This post is part of a blog series on the history of the U.S. health insurance industry. This series has been adapted from the Zane Benefits white paper, The Inevitable End of Small Business Health Insurance. To access Part 2 of this blog series, please click here.
Since the early 1980s, employer-provided health insurance costs have been on the rise. In the early 1990s, numerous attempts were made at the state-level to make health insurance more accessible to small businesses, however these efforts did little to mitigate the rising costs.
By the 2000s, the employer-provided health insurance death spiral had begun to run its course. From 1999 to 2013, without accounting for the annual benefit reductions, the cost to cover a single employee rose from $2,196 per year in 1999 to $5,884 per year in 2013. Family coverage increased from $5,791 per year in 1999 to $16,351 per year in 2013.
As a result, the individual market expanded and numerous entities were formed to service the new health insurance consumer.
New Business Models Service the Growing Individual Health Insurance Market
In 1997, eHealthInsurance.com was founded to service the individual health insurance consumer online. Today, eHealthInsurance.com has enrolled over 4 million people in health insurance coverage and is the leading online marketplace for individual and family health insurance products in the nation.
In 1999, Paul Zane Pilzer founded ExtendHealth, Inc. (originally Wellness Services, Inc.) to distribute Defined Contribution Healthcare and individual health insurance policies through employers. ExtendHealth eventually focused on offering Defined Contribution Healthcare to retirees of large U.S. employers. ExtendHealth was acquired by Towers Watson in 2012 for $435 million.
In 2003, UnitedHealth Group, Inc. began consolidating several individual health insurance companies to expand its reach in the individual health insurance market including Golden Rule, American Medical Security, Oxford Health Plans, and PacifiCare. UnitedHealth’s individual business unit now operates under the brand UnitedHealthOne.
After ExtendHealth was acquired, Paul Zane Pilzer founded Zane Benefits in 2006 to help small employers take advantage of new Defined Contribution Healthcare via its proprietary SaaS software platform ("ZaneHealth"). Using Zane’s platform, employers offer a custom Defined Contribution Healthcare solution that allows the business to reimburse employees for their individual health insurance policies.
The Affordable Care Act - Individual Market Reform
While the economics of employer-provided health insurance and the work of innovative firms in the private sector helped broaden the appeal of the Individual Market to millions of Americans, there were still many people who had limited access to individual plans. As we will discuss in the next part of this series, the Affordable Care Act was passed to address these limitations.