Medical certainty is one of the basic human rights. Sickness might often come with a hefty medical bill. Health insurance is supposed to provide relief from the burden and ensure maximum healthcare.
In the U.S, the reality is different.
While an attractive health insurance plan can add a lot of charm to the job, the increasing deductibles and premiums are making it a lot harder for both the employers and employees.
If you like to keep your eyes open, you might have seen the headlines about how Starbucks or General motors spend more on health insurance than their actual operations. Large corporations know how important it is to keep the employees healthy in order to get the best
The scenario isn’t the same for small and medium corporations and businesses. With theAffordable Care Act (known as ACA or Obamacare) in place, health insurance plans are more accessible to people who cannot rely on employer insurance. Still, it’s considered a flaw in the system.
Before understanding how employer and employee health insurance is getting out of hand each year, understanding some basic terminology is important. They are essential in order to understand the whole insurance paradigm better.
The first term is the out-of-pocket costs. Its paid by the employees and is a very important metric in determining the feasibility of the plan.
Deductible: It’s the amount that the employees pay before the employer can start paying. It comes directly from the employees’ pockets. If there is $1,800 deductible per annum, the employee must pay it as medical bills before his/her employers can take care of the rest.
Co-Payment: Also known as co-pay, is the amount that the employee directly pays to the provider, but it does not come with every healthcare plan.
Coinsurance: It’s the amount the employee has to share with the healthcare provider. In simple terms, if there is a 10% coinsurance, it means the insurance will pay for 90% of all covered medical expenses and the employee must cover the rest.
Shared Employee and Employer Cost
Besides the out-of-pocket costs, there is a shared cost between the employers and the employees.
Premiums: It’s the payment made to the insurance company at a regular interval. It ensures that health coverage is still in place. The employers and employees share the premium amount with the employer paying the lion share.
Health Saving Accounts (HSA): It’s a savings account that is not eligible for a tax deduction. It’s a very helpful way to save future medical expenses without having to worry about taxes. Both the employer and the employee can contribute to this account.
Flexible Spending Accounts (FSA): A form of the pre-tax account and its set aside to cover medical costs not covered by the insurance. It’s operated by the employer and the employees use it accordingly. By the end of a fiscal year, the unspent amount is returned to the employer.
With so many accounts payable in place, it’s no wonder why healthcare is so expensive. The employers are struggling to keep up with the increasing premiums and it’s affecting the entire economy and basic human rights.
The Current Status
Currently, 60% of employees are getting health insurance through their employers. It’s known that Starbucks spends more on employee healthcare than they spend on their coffee beans. Big corporations like Starbucks don’t focus on the fact much.
But for small and medium businesses, healthcare is becoming more and more of a challenge. As employers are the main source of health insurance covering approximately 153 million people, the premiums and deductibles are pushing the limits in 2019.
A survey by the Kaiser Family Foundation found some compelling data on healthcare insurance by employers and the impact of the rising costs.
The amount of the average premium paid for a family plan has reached over $20,000. The money comes out of both the employers’ and the employees’ pockets. The estimated amount paid by the employee is around $6,000. The rest is covered by the employer.
Over 25% of all covered employees pay a deductible of $2,000 per annum. The percentage rises even more to 50% when it comes to people who work for small and medium corporations.
With that said, the large corporations are getting an edge over the small ones with their financial capability. Before, the rate of moving from fully-insured to self-funded was 62% which is already a great number.
But in recent years, the percentage has grown to a whopping 92%. Big corporations are unwilling to give in to the exploitation of countrywide healthcare systems.
Moreover, 56% of the voters are also against the idea of a government-run system like healthcare-for-all proposed by the Democratic presidential candidates.
The Future of Healthcare Insurance
In a time where people have to leave their jobs to avail of the treatment, the future of healthcare insurance doesn’t make any promises. Despite the flaws in the system, it seems like the ACA is here to stay.
For big corporations, the scenario is a little different. As most of them are moving to self-funded healthcare plans, they don’t have to worry about overdraft in near future.
But for medium to small business owners, the employers must analyze the healthcare data to understand the behavior pattern of healthcare providers. Instead of sticking to one provider, looking into a pool of providers will open new opportunities to reduce healthcare expenses.
The expectations gap between policymakers and actual consumers has created such tension in the healthcare industry. The conflict between goals and realities, such as reducing cost versus expanding coverage are making it impossible to revise the current policies in place.
The advancements in medical technology have increased the expenses, unlike other industries where technological advancements tend to reduce costs. It has made people think that there is always a solution. Often, there is not
Lastly, inflation in the healthcare industry is here to exist. It won’t go away no matter how much effort we put in. The situation reached such state through a long phase. It will take longer to make it go away, if possible.