Health Care Costs in 2017 & What They Mean For Your Small Business

Looking forward into 2017, employer-sponsored health insurance remains the foundation of America’s health insurance system.

Experts are predicting a major shift, however, as the market has been shifting from employer-sponsored health insurance as a defined employee benefit to individual insurance for employees with an employer-sponsored contribution to the premium.

The general well-being of the health insurance industry counts on the continuation of the employer-sponsored health insurance sector.

Affordable Care Act Plans vs. Group Plans

Since the Affordable Care Act (ACA) came into effect, individual health insurance plans offered on the individual state exchanges have been comparable or priced lower than similar employer-sponsored plans. An analysis of employer-sponsored premiums of 156 million people in 2014 found that the median individual annual premium exchange premium was $5,844, while the median employer premium for a single worker was $6,119 a year.

Many employers are now opting out of corporate-sponsored private plans and offering some subsidies for employees who enroll on the ACA exchanges. The truth is, group insurance premiums have never been less expensive than individual coverage.

Before the ACA, group insurance offered a guarantee of issue and no applicant could be turned down because of prior medical conditions. Individual insurance offered no such guarantee. That guarantee made group insurance riskier for the insurance company and thus, more expensive per policy.

But this is no longer the case, as the ACA has made the guarantee universal.

One advantage of group insurance that offsets the group versus individual insurance difference is that larger employers contribute to the plan premiums. The government does provide some assistance to individuals buying insurance on the exchange, but that assistance comes from tax revenue.

The advantage of group insurance comes from the fact that the individual network is including fewer and fewer plans, with so many companies opting out of the exchanges.

For example, New Jersey uses the public ACA exchanges for people to enroll in healthcare plans. Five health insurance carriers offered plans for New Jersey applicants in 2016. Three of those carriers—United Healthcare, Oscar Insurance, and Aetna—are leaving the New Jersey exchange this new year. That means there will only be two insurance companies—AmeriHealth and Horizon BCBS—to choose from in 2017.

Another Option: Private Exchanges

Over the last couple of years, health care has consumed more of corporate managers’ time and energy than anything else. Many employers are beginning to drop the hassle of employer-sponsored health coverage and default to the ACA exchanges or to private exchanges to reduce the administrative load.

New Jersey is one of the states that permits private, non-ACA health care exchanges. These exchanges are private companies which have collected health insurance offerings. They initially appeared in the 1980s, predating the public ACA exchanges. They facilitate insurance plans for employees of small to medium-sized businesses, removing the responsibility for management and supervision inherent in group health insurance.

Private exchanges let employees shop for plans on an online portal. The number of employees using private exchanges has been increasing by as much as 50 percent year over year.

Private healthcare exchanges use computer network system to integrate claims management, eligibility verification, and inter-carrier payments. They have becoming popular as a way for small and medium-sized businesses to pool their purchasing power to compete with larger corporations.

The catch is that private exchanges may shift more of the financial burdens of health care on workers while they save employers some money. Employers can set aside an amount of money that workers can use to pick an insurance option. While this could be good for relatively healthy employees who choose cheaper plans, it may leave many workers with more health issues to cover more of the costs out-of-pocket.