The group-to-individual migration: What it means for health insurers, employers and employees
Imagine you are a small business owner. You run a small hotel in Montana and want to be able to give your employees – many of whom you’ve known for years – good health insurance coverage. But this year, your health plan costs jumped by 20 percent, making it unaffordable to continue providing this valuable benefit to your employees.
So what are your options? You can encourage your employees to purchase coverage on the public health insurance exchanges. The good news is that if your employees no longer have employer-sponsored health insurance, they now qualify for government subsidies on the federal exchanges. But disbanding your group health insurance has significant downsides. Employees may feel cast aside by their employer. Employers will also face a flood of questions from employees as they try to figure out how to buy insurance on their own by navigating the shopping, subsidy and enrollment process in the public exchange. This transition also means the employer loses the ability to provide any health benefits when hiring new employees – a potential recruiting disadvantage.
While this example is hypothetical, it is a familiar story for many small businesses. Employers facing increasing health insurance costs are under financial pressure to drop health insurance benefits and their employees are caught in the middle. Without employer-sponsored insurance, they would qualify for a subsidy, while the group premiums available to them are too high for them to afford.
The Small Business Health Options Program (SHOP) Marketplace was intended to address this type of situation, offering small groups affordable health insurance and dental coverage for their employees. However, the main drawback of the SHOP is that it doesn’t provide the subsidies offered in individual marketplaces. Without the tax subsidy, many employers are, in fact, pushing their employees to the individual exchanges where they can obtain subsidies and, as a result, lower the insurance cost.
Groups dropping coverage is a significant trend – especially small groups. According to the 2015 “Small Business Health Care Survey” report by the National Small Business Association, even though nearly 90 percent of small businesses view health insurance as important to recruiting and retention, the number of companies offering health-related benefits actually dropped by five percent from 2014 to 2015. This is reinforced by the Kaiser Family Foundation data from 2015, which indicates that the likelihood of offering health benefits differs significantly by size of firm. Only 54 percent of employers with three to 49 workers offer coverage, compared to 97 percent of firms with more than 100 workers, according to the September 2015 “Employer Health Benefits: 2015 Summary of Findings” report by The Kaiser Family Foundation and Health Research & Educational Trust. The bottom line: Small businesses are disaggregating swiftly.
For the Montana hotel owner who can no longer afford complete health insurance benefits for his employees, wouldn’t it be nice to have some additional options that reduce employee costs, while still providing a straightforward and simple experience?
Perhaps it’s time that insurers step up to make it easier and more transparent for employees to go from group to individual plans, or vice versa. The key to this is a modern e-commerce approach, which would enable any employee leaving group coverage to shop for an individual plan using an insurer’s private exchange platform. The private exchange should:
- Help employees find coverage that is similar to their group plan, or allow them to easily find the plan that best matches their needs.
- Allow employees to determine if they are eligible for a government subsidy and then present appropriate on-and off-exchange products, and
- Enable subsidy-eligible employees to fully enroll in their selected qualified health plan.
Insurers also should be ready to support employee questions though online help and real-time support that engages the consumer and offloads this burden from the small employer.
This approach is a win-win-win scenario. Employees can utilize the government subsidy and select from a much wider array of coverage options. Employers can support their employees and reduce their own benefit administration headaches. And insurers can retain many of the group members that would have otherwise shopped the public exchange. Capturing these new individual members also can help the viability of the insurer’s individual business. Many insurers have struggled with the high costs of members that have purchased qualified health plans through the public exchanges. As former group members, these new individual consumers are likely to have better risk profiles than the general population of consumers buying on the public exchanges.
There are a wide range of industry, employer and consumer forces converging to drive the shift from small group-to-individual coverage. And these trends will continue to cause small group disaggregation. But for the Montana hotel owner who wants to retain his talent and be a good employer, there is a need for creative solutions that don’t simply look at employees as “individuals” or part of a “group.”
As the U.S. insurance market continues to evolve, insurers, employers and employees alike will gain as insurers take a more holistic view of consumers. Distinctions between group and individual segments will become less important over time. Ultimately, the goal for an insurer will be to match each consumer with the health and voluntary products that best meet their needs at the particular time of their life, regardless of line of business. Insurers need a private exchange platform that can support both their group and individual lines of business – and ease the transition between group and individual coverage.