Group Health Insurance Is a Dead Man Walking – Part 1

The dramatic cost increases for group health insurance is not only breaking the bank for employers but employees as well. From 1999 until 2012, group health insurance costs have tripled. Business managers instigated a number of countermeasures to reduce their company’s health insurance costs. In spite of cost reduction maneuvers, the cost to employers doubled in ten years.Formerly, employers paid all or most of the premium for group health insurance. Companies covered employees and their families. Today it’s rare to find an employee that does not pay 25 to 50% of their own health insurance. Businessmen also switched from traditional insurance to PPOs and HMOs. Some companies took the drastic measure of self-insuring and becoming their own insurance company. Dropping the family and pushing that cost to employees reduced company costs as well. Additionally, deductibles were raised, while coverage and benefits were lowered. Today it’s difficult to find a company that has not taken some, if not all of these steps.Over 99% have changed to PPOs, HMOs or self-insurance plans. Only a fraction of companies’ pay 100% of their employees insurance and fewer still pay family coverage. The salient point here, in spite of all the countermeasures, the cost for business to offer group health insurance has doubled in 10 short years. As you can see many of the countermeasures pushed costs to the employees.Individual insurance in most cases runs 50 to 75% cheaper than group plans. We received an increasing number of calls from employees looking for competitive quotes on individual insurance. More often than not, an individual/family plan is more affordable and delivers better coverage than company provided insurance. This in spite of the fact that at least 50% of the group insurance cost is employer paid. We insure most of these prospects with individual policies, particularly if it’s family coverage they seek.In 2012, the cost for family group coverage is around $15,500 a year. We can insure that same family in for $5,000 – $8,500. So you see, even with employer contributions of 50% it is often cheaper to go individual. Most people are unaware coverage is less expensive on the open insurance market or a private health insurance exchange than their subsidized company group plans. However, the trend is gaining traction. In 2013, the price for group coverage will jump again to the $16,000 a year range.One of the factors pushing premiums for group coverage higher is the aging, overweight or unhealthy members of the group. As people age they cost more to insure. Group insurance coverage is underwritten with the company’s employees comprising the entire group. For companies with thousands of employees, costs are spread over a diverse and large group. However, one employee experiencing coronary disease or cancer can drive the cost for smaller groups through the roof. Additionally, healthy, non-smoking folks who work out and keep their weight under control pay high premiums to support the unhealthy, the overweight or the smokers with whom they work.Younger employees are usually the smallest wage earners and thus damaged more financially by the increasing contributions of group health plans. On the flipside of the coin, younger people are far cheaper to insure. This holds especially true for the individual market where costs are underwritten over wide and large geographies and populations. Many people in their 20s can buy policies for as little as $50 or $100 a month.The healthy, the non-smokers and the young are quickly tiring of supporting others in their group by paying extraordinarily high insurance premiums. As the trend catches hold, and it’s beginning to snowball, the healthy and young will flee group coverage. This reduces the group size further, making it more expensive to underwrite and of course driving costs higher still. Additionally, the insurance companies underwriting group health insurance mandate that certain percentages of the staff must purchase the coverage. As the healthy and young flee the high price of group coverage those percentages will become more difficult to maintain.Another important factor from the employe’s point of view is that of control. Everybody has different needs when it comes to health insurance. Even among a specific individual, needs change as their life changes. A young person with a family is probably more concerned with co-pays, office visits and low deductibles. That same person at age 55 will have more interest in quality dental, vision and catastrophic coverage for major illnesses. In the individual/family health insurance market, literally thousands of different types of policies are available.Another advantage of carrying your own insurance is that of changing jobs. It’s one thing to lose or change your job, it it’s quite another to lose your insurance in the process. With individual coverage, there is no loss of coverage as it travels with you from job to job. These are just a few of the many reasons that group health insurance is a dead man walking.Disclaimer: the figures quoted here are estimates your own experience will vary depending on how healthy you are, your age, the state in which you live and other factors. Please feel free to call us are your own insurance agent for a specific quote.

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