Note: This should not be taken as tax or legal advice.
The answer is yes in most cases. The real answer depends on two things:
What state you reside in, and
What type of policy you are purchasing
A personal health insurance policy, sometimes called an "individual" or "family" health insurance policy, covers you and your designated family members. Personal health policies are the fastest growing form of U.S. health insurance. The number of personal health policies grew from 12 million members in 2002, to 24 million members in 2008, and is expected to reach 50 million members by 2012. In contrast, the number of people covered by employer group policies has substantially declined—less than 40% of U.S. small employers now offer group policies.
In 46 states, the price of a personal health policy is based on your age and your health at the time of application—but once insured, your premium cannot be increased because you become ill.
Once you obtain a personal health insurance policy, in most states:
You and your covered family members are guaranteed the right to renew your personal policy until age 65, independent of employment.
Your renewal premium may not be substantially increased due to your claims experience—even if your carrier pays a claim for you of $1 million or more.
Your renewal premium will increase when you enter a higher age band (typically every 5 years) or with general medical inflation—based on the claims of a very large group of people in your state who purchased similar personal policies.
Some states set limits on annual increases regardless of medical inflation. Depending on your state, you should expect your premium to increase 5% to 15% each year from an initial price much lower than group coverage. See your local licensed agent for detailed information on your state.
If you are healthy and don't like your proposed annual renewal premium, you can always shop around for a new policy just like you do with auto or homeowners insurance. Nationally, more than 300 different carriers, including 76 Blue Cross Blue Shield companies, offer personal polices.
According to the White House, 28 states are “on their way” to establishing new marketplaces, called health insurance exchanges, where consumers can begin to shop for health insurance starting January 1st, 2014.
Nancy-Ann DeParle, White House Deputy Chief of Staff, remarked, “States are taking strong steps to implement health reform. The Obama Administration is working in partnership with State leaders across the country... we will ensure Americans in every State have access to an Exchange and the same kinds of insurance choices as Members of Congress.”
But does that mean 22 states will not be ready in time? Administration officials said ““it would be premature at this point” to draw that conclusion.
While the government is reviewing another round of grant proposals to assist states, some states, including Wisconsin and Kansas, have said they plan to give the grant back. Last week, South Dakota’s governor said there is too much uncertainty for the state to move ahead with an exchange until after it learns the results of the Supreme Court case challenging the law, and the outcome of the November Presidential election.
Will that be too late?
“If states decide after the Supreme Court decision, we will work with them to get them as far down the path as possible,” said the official, noting that a state initially could do a partnership with the federal government, if necessary, then get certified to run its exchange solo after that. Residents in states that can’t — or won’t — run their own exchanges will be directed to a federally facilitated fallback exchange.
Still, some policy experts have questioned whether the federal government will have its backup system up and running by the time enrollment is set to open in the fall of 2013. “We are making substantial progress of development of federal exchanges,” the official said, “including signing contracts with private sector vendors to create the systems.”
It costs a typical employer the equivalent of 6-9 months in salary each time they have to replace a salaried employee—that’s $20,000 to $30,000 for a $40,000 manager in recruiting and training expenses, along with the potential lost revenue from customers.
Employers can save approximately half of these expenses, $10,000 or more per replaced employee, with a health benefits plan that helps them recruit new employees and retain existing employees.
Defined contribution health benefits provide many advantages over traditional employer-sponsored benefits. Rather than paying the costs to provide a specific group health plan (a "defined benefit"), employers can fix their costs on a monthly basis by establishing a defined contribution health plan that gives employers and employees full control over healthcare costs – the employer’s costs are predictable and controllable, while employees are given full control over their health care dollars and choose a portable plan that meets their exact personal needs. How do defined contribution health benefits work?
An employer gives each employee a fixed dollar amount (a "defined contribution") that the employee chooses how to spend. Typically, employees are allowed to use the defined contribution to reimburse themselves for personal health insurance costs or other medical expenses such as doctor visits and prescription drugs.
Under the traditional approach to health benefits, the company selects and funds the same insurance plan for all employees in a one-size-fits-all approach.
Alternatively, in a defined contribution approach, the employer designates a fixed amount of money, the “defined contribution”, and employees purchase personal health insurance directly from any insurance company they choose, selecting products that specifically meet their family’s needs and budget.
What is a personal health policy?
A personal health policy, sometimes called an "individual" or "family" health insurance policy, covers you and your designated family members. You purchase a personal health policy through a licensed health insurance agent who is appointed to represent the insurance companies in your state.
Personal health policies now cost 1/3 to 1/2 the price of similar-benefit employer-sponsored coverage in 45 states. This is primarily because insurance carriers in 45 states are allowed to: (1) price based on age bands and (2) reject or charge more to applicants for personal policies with pre-existing conditions.
If you or a member of your family are rejected or charged more for a personal health policy because of a pre-existing medical condition, you typically become eligible for state-guaranteed (“HIPAA-guaranteed”) or federally-guaranteed (“PCIP”) personal health insurance.
How do businesses determine the amount of money allocated to employees?
Providing different levels of benefits to classes of employees is at the core of benefits compensation and is routinely done by major corporations. With salary and other types of compensation, employers routinely compensate groups of employees differently. Field sales people are compensated differently than sales managers. Some employees get company cars, while others earn quarterly bonuses. Because health benefits are such an important part of compensation, why not provide benefits that vary by class of employee?
With defined contribution health benefits, businesses can create employee classes that offer benefits tailored to the company’s objectives, transforming a health benefit plan into a tool to find and keep great people.
For example, consider an electrical contracting company who struggled to hire and keep journeymen electricians in a very tight labor market. Instead of offering the same health plan to all employees, the company created separate classes for apprentices and journeymen and gave journeyman $350 more per month in their HRA. This large increase helps the company reduce attrition among journeyman. Plus, it creates a visible incentive for apprentices to complete the education required to become journeymen.
As there are no minimum or maximum contribution requirements, a business can design their defined contribution health plan to fulfill its exact recruiting and retention needs.
Conclusion
Recruiting and retaining key employees is essential to every business, and a company's health benefit program is a key part of the compensation they offer to their employees. Due to the rising costs of traditional employer-sponsored health insurance, defined contribution health benefits are gaining popularity in the U.S. Rather than paying the costs to provide a specific group health plan (a "defined benefit"); employers might want to consider fixing their costs on a monthly basis by establishing a defined contribution health plan.
Zane Benefits (www.zanebenefits.com), the leader in defined contribution health benefits. Zane works with brokers, agents and CPAs to transition clients to defined contribution solutions. Follow Zane at www.zanebenefits.com/blog.
Note: None of this should be taken as legal or tax advice.
The Medical Loss Ratio (MLR) final rules require insurance carriers in the small group and individual markets to spend at least 80% of the premiums toward the participants medical expenses. Insurance carriers insuring large groups must spend a minimum of 85% of the premium on medical expenses. Insurance companies that do not meet the minimum requirement must rebate the consumers a portion of the premium.
The first round of rebates will begin this year for carriers not meeting the requirements in 2011.
All rebates must be distributed before August 1st, 2012.
Clarifying Health is a blog about health insurance, health benefits, and everything else related to how Americans pay for medical expenses.
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We also run a company called Zane Benefits where we're doing everything we can to help America out of the current healthcare mess.
If you want to learn more about how Zane Benefits helps companies with their benefits, or you're interested in working with us, visit the Zane Benefits website.
