The question is not whether your employer will drop its employee group health plan, but when. The good news is that the alternatives are actually better than the current system.
Changing times are eroding the old system
When group health insurance developed during World War II to attract a shortage of workers, health costs were relatively low and lifetime employment was common. While technology has made companies more efficient, the increased competition has strained profit margins in many industries. In an era of increased efficiencies, health care costs, on the contrary, are steadily rising 2 to 3 times faster than inflation.
Five-year decline in employer-provided health insurance
In 2005 nearly 4.5 million fewer workers had employer-provided health insurance than in 2000. The downward trend continued even during upswings in the economy such as between 2004 and 2005 when over 2 million jobs were created. The decline affected all segments of the workforce including full-time workers, those with college degrees, and even those with salaries in the top twenty percent. The decline was not limited by geography with 34 states experiencing significant losses in coverage and no state experiencing a significant increase.
Employer health plans that remain are hardly insurance
Many of the employers that have retained coverage for their employees have had to cut benefits, raise deductibles, or increase required employee contributions. Even Microsoft, which has long touted its generous health benefits, has made cuts to its prescription drug coverage. Considering these risks and the fact that employees lose health coverage when they leave their employer it is obvious that group health insurance could hardly be considered insurance at all.
HRA, HSA, and individual health insurance
The good news is that in place of completely dropping health benefits, more and more companies are reimbursing employees for their own individual and family health insurance through HRAs (Health Reimbursement Arrangements). Individual health plans, which include family plans, are more advantageous than group plans because the plan stays with the employee even if they leave their employer. And unlike group health plans, individual plans cannot have their benefits cut. In addition, an individual’s medical claims or health cannot alone cause an increase in premiums or loss of coverage.
The Federal government has also stepped in to make individual health insurance more affordable to more Americans by enacting legislation for the creation of HSA (Health Savings Account) plans. An HSA plan consists of a tax-favored savings account tied to a high-deductible health insurance policy. Eligible medical expenses that contribute toward the deductible can be paid with tax-free dollars from the HSA. The high-deductible plans were structured to reduce costs associated with processing small claims and at the same time put more responsibility for managing personal health into the hands of the consumer.
