Why do employees increasingly view their employer-sponsored health insurance plans a poor value that fails to meet their needs?   

Back in the prehistoric age of health insurance, when I started. Group Health Insurance was designed to benefit the GROUP. In other words, coverage was designed to appeal to 95% of the employees. This made perfect sense. On the other side of the coin were the 5% (higher risk) who had to rightfully pay more for services and in some cases a lot more. Somewhere during the managed care evolution of the 80’s and 90’s, this ratio slowly inverted to where our contemporary view of “group health” is that it must be designed and financed to protect the 5% from financial ruin, while the other 95% were stuck with high deductibles and cost-sharing required to protect the high claims minority. Fair?

One reason why the good old days provided a so much more equitable environment for the 95% was the use of the so-called “doughnut hole” approach to coverage. Some of you grizzled health agents may recall that years ago, the Blues would sell something called a “base-plus” plan. This type of plan provided first dollar (no deductible) coverage for most basic elective outpatient services, say the first $2,000. After this threshold was met, the covered member would be financially liable for some cost-sharing (deductible and coinsurance) up until these claims reach an attachment point, after which the plan covered most expenses. The so-called doughnut hole is that part of the coverage that the member was responsible for. This type of plan had a very high perceived value because it provided free preventive and basic services. As an added bonus, the middle doughnut hole cost sharing tended to discourage overutilization, while the third component took care of serious illness or accidents.

To provide a safety net for the uninsured, the federal government passed the Affordable Care Act. As part of the law, pre-existing conditions limits were eliminated. Also, state or federal exchanges were established to provide untethered access to different levels of major medical coverage.

What significance do state/federal exchanges have for our beleaguered 95%ers? The answer is that If employers only had to worry about low-risk employees (the 95%ers) they would be free to sponsor first-dollar limited benefit plans that would appeal to the 95% of relatively healthy workers. At the same time, these more limited plans would be far less attractive to the high-risk 5%ers. Plans would be designed with generous first-dollar coverage but limited on the catastrophic. To protect those employees who may unexpectedly incur a major health problem, critical illness, or dread disease lump sum indemnity coverage would be included in the employer-sponsored plan, but only enough benefit to safely allow a “transition” to private major med or a state exchange coverage.

High-end indemnity plans, sponsored by major insurance carriers could be designed to provide hundreds of thousands of dollars in hospital/surgical coverage on a first dollar basis, thus creating the doughnut hole incentive of old. High-risk employees, or employees who prefer major medical coverage, would be given information on how to enroll in coverage through outside sources, either private or public. Employers might even supplement income at equivalent levels matching what they would contribute for an employer-sponsored plan to help these employees pay for the outside coverage.

To my knowledge this strategy does not violate any elements of the Affordable Care Act or Labor Law (check with your own legal team to confirm) In my opinion if you include plan options that meet the Minimum Value and Minimum Essential Coverage thresholds, you should be safe from penalties. Care should be taken not to incentivize employees to leave your company-sponsored plans, but information on what is available through the state or federal plans is appropriate. Your new plans may be limited, but they still provide minimums required by law.