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Private Insurance Based Study Shows Employees Want Fewer Costs, More Choice

Posted on Jul 29, 2013 by Ailee Slater ()  | Tags: defined contributions, employer-sponsored health insurance, Liazon, private insurance exchanges, workplace health insurance

At the start of July, USA Today published a news story entitled, Consumers Choose Cheaper Insurance. The story went on to detail the results of a recent survey in which more than 2,000 employees were asked to choose between eight imaginary health plans. Of course, it's no surprise that many people chose the cheaper option. More shocking, perhaps, was the fact that 80 percent of people polled said that they were unhappy with their current employer-sponsored insurance.

The survey, conducted by the private insurance organization Liazon, talked with 2,503 employees working at small-to-medium companies based around New York and New Jersey. These employees were quizzed on a variety of questions about their current health care situation, then asked to look at a selection of eight different health insurance plans, and indicate which plan they would hypothetically choose. Sixty percent chose plans in the lowest monthly price bracket - even though the cheapest plans came with disadvantages such as limited provider networks and higher deductibles.

Then again, plenty of employees surveyed chose the most expensive insurance offered, opting to pay more per month and in return receive more choice in doctor and a broader range of services. In the end, what the Liazon survey truly revealed was that different employees want different kinds of coverage, and that the majority are very interested in a new way of receiving employer-sponsored health insurance.

At the moment, most employees cannot choose their own health insurance plan, as they were able to do in the Liazon survey. Workplace health insurance traditionally follows a one-plan model, wherein the employer will give all employees the opportunity to join the same plan. Occasionally a workplace may be able to offer a choice between two or three plans, but normally, employer-sponsored health insurance in a one-size-fits-all system. Insurance for employees will usually cover inpatient and outpatient services and prescriptions drugs, but may or may not cover additional benefits such as maternity care or a dental plan. (Until 2015, that is, when the Affordable Care Act will require all employers to offer a minimum standard of health coverage to their workers).

For employers, there are definite advantages to giving all employees the same health coverage plan. To begin, most large insurers only offer the one-for-all system, so if an employer wants to get a good group rate from a trusted insurance company, it makes sense to put all workers on the same plan. Also, having one set insurance plan also makes sense for the sake of simplicity. If the cost of health insurance for each employee is exactly the same, employers can easily divide premiums between workers, and not spend time considering which tailor-made plan might be best for which employee.

However, the one-size-fits-all-model is not always ideal for employees. Indeed, as demonstrated by the Liazon study, 80 percent of workers are not happy with their insurance. Many of these employees feel that they are paying too much money, and in the end not receiving the health benefits they want. A physically fit, non-smoking 29-year-old woman, for example, may be unhappy about paying into an employer-sponsored health insurance plan that offers prescription drug coverage for chronic conditions, but no maternity services.

And again, as indicated by the USA Today article, employees are also dissatisfied with health insurance costs. The fact that 60 percent of employees in the Liazon study chose the cheapest coverage shows that many workers are willing to sacrifice insurance benefits if it means more money in their monthly paychecks.

In fact, the authors of the Liazon study have a vested interest in proving that employees want more choice in their employer-sponsored health insurance. Liazon is a business that creates private health exchanges for small and large businesses. Working with insurance companies, Liazon will connect companies to multiple insurance plans, creating an online marketplace where employees of that company can compare and eventually purchase a health insurance plan. Instead of buying one plan for all their employees, the employer will give each worker a defined financial contribution; with their contribution, each employee can shop at Liazon's online exchange and choose the plan they like best.

A private insurance exchange is different from traditional employer-sponsored health insurance, because an employee is able to choose between a huge number of plans. As many as 40 options may be available, and each employee can buy a different plan to suit their individual needs - opting for a low monthly premium and high deductible, choosing to pay into a health savings account, and so on. Employees can also choose to pay money out-of-pocket if they prefer a plan that's more expensive than their employer's defined contribution. Private exchanges usually offer extended packages, such as dental care or long-term insurance, and an employee may choose to put their own money toward accruing such benefits.

More choice is clearly good for employees, but private insurance exchanges offer many advantages for employers as well. If employees choose low-cost health insurance (as the Liazon survey has indicated they will), that means lower costs for employers. Also, offering each employee a defined financial contribution rather than a set of health benefits gives an employer more control, and a better way to predict health coverage costs in the coming years.

As more employers seek health coverage in order to comply with the Affordable Care Act, it will be interesting to see whether or not private exchanges prove a viable option for employer-sponsored insurance. Companies like Liazon are clearly hoping to prove that when it comes to health insurance, what business leaders and their employees want most is choice.

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