The Future Of Employer Based Health Insurance

A recent Kaiser Health News article about the possibility of employers pulling out of the health insurance system is an interesting and thought-provoking read.  The authors focus on both the financial squeeze that rising health care costs are placing on employers, and the likelihood that the penalty for not providing coverage starting in 2014 might be more attractive to employers than continuing to provide health insurance (at an ever-increasing price).

While it’s true that a mass exodus of employers from the health insurance infrastructure might lead to overwhelmed public health insurance programs and a higher number of uninsured Americans, we also have to keep in mind that as of 2014, health insurance in the individual market will be guaranteed issue, and available to anyone who can pay for it.  Currently, only about 6% of Americans purchase their own health insurance in the individual market – mainly because most people either get health insurance from an employer, or qualify for public health insurance through programs like Medicaid or SCHIP.  And getting health insurance in the individual market can be a difficult process for anyone with a pre-existing condition.  But if employers were to stop offering health insurance at the same time that individual policies became much easier to get (from an underwriting perspective), it makes sense that far more people would simply become insured in the individual market.  Allowing people to shop for their own health insurance – rather than simply accepting whatever coverage their employers provide – would allow consumers far more choice in terms of the coverage they have now.  And it’s possible that if employer were able to stop shouldering the burden of cost for health insurance (in trade for a $2,000 per employee penalty), they may pass on some of the savings to employees in the form of higher wages.

I can’t imagine huge numbers of people simply opting to be uninsured if employers stop offering coverage, especially once individual health insurance is guaranteed issue and pre-existing conditions are no longer an issue.  I would guess that in 2014 we will see at least some shift away from employer-sponsored coverage in favor of individual health insurance, but I imagine that plenty of employers will continue to offer at least some level of coverage as a way to attract and retain quality employees.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.

Comments

  1. Louise:
    How do you think the premiums for individual policies will compare with group insurance for large groups, in that both are guaranteed-issue?
    Will insurers still practice durational rating, charging higher premiums simply because the insured remains on his policy?
    Don Levit

  2. Great question Don, and I’m not sure it’s one that even the insurance carriers could answer with certainty at this point. My guess is that premiums on individual policies will start to become more in line with what group policies cost once coverage is guaranteed issue. Although hopefully some of the cost-saving measures in the PPACA will help to keep healthcare costs – and thus insurance premiums – somewhat under control.
    Durational rating has to do with the fact that underwriting “wears off” on individual policies as time goes by, since new conditions occur in people who were healthy at the time of application. Since insurers will no longer be able to account for health status when policies are issued, it makes sense that durational rating will no longer be much of a factor. But it also makes sense that people might stay on their individual policies more long-term, if employer group coverage becomes less available. So I’m not sure what the combined effect might be…
    I’m curious to know what your thoughts are on this issue too.

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