Even with the substantial decreases in employer-based coverage levels year over year, the cost of workers' health benefits continues increasing at a rate three times that of wages since 1999.
The result is that today only 9 percent of employers pay the full cost of their workers' health benefit. Employers are left between a rock and hard place with increasing costs in one hand and decreasing worker satisfaction in the other.
But the changing nature of the workforce and the realities of traditional market frustrations now present an interesting alternative — access to the new, portable marketplace created by the Affordable Care Act (ACA).
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Out with the old — the end of employers as a "pooling" mechanism
Traditional employer-sponsored health benefit plans as a pooling mechanism just no longer make sense. The whole value of pooling Americans based on their place of employ went out the window when the worker base itself stopped being homogeneous and stable.
Millennials are now the largest generation in the U.S. labor force and have decreased the worker tenure to three years or less. As a result, employer obligations under COBRA can be costly with these more transient workers.
Additionally, decreasing family size and health financing alternatives under ACA are further destabilizing the historic balance that existed with the employer-based pooled program model. It's evidently time for a change.
In with the new — a bigger, more stable commercial pool
The "new" individual market, composed of 22 million Americans, provides a refreshing if unexpected alternative for employers. This market is not to be confused with the public exchange market, HealthCare.gov, or its state counterparts.
Half of the 22 million individual enrollees actually obtain their private plans directly from private exchanges, brokers or straight from providers like Aetna, Cigna, Humana, your local Blue Cross or Blue Shield plans and others. Considering this, American employers can now unshackle their workforces to make their own health coverage decisions with access to personal ownership — making it a higher-value benefit.
Further, personal funds and personal ownership would let workers use some of their funds for other health-related purposes or broader benefits in general, and that could boost satisfaction for workers in and outside of their workplace.
Yes, there are new considerations about process, compliance, tax preferences, and other factors that have a significant impact on the effectiveness of such a model but they will be more and more settled, as existing models that do this become better understood by employers. After all, consider the successful marketplace shift stimulated by the introduction of the 401(k).
As 401(k) emerged, previous employer pension programs — typically strictly controlled by a single employer — were replaced with programs that provide employees a wide range of retirement funds and investment options. Workers can now personally invest and personally own their retirement plans with contributions from their employer, all with great success. In the same vein, it's time we break away from a similar, century-old model and rethink how we approach health care benefits.
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