As one tech entrepreneur sees it, the time has come for a movement — one involving brokers and advisers — that will steer employee populations from group health plans to what he sees as a far more efficient individual insurance market.
“Our model is based around the power of personal ownership,” says Denny Weinberg, whose company, Hixme, built a digital healthcare benefits consulting platform. In essence, it disaggregates group benefits and leverages a massive retail market created by the Affordable Care Act, which limits the effectiveness of ACA-compliant group plans.
Of 22 million Americans being served by that market, about half are covered by private plans off the public exchanges without subsidized coverage. He calls it “the largest and most stable commercial pool in the country.”
Under this approach, health plans are bundled with other specific types of insurance and financing as a line of credit to fill coverage gaps. Employer contributions are earmarked for individual-market plans, which are purchased through payroll deduction.
Another key component is portability, with employees able to take their customized plans with them from one job to the next. They also can use savings from cheaper health insurance to help pay for commuting, childcare, pet insurance, or other options that best fit their circumstance.
A steep climb
As appealing as this may sound to individual-market proponents, industry observers believe acceptance of this approach could be a steep uphill climb unless it’s able to demonstrate meaningful results.
“Employers want to continue offering benefits and make sure their employees have choices in terms of their coverage options and wellness incentives,” says Clare Krusing, a spokeswoman for America’s Health Insurance Plans. “The anticipated movement of employees to exchanges or individual-market coverage hasn’t taken place, and that’s because employers look very closely at how they tailor their benefits and offer a wide range of products that make sense specifically for their employees.”
She says AHIP doesn’t track the number of group plans transitioning to the individual market.
Steve Wojcik, VP of public policy at the National Business Group on Health, sees employers being open to alternative sources of coverage, as long as they’re better able to control costs, improve quality, provide a positive customer experience and sustain affordability. Otherwise, he says, “employers and their employees would prefer their group health plans.”
While unwilling to abandon the financing of employee healthcare, Weinberg says HR and benefit executives at larger companies, as well as their CFOs, are more than happy to eliminate the cost of plan administration. Unlike auto insurance or workers’ compensation, Weinberg says “there’s no actuarial basis for tying health insurance around people that just happen to work with each other. It makes no sense at all.”
A better deal
Savvy healthcare consumers are drawn to individual-market plans “because it’s a better deal than attaching themselves to a spouse’s work-related insurance,” he explains.
If structured correctly, Weinberg says the switch to individual from group health insurance can be done on a pretax basis. “That’s one of the very tricky issues of doing this right,” he says, noting the involvement of “some proprietary issues.” The challenge at hand is bundling gap insurance and gap financing, while maintaining this linkage on a tax-favored basis.
Hixme has had extensive conversations about its approach with officials from the Department of Labor, Department of Treasury, Department of Health and Human Services and White House. Since regulators and policymakers are “desperately looking for ways to shore up the quality of the individual-market insurance pools,” Weinberg says transitioning from group to individual insurance is good from a public policy standpoint by broadening an already massive and stable health insurance risk pool.
Hixme offers a sophisticated modeling tool that matches employees with a health plan in their ZIP code that most resembles their group plan, re-aggregates the numbers, presents the cost difference and projects pricing over the next five years.
“In about two-thirds of the cases, we’re able to show between 5% and 15% savings in just the first year,” Weinberg reports. “Those savings continue through the next five years, because once employees now have this experience with their own money shopping, they are more shrewd purchasers and more careful thinking about their needs in the upcoming year.”
Hixme’s tagline is, “Building benefits from the bottom up.” The company envisions shifting to true healthcare consumerism from powerless, third-party purchasing that was an accident of history rooted in wage and price controls. Since receiving venture funding in late 2014, it has 13 employer clients with just under 10,000 consumers and expects nearly four times that number by the end of the next open-enrollment period.
Weinberg says his company is about a year away from involving brokers and advisers in helping their clients shift from group health to individual-market plans with enough accuracy and ease. “We’re working on a coalition right now that we believe will eventually be an association that is focused on what we call the group-to-individual movement,” he reports. “Our goal is to see this as really the next big wave in health financing for large employers.”
Weinberg predicts “a bit of a food fight” between consultants at Aon, Willis Towers Watson and other big-name firms, as well as “the everyday broker who sells to consumers” in making this transition. He sees a great opportunity for all brokers to service with their boots on the ground the workforce of large employers on an employee-by-employee basis. He also believes the brokerage community is well-equipped to manage such a significant market transition.
Looking ahead, Weinberg is bullish about the individual market’s staying power, “regardless of who is president and who is running Congress.” Not only is the quality of individual plans superior to those offered by large employers “because they’re done en masse,” he says, but it’s also worth noting that insurers are on the hook because it’s their risk.
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