The End of Employer-Provided Health Insurance
Why It’s Good for You, Your Family, and Your Company
Rick Lindquist and Paul Zane Pilzer, coauthors of “The End of Employer-Provided Health Insurance: Why It’s Good for You, Your Family, and Your Company,” say there’s a massive shift happening in the way Americans get health insurance. Companies are scrapping the old employer-driven defined benefit model and replacing it with an individual-driven defined contribution model.
Consider some recent evidence:
Largest insurer sees small businesses dumping health insurance.
Indianapolis based WellPoint is seeing its small business customers dump their group health plans and move workers to the Obamacare Health Insurance Marketplace faster than expected. According to 2014 reports, WellPoint has watched 218,000 members, or 12 percent, of its health plans disappear because small businesses have ended their employer-provided health plans. WellPoint expects this trend to play out over the next two years. “We think [that] will be in a more accelerated timeframe over a shorter window of time, meaning this year and next, than over a longer period of time,” said WellPoint Chief Financial Officer Wayne DeVeydt during a July 30 conference call with investors.
Leading consultant releases report on shift to business-to-consumer model.
Leading consultant PricewaterhouseCoopers Health Research Institute released a new survey of 1,200 businesses that found one-third of employers are now considering shifting their employees onto the Obamacare Health Insurance Marketplace. Some companies, for example, are moving toward a defined contribution model where the companies would give workers a fixed sum of money to put toward an individual policy of their choice sold on the Health Insurance Marketplace. “Early tremors in the market suggest a coming paradigm shift from a business-to-business model toward a business-to-consumer model of purchasing healthcare,” the report said.
Healthcare architects foresee end of employer-based insurance.
Ezekiel Emanuel, one of the architects of the Affordable Care Act (ACA), recently published a book titled, “Reinventing American Health Care” in which he argues that fairly soon “a few big, blue-chip companies will announce their intention to stop providing health insurance.” Once it begins, he argues, other companies will follow, dropping workers by the millions onto the new health exchanges. By 2025, he believes, fewer than 20 percent of Americans will get their coverage from an employer.
In their new book—aimed at the owners of small- and medium-sized companies, employees, and trusted business advisors (including insurance professionals)—Lindquist and Pilzer explore the inevitable forces driving this trend. They also lay out step by step exactly what each of these groups can do to benefit from this paradigm shift.
Since the ACA passed in 2010, Lindquist and Pilzer argue, it no longer makes financial, legal, or social sense for any U.S. employer to continue providing health insurance to its employees.
“Most Americans don’t yet see the writing on the wall,” says Lindquist, president of Zane Benefits, the U.S. leader in defined contribution employee health benefits. “The insurance industry and larger employers don’t want them to know. The $1.2 trillion employer-provided health insurance industry relies on most Americans under 65 paying two to four times what they should be paying.”
The current switchover from group plans to defined contribution models parallels a similar shift in employer-provided retirement benefits that took place two to three decades ago, says Pilzer, a former White House economist and the New York Times best-selling author of 11 books.
“In the 1970s, many U.S. employers were statistically bankrupt due to the expected cost of their defined benefit pension programs,” says Pilzer. “So, starting in the 1980s, employers switched to affordable ‘defined contribution’ 401(k) retirement programs, which today cover more than 100 million Americans. Today’s health benefits shift is happening due to rising health insurance costs and the 2014 implementation of Obamacare.”
Lindquist and Pilzer predict more than 100 million Americans will move from employer-provided to individually purchased health insurance over the next 10 years. The book focuses on this shift, which the authors believe will be led by small businesses.
“Due to the significant cost advantage for business owners and their employees in the individual market, we predict 60 percent of businesses will eliminate traditional employer-provided health insurance in favor of defined contribution healthcare and individual health plans over the next three years,” say the authors.
According to The End of Employer-Provided Health Insurance:
1. Employer-provided health insurance is the greatest financial risk facing most American families.
2. Employer-provided health insurance is the greatest challenge facing U.S. employers, small and large, when it comes to recruiting and retaining top-quality employees.
3. Individual health insurance policies covering the same medical providers as employer-provided coverage are now available for Americans regardless of their health at one-half (pre-subsidy) to one-fourth (after-subsidy) the cost of employer-provided coverage.
4. Once you get a subsidized individual health insurance policy, your monthly premium can almost never increase unless your income does—that’s because the amount of your monthly federal subsidy is calculated so that you pay a fixed percent of your income for your individual health insurance.
5. New defined contribution healthcare solutions allow employers to reimburse employees for individual health insurance costs in lieu of offering traditional employer-provided health insurance. These defined contribution solutions save businesses and their employees 20 to 60 percent on health insurance costs annually.
6. All Americans, employers, and employees need to understand how the new federally mandated Health Insurance Marketplace for individual health insurance works, what policies are available, how to choose one, how to sign up, and how to manage their lifetime individual health insurance and healthcare.
While employees may initially balk at the thought of losing their group health coverage, Lindquist and Pilzer argue this transition is a good thing for them and their families. They get more choice in costs and coverage levels (rather than being forced into a one-size-fits-all policy), and if they lose their job, it’s less likely that an illness will bankrupt them because they can keep their health plan independent of work.
“Don’t despair as you start to read the first chapter about the problems with employer-provided health insurance,” says Pilzer. “This book is about a solution that you can take advantage of immediately.”
“Early adopters gain a huge advantage over competitors still crippled by the costs and ‘headache factor’ of the old system,” adds Lindquist. “Not only can they save thousands of dollars per person each year, they free up time and energy for meaningful work.”