Some U.S. Employers Ending Group Health Insurance Plans, Helping Employees Pay For Individual Policies

Main Category: Health Insurance / Medical Insurance
Article Date: 25 Jan 2008 - 7:00 PDT

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Some employers are ending group health insurance coverage for workers and instead are offering employees financial contributions to purchase individual coverage -- a trend that if "broadly adopted ... would represent a fundamental shift in health coverage" in the U.S., USA Today reports. According to USA Today, the trend is "touted as a lower-cost way for employers to offer workers some kind of health coverage, while making smaller and more predictable" contributions toward that coverage. Employers using the model typically contribute between $50 and $200 to a tax-free account that workers can use for health care costs.

Paul Zane Pilzer of Zane Benefits -- a company that sets up and manages tax-free medical reimbursement accounts for clients' employees -- said under the model, more workers will be able to purchase health coverage on their own, and healthier employees will pay less for individual coverage than they would under an employer-sponsored plan because they would no longer "have to pay for sick employees."

However, critics of the trend say shifting employees to individual policies could benefit younger, healthier workers who often have lower premiums and lower medical costs, while leaving older and sicker workers unable to obtain coverage. USA Today reports that "ending group coverage removes a key protection in group insurance plans": Insurers cannot reject group plan members for health reasons, and all members of the group pay the same premium.

In addition, Sara Rosenbaum, a law professor at the George Washington University School of Public Health, said proponents of individual policies might mislead employers into thinking that group and individual coverage are the same. Rosenbaum said, "Many employees may find themselves shut out of the individual market, and even if they can get in, the coverage is dramatically less than what they can get in group products." According to Rosenbaum, financial contributions to individual policies "may be somewhat helpful for workers in businesses that have never been able to offer insurance coverage," but it is a "radical step backward" for companies that cancel group coverage (Appleby, USA Today, 1/24).

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