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Small Business Employee Benefits and HR Blog

Broker Tips: Make Individual Health Insurance Work For You

open_doorThe Affordable Care Act (ACA) has made significant changes to the health insurance industry, especially to how small and medium sized business owners purchase health insurance for themselves, their family, and their employees.

In order to adapt to this changing landscape, brokers and health insurance agents are adding new solutions to their product offerings, such as premium reimbursement plans. With a premium reimbursement plan, the employer sets up a health plan to reimburse employees for individual health insurance. This article contains an overview of the changes in the health insurance industry, and the opportunity for brokers to take advantage of offering premium reimbursement plans.

Cost of Group Health Insurance

The cost of health care has been on a steady increase over the last decade, and as such, group health insurance is too expensive for small businesses and employees. Additionally, the expected rate increases at renewal time leave financial uncertainty for small businesses.

The costs are becoming unsustainable for small businesses and their employees. Small business health insurance costs have nearly doubled since 2009, with 91 percent of small businesses reporting increases in their health plan at their most recent health insurance renewal.

Back in February, a report from The Centers for Medicare & Medicaid Services (CMS) found that approximately 11 million small business employees, over 65 percent, will see health insurance premium rate increases due to the ACA.

Group health insurance premiums have been increasing well before the ACA came into effect. As a matter of fact, between 1999 and 2013, group health insurance premiums increased by an astounding 168 percent.

New Advantages of Individual Health Insurance

With the cost of group health insurance steadily rising, the ACA has made individual health insurance a more appealing solution for small business owners and their employees because:

  • The ACA’s pre-existing condition exclusion (“guaranteed-issue”) provision prohibits health insurers from denying coverage to individuals due to a pre-existing condition.

  • Individual health insurance costs up to 60% less than group health insurance. In addition, individuals may qualify for premium tax credits, depending upon their income level, household size, and eligibility for other government subsidized programs.

  • Individual health insurance offers more choice and control to employees by allowing them to choose a plan that fits their own needs, including coverage level and network.

  • Individual health insurance is portable; employees get to keep their insurance if they decide to leave the business.

How to Make Individual Health Insurance Work For You

There is a huge opportunity for agents and brokers to take advantage of these changes. Premium reimbursement of individual health insurance premiums is a practical client retention tool for businesses cancelling group health insurance policies.

In addition, a premium reimbursement plan is more affordable than group health insurance, as the employer sets the healthcare allowances that employees can spend on individual health insurance. For small and medium-sized businesses facing cost challenges, premium reimbursement is an ideal solution to retain their business.

Premium reimbursement also opens the door to gain the business of small and medium-sized prospects who are not currently offering healthcare benefits. In fact, the ideal candidates for premium reimbursement are in this demographic. Premium reimbursement is a great tool for agents and brokers to gain the business of this huge, relatively untapped market.

Do you have any questions about offering premium reimbursement plans to your clients?