As health insurance premiums continue to skyrocket, more commercial enterprises are turning to the familiar, cost-cutting measure of passing along those price increases to employees. But with neither employers nor workers happy with that arrangement, many businesses are considering alternatives to traditional benefits that may limit business for brokers.
A Kaiser Family Foundation survey released Wednesday reveals that just over half of employees this year have a health insurance policy with a deductible of at least $1,000. While historically, it’s not much of an increase, it does outpace the rate of inflation, meaning workers will need to spend a larger portion of their income and employers, a larger share of their profits in order to cover healthcare costs.
“There’s been a gradual sea change in what insurance is for most Americans, from more comprehensive coverage to skimpier coverage,” said Kaiser Family Foundation President Drew Altman.
Overall, health insurance premiums for a family in an employer health plan rose an average 3% this year to $18,142. Employees now pay an average $5,277 of that.
Workers obviously resent the increases, and employers don’t like making them because they repel talented workers looking for comprehensive benefits packages.
In this environment, more employers are looking for alternatives to small group health insurance that cut costs, but still allow them to offer benefits that attract and retain top employees.
Unfortunately for brokers, these alternatives don’t always leave them in a financially sustainable role.
While some businesses are opting for telemedicine or narrow network plans (projected to include 27% of all employers by 2018), by far the biggest growth will be in defined contribution plans, a recent report from Arthur J. Gallagher found.
These reimbursement structures, in which employers provide workers with a lump sum to use in purchasing their own insurance, are still gaining traction. Just 2% of employers use defined contributions, according to the Gallagher survey, but that’s expected to jump an additional 15% by 2018. That’s a whopping 650% increase in just two years.
Attracted by the savings, ease of use and potentially more suitable plans in the individual marketplace, employers are considering the defined contribution strategy much more seriously than they have in the past – particularly in light of the expected passage of the Small Business Healthcare Relief Act, which would explicitly endorse the use of pre-tax employee reimbursement schemes by companies with fewer than 50 employees.
While brokers can advise and help facilitate such arrangements, it does often mean a significant loss of commission for the broker. Many companies adopting defined contribution plans refer employees to the broker, who can help select individual plans through the Affordable Care Act marketplace, but rapidly decreasing commissions in the space aren’t enticing many to stay in the market.
High costs and poor financial performance has led several carriers, including heavyweights like UnitedHealth and Anthem, to decrease and even axe the money they pay brokers for selling and servicing plans on the exchanges. Despite the fact that brokers are involved in between 40% and 60% of exchange plan sales, depending on the state, this behavior has only increased as insurers look to cut costs.
“Certainly when you look at what goes into servicing clients, it’s much greater than [just selling plans],” said Keegan. “At what point will agents and brokers even want to stay in this business?”
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