Over the years we have witnessed many concepts come and go in the health insurance arena. The preferred provider arrangements, HMOs, FSAs, HRAs, and HSAs. They have each changed the landscape of employer provided insurance and in some cases, been harmful to the general public. While HSA plans have become a dominate force and in my own humble opinion, brought sanity back to the buying process, not everyone agrees that they are the best option. Even though a year or so ago, I offered a reward to anyone who could prove that the HSA option isn’t the best for any consumer. Not one person took me up on the challenge. Now maybe it is because few people read this blog but I truly believe it is because it is a fundamental truth. The HSA provides true insurance rather than the half truth that co-pay plans offer. Even with this mindset, I hope to offer the newest trend and how all future employer paid health insurance should be offered. If you want to lead your competition and be the first to offer this “revolutionary” new idea, read on. If you want to continue what you have always done, and expect new results, you are defined as insane.
What is this new idea? Well, first, let’s go back a few years to look at retirement plans. Back in the 50s and 60s, companies provided their employees retirement plans that were called defined benefit plans. These were pensions that employees would get when they retired. Usually they were based on how many years an employee stayed and how much they earned. This determined how much the employee’s retirement income would be. The employee had very little to say on how the monies were invested or even how much they would get at retirement. It also became difficult on the company because of the large number of variables that were present in determining the benefits. Although there were plans known as CODAs that date back to 1956, it wasn’t until the revenue act of 1978 that defined contribution plans became popular. At that time, a provision in the Internal Revenue Code under Section 401(k) made a change to retirement plan’s that is still the standard today. This change allowed the employee, as well as the employer, to contribute to a fund that was based on contributions rather than on trying to figure out benefits. This made retirement plans more the responsibility of the employee and allowed more control by the employee.
Fast forward to today. Health insurance plans provided by the employer are usually “defined benefit plans”. That is, the employer picks a plan and determines that it is the best for all employees. The employer then sets a cost for the employee and leaves no options other than single or family coverage. This antiquated method of employer provided health insurance leaves the employee out of control much as the defined benefit plans in retirement planning did years ago. Just as it was difficult and unappreciated in retirement plans, today it is the same with employer provided health insurance. So why not take a new approach to employer provided health insurance and begin offering a defined contribution plan. Your discussion with an employer should go something like this. “Mr. Employer, why not remove yourself from the purchase of your employee’s insurance and rather, provide them with a set dollar amount that they can use to purchase the type of health insurance that is best for them?” By allowing the employees to choose from a multitude of plans, the employer no longer has to pick a plan and have the headaches that come because one or two employees don’t like it. The employer then selects a professional to sit down and explain the insurance options and help each employee decide what best solves their insurance need. The best part of this solution is that it can still be done under a group chassis which allows for guaranteed issue and no pre-existing conditions just like their current group plan. The other huge benefit to the employer is that their cost is pre-determined and future costs can be managed much easier. Wellness benefits can be built into the program and employees can be educated on how best to purchase their health care. You will notice that nowhere in this dialogue did I mention cheapening the rates. Rather, solving the employer’s problem (group health insurance) is what this option is all about.
Currently, I know of just one carrier that allows for this type of solution although my hope is that others realize the value of this offering and bring it to market. If you want to learn more, give me a call or shoot me an email. I will be more than happy to accompany you and do a presentation to a client. I can assure you that you will not only impress the client, but you will increase your business dramatically.