Kaiser released its annual Employer Health Benefits Survey recently and that got me wondering why we are so tied to employer sponsored insurance? It’s kind of like smoking to me; I get why people smoked in the 40’s, 50’s,60’s but can’t figure out why anyone would start today.

The survey points out that family premiums have risen 113% since 2001 (and of course this is for lesser coverage) and it also shows that employers don’t have confidence in their ability to control costs. Many of these employers use the largest consultants and employ all sorts of other vendors and tactics to try to decrease the annual cost increases.  The costs are still doubling every 8 or 9 years.

Maybe the whole system of employer sponsored, 3rd party pay is the culprit.

What would the cost of auto insurance be if it was an employer sponsored benefit with state and federal mandates?  Before you make a guess you need to factor in the following rules:

  • Individual premium rates can not be based on the type or value of the car – so a Bugatti and Chevy would be the same
  • Individual premium rates can not be based on the driving record and all applicants must be accepted
  • Gas and car washes are included for a fixed co-pay (equal to 20-50% of the actual cost) as long as you use a “network” station – at least 75% of the stations will be in network – unlimited use of the copay and the copay is the same for any fill-up or wash regardless of vehicle
  • Oil changes, brake pads and tires are included at no cost to the “insured”

I ‘m thinking that I would be able to find a lower cost, higher value plan in the non-employer sponsored market.  Unless I drive my expensive, gas guzzling cars fast and furious.

The Kaiser Family Foundation reports that the average family health insurance premium is $15,073 for 2011 and the Census Bureau reports median household income of $49,445.  And I thought the 30% rule was for your mortgage!

Not only have the premiums gone up, but most likely the benefits have gone down.  Unfortunately, group health insurance is the inverse of Moore’s Law – the plans double in price and offer fewer benefits.  So, everyone is paying more and getting less.

There is plenty of blame to go around, but let’s focus on some possible solutions.  The first option is to tap in to the individual insurance market.  Contrary to popular mythology, this is a vibrant market and with the passage of PPACA all the plans offered are permanent and portable.  The best part is that more than 70% of the population can obtain the best prices.  In fact, the individual market is typically 50% less than the group market.

For those who can’t qualify for individual insurance there are two great options.  The first is due to HIPAA and has been in effect since 1996 and the most recent is the Pre-Exisitng Conditions Insurance Plan or PCIP, created through health reform.  Many of these options have premium subsidies based on income so they are worth checking out.

Instead of trying to find the least expensive group insurance plan employers may want to seriously consider offering tax-free funds to their employees so they can pay for health care expenses and insurance.  This saves the employer time and money while increasing take home for most employees.

If you are covered under a group plan at work or through your spouse it makes sense to compare the options you have in the individual market before the upcoming open enrollment season.  Want to find out what choices you have?  I recommend you go to the US Government site and see what options are available (including the HIPAA and PCIP plans in your home State).

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