I recently had a short conversation that was somewhat surprising, and maybe very telling. I was having a prescription filled and I spoke briefly with the woman handling my order. I had to give her my new insurance card (third carrier in three years) and mentioned how I had to switch often because of price increases. She then told me that she had a $4,000 deductible and close to $15,000 in debt from medical bills. I was shocked. Her employer is a major employer and more than likely a benefactor of Obamacare, yet her deductible is $4,000 and she has medical bills causing financial duress. I would imagine this story plays out across America. It is a system that is more than broken. It is on fire.
In this political environment where Obamacare is in the news daily, I think the problems with employer-based insurance get lost in the discussion. It seems like people have created a one-to-one relationship between Obamacare and the exchanges. It is the exchanges getting huge increases. Insurance companies are leaving the exchanges because of big losses. Many markets only have one option. And of course you won't have to switch your doctor. All this noise may be hiding the fire that is also burning in the employer healthcare market.
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On the employer side, some of the same dire stories are playing out, except the press seems to be ignoring them. Sure, if you look for stories like I do you will find them, but they aren't on the front page of the New York Times or the lead story on the nightly news. Relative to the fire burning in the exchanges, the employer fire is smaller — but it is still a big fire. I am sure the woman at the pharmacy was much more concerned about her personal "fire" from her healthcare expenses than what is going on with the exchanges.
Ongoing problems
If you have employer-based insurance, then you more than likely have a single medical insurance option. Your contributions may have increased by 30% or more over the past few years. Your deductibles and coinsurance may have doubled. You don’t even know what coinsurance means. And the odds are greater than 50% that you don't have enough money in a savings account to pay for your deductible, if needed.
If you are an employer, you are tired of the regular rate increases and delivering bad news to your employees. You have not been able to give employees raises. You may have tried PEOs, captives, wellness programs, cost shifting, HSAs, self-funding on smaller and smaller groups, or private exchanges to try to control costs. But, at best, these are temporary fixes — if they even work at all. I was once asked, “How can you reduce healthcare costs?” I said, “Don't hire anyone old.” Is that what this will come to?
While the focus of Obamacare has been on the exchanges, Obamacare technically covers health insurance in its totality. Employer-based insurance is a part of it and it is part of the problem. Fixing healthcare includes all of it, not just the exchanges. It is all related. Government intervention putting the squeeze on individual policies, small group, Medicare and Medicaid only shifts the problem to employer plans. And when an employer with a younger population counters that action by going self-funded, this results in the younger, healthier people not contributing to the pool.
We heard this before: You need the young to participate for this to work. The recent race to get younger groups self-insured impacts the entire system. The game goes on.
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We can all speculate as to what President-elect Trump is going to do to try to fix the healthcare problem. Based on what I have been reading, his focus is not limited to the exchanges. He recognizes the problems span the entire healthcare industry, and that includes the problems with employer-based health insurance.
For benefit brokers, it would be naïve to think that the only change to employer-based insurance will be the elimination of the employer mandate. There is a fire burning at the employer level too, and this fire is not unrelated to the other fires burning on the exchanges.
Most of the conversations I hear, or articles I have read, reference the exchanges as something totally separate from employer-based insurance. I believe one can’t be solved without significant changes being made to the other. Anticipating what those changes will be and becoming part of the solution is a big opportunity. Stay tuned, because we are about to see what the next administration has in store.
