Soon All Employee Health Insurance Benefits Will Be Voluntary

Employee health insurance benefits are trending from company paid and sponsored towards voluntary or employee paid benefits. Health care costs are rising for everyone and the landscape is changing. Risings costs of health care are forcing employers to raise employee contributions, while simultaneously cutting back on coverage - making coverage options more voluntary. In addition the Health Care Reform Act contains provisions that accelerate this trend. The end result will be that employers simply become a facilitator of benefit programs, giving rise to a new breed of providers to administer the process.

Each year when employers reach their health insurance renewal date their insurance broker works with the carrier to determine the employer's renewal rate - the new premium for the next 12 months to provide the same level of benefits for the same group of employees. Often these renewal rates translate come in at 20% to 30% over the previous year's rates. The compounding of these costs over time makes this business cost unbearable for many employers. So employers react by doing one of two things, or a mix of both: cut back on benefits to lower premium costs, or ask the employees to contribute a greater share of the premium cost.

Increased Employee Out-of-Pocket Costs

When employers cut back on the plan benefits in order to lower premium costs, they are really pushing the cost increase onto the back of the employees who experience health events. Any plan with a larger deductible, higher co payments and co insurance, or smaller network of doctors will cause employees needing health care services to pay more out-of-pocket. In essence the employees are now choosing where, when, and how they engage health care services. The employees are forced to volunteer their resources when health events occur and services are needed.

Employees Pay a Greater Portion of Premium Costs

Employers may also choose to reduce the amount of premium they subsidize for each employee. Each employer is required to pay a minimum percentage of the overall group premium in order to qualify for group coverage. That minimum percentage has historically been far below what employers chose to subsidize. The thinking was that low-cost health insurance coverage helped attract and retain workers.

But as health care premiums continue to rise employers reach a limit of what they are willing to subsidize. And during difficult economic times, the subsidy level will tend to fall. Many employers are requiring employees to pick up a larger and larger portion of the overall cost. Some employers change subsidy levels based upon the type of coverage selected: individual, husband/wife, family, etc. Many employers will keep a higher subsidy on individual coverage, and ask employees to cover a larger share of coverage for other family members. No matter what strategy employers use to pass premium increases on to employees, at some point the choice becomes more voluntary than in the past.

Health Care Reform Accelerates Trend

The recently passed health care reform, the Patient Protection and Affordable Care Act will bring many changes to how employee health insurance benefits are administered and delivered in the workplace. While the law focuses primarily on the individual market, the creation of a guaranteed issue, community rated individual market will accelerate a trend towards voluntary employee health insurance options. Today there are significant differences between what group health insurance covers and what people can find in the individual market. As the gap narrows, so does the value of group health insurance coverage. Many employers will find that offering health insurance benefits is less important than in the past and not worth the administrative headaches.

Health insurance choices are being pushed from the employer onto the individual employees giving rise to the question: who will explain all this, and administer all the variations? Voluntary employee benefit providers are happy to step in and answer that question.

Find out more about how small business health insurance is changing, and how to adapt.

Kevin Haney is a licensed health insurance agent helping businesses make the most of voluntary employee benefits by using using supplemental family health insurance benefits.