While it’s hard to identify the exact point at which the “old” healthcare model – affordable, employer-provided insurance provided by a major company – began to break down, its impending demise seemed apparent once serious discussion of the Affordable Care Act began in 2008. Its fate seemed sealed once the ACA passed into law.
To paraphrase Mark Twain’s comment about himself: Reports of employer-sponsored insurance’s death have been greatly exaggerated. Unexpectedly, some unforeseen events stand to breathe at least some temporary life into the employer-sponsored insurance model, starting with the ongoing controversy and rising costs associated with the ACA itself.
Leaving aside any political or popularity considerations, the ACA in its current form. is not succeeding in either creating stability or containing costs. Significant changes to the law, including elimination of the individual mandate, are causing significant premium increases. Early 2019 cost projections in Virginia, one of the first states to release an estimate, suggest increases of up to 64%. While this will vary in other states, it suggests an unwelcome – and possibly unsustainable – strong upward trend likely to be repeated elsewhere.
At the same time, the U.S. has returned to what are considered to be “normal” unemployment figures for the first time since the 2008 downturn. The Bureau of Labor Statistics has posted a 3.9% rate for April, effectively considered “full employment.” The H1B and H2B visa programs enabling recruitment of foreign workers – primarily for highly skilled and seasonal employment respectively – have also been curtailed. As a result, many employers are having to compete more aggressively to recruit new talent.
One of the most powerful tools available to them: Health insurance. While traditional motivators such as higher wages remain effective in attracting new recruits, the ability to offer affordable group health plans provides powerful incentive for them to stay. Workers unable to afford ACA exchange premiums, or unwilling to pay for them, are more likely to be drawn to – and stick with – jobs where insurance is an option. The Society for Human Resource Management reports that 46% of employees cited health insurance as a determining factor or a positive influence in accepting their current job.
Of course, the rapid rise in insurance costs isn’t limited to the ACA marketplaces. Group insurance rates have risen too – but at a rate well below those of individual market plans. It’s still possible in most locations for employers to “shop around” for a cost-effective solution. Quite often, that shopping leads them to a PEO.
We’ve noticed this effect in action here at Trion Solutions. Many companies subject to federal insurance provision mandates find that by virtue of our size, we’re able to access group plans that would be unavailable to them on the open market. At the same time, smaller companies who aren’t obligated to offer insurance are finding that it provides a powerful competitive advantage in recruiting high quality personnel, and are following bigger firms through our door, eager to take advantage of the comparative stability and cost-containment that our benefit plans provide.
The U.S. health insurance climate is likely to remain unsettled for the foreseeable future. The only factors that appear to be reasonably certain are rising costs and insurance market instability. In those circumstances, the ability to provide employees with access to coverage may become a recruitment and retention tool that businesses can’t afford to go without.
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