Much has changed in the lives of working Americans in recent years. But one thing that has remained constant over the past 80 years is how employees obtain health coverage: More than 156 million Americans are covered through employer-sponsored programs. but will it always be like this? maybe not. here’s why.
The story of why we get our benefits from employers dates back to World War II, when companies began using healthcare as a means of attracting talent, especially women. To combat inflation, the Stabilization Act of 1942 was passed to limit an employer’s ability to raise wages to attract workers when labor was scarce. but the actual result of the law caused employers to turn to alternative incentives, such as health insurance. Since health benefits could be considered part of the compensation, but did not count as income, workers did not have to pay income taxes or payroll taxes on those benefits.
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While employer-sponsored health insurance has been the norm ever since, it’s clear that consumer needs may have changed. One-size-fits-all coverage may no longer be enough for Americans with high expectations and a variety of health issues. In the future, we may see employer-sponsored health insurance go the way of pension plans. here are five reasons why:
1. today’s workforce is highly mobile
Employees often move from job to job, changing employers after only a couple of years, rather than staying with the same company for decades. Younger workers are statistically twice as likely to leave their jobs in search of better deals, according to data from Visier. they make these changes for a variety of reasons: advancement, compensation, cultural fit, and more. Health insurance considerations may not always be top of mind when navigating job changes, but their effects on employees are more than trivial.
When employees change jobs mid-year, even if they have already met their health insurance deductible in their previous employer’s plan, they must start over with their new employer’s plan. There are also other after effects, such as possible changes in providers and in-network coverage. these factors can create greater unanticipated out-of-pocket responsibilities and can sometimes affect people’s ability to access the care they need.
In this regard, decoupling insurance from employment can make a lot of sense, so that job changes do not disrupt health care consumption or create unexpected (sometimes significant) expenses for consumers, particularly for these demographic groups younger and highly mobile.
2. consumer expectations have evolved
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We no longer accept “one size fits all” solutions in other areas of our lives, so why should healthcare be any different? Consumers’ needs and perspectives on health insurance coverage vary widely along many dimensions, including generational differences.
As the father of four children, including a son just entering the workforce, I’ve seen firsthand how younger generations think differently about their insurance plan options and experiences.
Younger generations have only lived in a digital age and therefore have high expectations for flexibility, convenience and customization. They are generally in good health, so they are much less likely to have to deal with chronic illnesses, specialized doctors and treatments, or high-cost prescriptions. many are single and have not yet started families, simplifying your considerations when choosing coverage. Younger generations are heavy adopters and proficient users of technology, and therefore likely to be more receptive to change and at the forefront of adopting new technologies and experiences.
It is inevitable that the demands for greater personalization in health care will reach a tipping point, and employers’ plans will have to evolve to deliver these experiences, or consumers may take matters into their own hands and re-evaluate where they get their health care coverage. .
3. technological advances make it easier to customize plans to each individual’s unique needs
Technology has unlimited potential to bridge the gap between supply and demand in new and creative ways. it is happening everywhere. Netflix has changed the way we think about television and movies. Amazon has changed the way we think about shopping. the list goes on and on, with new names being added every day.
health care will be no exception: traditional health care experiences will also be disrupted. There are pain points for consumers everywhere you look in health care. and where there are weak points, there is a demand for new solutions. technology has great potential to help improve healthcare experiences, increase fluidity, and guide consumers through healthcare decisions, providing personalized recommendations to help consumers save money on coverage and care.
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but we’ve only scratched the surface of what’s possible.
4. Employers, particularly those with younger leaders, don’t see the point in providing healthcare
Unless you’ve grown up in this system, it doesn’t make much sense. Health insurance is important and affects people’s ability to access the care they need for their specific health and family situations. Why should something so personal and important be related to where you work?
When employers make decisions about health insurance plan designs, they are balancing the needs and wants of a diverse population of employees, with a few limited and unique options.
Each year, employees must go through the often confusing process of open enrollment. As the overall costs of health care have risen, so has the share of employee costs. As employees enroll in benefits, they often feel like they’re spending more of their income on insurance that doesn’t provide as much value as it used to. that can have a negative impact on employee job satisfaction ratings.
Providing health insurance to employees also places a financial burden on employers. Cost-sharing falls primarily on employers, with a report from the Kaiser Family Foundation finding that in 2019, the average employer paid $7,188 per employee for individual coverage and $20,576 per employee for family coverage.
5. regulatory changes have opened up new possibilities
We have already seen the need for greater flexibility in health benefits with the introduction of the Individual Coverage Health Reimbursement Arrangement (ICHRA). ICHRAS are designed to allow employers of all sizes to give employees pre-tax dollars to purchase the insurance coverage that best suits their needs on an individual basis, rather than offering group coverage under the Care Act. affordable (aca). By making a defined contribution toward coverage, employers can control rising health care costs and relieve themselves of the administrative burden of administering health benefit programs, while giving employees greater flexibility by allowing them to choose their coverage from a much wider range of options. this is very similar to the change we saw in retirement benefits, from pension funds to 401ks.
All of the above factors have led to more discussion about moving away from employer-sponsored health insurance. And consumers are showing they’re ready for change, with data showing that 41% of consumers say they believe health insurance should be decoupled from employment. As business leaders look to the years ahead, with their employees as their guide, we have an opportunity to meet the moment and reimagine what health insurance looks like.
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