money that would have been used toward the group plan to buy an individual policy that employees choose themselves. Both the employer’s and employee’s money will be tax free. Employees will get access to a wide variety of plans from high-cost, high coverage with a broad network to low-cost, lower coverage plans with a smaller network. In addition to being able to control their coverage and monthly costs, they also own the plan. So if they leave the company for any reason, they can take the plan with them to their next job. It’s completely portable. No more changing networks and resetting deductibles.

This opens up an entire world of possibilities. Picture this scenario: employers offer $600 toward the $800 group insurance policy, leaving employees on the hook for the other $200. Employees have one option, and they are legally obligated to have insurance, so they take it. Instead, picture this: employers give employees the $600 and let them choose their own plan. An employee finds a plan for $450 that has their doctor and favorite hospital in the network.

They use that extra $150 for voluntary products, telehealth, wellness programs, mental health assistance, or even paying down student loan debt. These are all things they could put the money toward right now if their employers just gave them the choice. By having this choice, employees went from spending $200 a month out of their own pocket for a plan they might never use to securing a suitable plan and additional benefits without spending any money out of their own pocket. 

Read more: Employee benefits are inequitable — and it’s getting worse

The good news is that the word is starting to get out. And once a critical mass has hit, the demand for personal choice of health insurance will quickly grow to become universal. Like remote work, once employees get wind of being able to use their employer’s pretax dollars to buy whatever insurance plan they want, there will be no going back. Employers that want to attract talent in this new world will need to offer individual choice of health insurance the same way they now need to offer remote work. And the brokers who show them how to do this first stand to gain a lot of business. Any such new business would quickly erase the loss in revenue from group carrier bonuses. 

Employees having the ability to choose their own plan also will have positive ripple effects on the entire healthcare system. Not only will choosing their own health insurance give them access to more plans and control over monthly costs, it also will put in motion market forces that have long been absent from our health insurance system. Under this new model, insurance will get better, not worse like it has been for 60 years. 

I advise you to stop participating in this broken system. Employers are desperately seeking ways to make their employees happy enough to retain them year over year. Most employers do not know this is possible because their broker hasn’t shown them this option. Employees deserve the right to choose their own health insurance plan. It is the only way forward. No matter what role you play in this system, you stand to benefit from this new model.