Employees want to manage their own health plans — this is why you should let them

The number of uninsured Americans is creeping back up and it’s not because employers are dropping plans — people have employer-sponsored group plans, but they are choosing to opt out altogether.

High costs are driving much of those decisions: employees are paying nearly $2,000 more of their own pay toward health benefits on a traditional group plan than they would on an individually managed plan, according to the National Health Benefits analysis conducted by Remodel Health. And since employees cannot afford those costs, they’re foregoing insurance altogether.

“Employees either cannot afford their employer-sponsored plans,” says John Staub, thought leader at Remodel Health. “Or they are choosing not to “waste” their money on something that is not worth it to them.”

The financial optics for employers aren’t much better, either. The projected cost per employee for organizations on traditional group plans by the end of 2021 is over $15,000.

“The idea that you buy an insurance plan and you use an insurance plan is not the problem,” Staub says. “The problem is how much it has been costing — the latest is an 368% increase over the past two decades. And we are not paying people 368% more.”

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One solution employers and employees are gravitating toward is individually managed health benefit plans. Unlike a traditional group plan — where employers make all of the decisions regarding copays and deductibles and purchase those pre-selected plans in bulk to offer to employees — an individually managed plan allows employees to build their own plan and the employer will then subsidize a portion of the cost.

“The employee is in control,” Staub says. “And that plan is also portable. You can take it with you to any employer that you want to and you get to keep it within reason.”

Individually sponsored plans give power back to the employee to choose the healthcare that works for them, at the price point they can manage. And while traditional plans have an 8-12% increase in premium costs annually, individual rates have actually gone down, according to Remodel Health’s analysis. Individually managed plans are also eligible for tax credit discounts — also referred to as a health insurance subsidy — which saves employees and employers an average of 51% on health benefits.

“Not only are the core products themselves cheaper but they're getting discounted by tax credits as well,” Staub says. “So when the employer then gives some of the money over to the employee, they now have access to cheaper plans than they would've ever gotten in the traditional group space.”

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But despite these benefits, many employers are still hesitant to uproot their current system. Switching from a traditional to individually managed plan is a lengthy process, and on top of having to rethink their entire benefits strategy — and what it means for other aspects of the company — it also requires companies to check their pride at the door.

“The reality is that employees need to be given ownership of their own benefits because they know what they need more than the employer does,” Staub says. “But the employer certainly has to give up control, which they don't like to do a lot of times.”

The good news is that employers are increasingly willing to make the switch: around 800,000 to a million employers are projected to offer this option over the next three to five years, according to the Bureau of Labor Statistics.

“Fundamentally I think that the American consumer is one of the smartest out there,” Staub says. “Empowering individuals actually will create a more satisfying benefit.”