Employer-based health insurance in the U.S. has been around for over a century.
In the 1870s and 1890s, industrial employers and unions provided company doctors and other forms of health care.
During World War II, health insurance emerged as an incentive to combat government-controlled wages.
For those of us old enough to remember, union-negotiated plans and many employer-sponsored plans offered a rich array of benefits.
That was then. This is now.
Protected No More
Most employers took a paternalistic approach to health insurance.
They shielded employees from the true cost of health care.
- Employees knew only their portion of premium costs
- Employer costs were a well-kept secret
- Low copayments and HMO-type plans hid the full cost of health care services
If you ever applied for COBRA benefits, you understand the meaning of sticker-shock.
COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act. The federal legislation allows qualified employees and their dependents to continue employer-sponsored group coverage.
Sounds good, right? It might be until you discover you must pay 100% of the premium cost, plus up to a 2% administrative fee.
For employees used to paying about 25% of the cost, paying the employer’s portion as well was painful – to say the least.
As health care costs skyrocketed, parenting employers allowed employees to grow up and realize the true cost of health care.
A Dose of Reality
Enter the new era in employer-sponsored health insurance.
- Consumer-directed health plans
- Corporate wellness programs
- Private health insurance exchanges
What the above have in common is a goal of educating and engaging employees and individuals in their own health care.
The parents began kicking the youngsters out of the nest.
Consumer-Directed Health Plans
Introduced in the late 1990s, consumer-directed health plans (CDHPs) took different shapes.
- Health Savings Accounts (HSAs) couple a tax-favored savings plan with a high-deductible health plan
- Health Reimbursement Arrangements (HRAs) have similar features to HSAs; however, the employer owns the account, whereas the employee is the account owner for an HSA
CDHPs have grown in popularity.
Generally, employees have a higher deductible they must satisfy before benefits are payable. For 2013, the minimum HSA deductible is $1,250 for an individual and $2,500 for a family. HRAs are not required to have a specific deductible amount.
The IRS sets the rules and limits on HSAs and HRAs.
High deductibles are enough to make most people stop and think twice about health care.
In an effort to encourage healthy consumerism, most plans do not apply the deductible to certain preventive care.
A 2012 RAND study has us questioning the effectiveness of that strategy.
Corporate Wellness Programs
Corporate wellness programs have advanced far beyond discounts at gyms.
Employers followed the dots that connect good health and productivity. And what hits the bottom line grabs the attention of senior executives.
Sophisticated wellness programs build in sanctioned incentives for encouraging healthier behaviors from employees.
Review the nondiscrimination provisions of the Health Insurance Portability and Accountability Act (HIPAA) and you discover an interesting exception.
HIPAA allows premium discounts or rebates in exchange for employees adhering to “programs of health promotion and disease prevention.”
Sure, there are rules for keeping incentives from discriminating against those with health conditions that would prevent compliance.
However, employees now have some skin in the game if they want to have access to those premium discounts or rebates.
Private Health Insurance Exchanges
It’s too early in the game to determine the effectiveness of health reform’s proposed insurance exchanges.
Health reform calls for the creation of state or federally-run organizations that offer an organized and competitive marketplace for individuals and small businesses to buy health insurance.
Not all employers and the insurance industry are waiting for the 2014 effective date.
Private health insurance exchanges are emerging as an alternative to traditional markets for insurance. And they are not just for individuals or small business.
Aon Hewitt introduced a private exchange in 2012 for mid- and large-size employers. A recent report revealed results from coverage offered to nearly 100,000 employees – including the likes of Sears and Darden Restaurants.
The chart below depicts the selections employees made in terms of the level of benefits. Most (42%) selected lower benefits in exchange for lower premiums.
Another trend from an Aon Hewitt survey showed 94% of large and mid-sized employers expect to continue to offer employee health benefits in the next three to five years – with a slight twist.
Nearly two-thirds of employers plan to shift increased accountability to employees.
A New Normal?
Proponents for individual accountability see the rising trend as a good thing.
I admit I am among those who think each of us needs to take responsibility for our own health. Whether or not that means sacrificing benefits is another story.
The future should be very interesting.
What do you think?
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Notice of Disclaimer –Cathy Miller is not an attorney or health care provider and cannot provide legal or health care advice. The information provided is for your general background only, and is not intended to constitute legal or health care advice as to your specific circumstances. We recommend you review legislation with legal counsel and visit your physician for health care issues.
{ 2 comments… read them below or add one }
Great, comprehensive article…I despise the fact that this is the new normal.
Des @StressFreeBaby´s last [type] ..Atlanta Auto Show Puts You in the Driver’s Seat
Thanks, Des. I hear you about the “new normal.” I’ve often said if I could figure out the magic fix for health care and insurance, I could retire.