In a recent edition of ProSales there was an article on the high cost of health insurance. A couple of business owners were quoted about whether it was time to move this fringe benefit out of the businesses and have individuals purchase the insurance directly.
I have felt this way for several years and the main reason is: as a business owner and employer, I am not the person who should be making the decision on the best health insurance plan for an employee. I do not have the knowledge of any acute or chronic health issues my employee or their family members may have. I cannot decide if they should have a major medical plan, an HMO plan, high deductible, low deductible, or prescription coverage. Legally, I am barred from asking them directly.
If individuals could purchase health insurance on their own, the way they purchase other insurance such as auto and homeowner’s insurance, it would allow them to be the direct consumer and perhaps allow them to make better decisions about their consumption of health insurance and health care. And this may help in controlling the growing cost of health care.
When I became a business owner, we were counseled to have employees pay a portion so they would understand the value. Then we moved to annual fringe benefit statements so an employee would know how much they paid annually and how much the employer covered. But I think employees still did not value the insurance because they didn’t have to write a check to purchase it. They were absentee consumers. Now as we move to plans with deductibles, employees are becoming conscious of the tests they are having and lab work being done because they will be writing a check to cover these services.
Over the years, I did not pay someone extra in salary if they opted out of health insurance. I considered health insurance a fringe benefit without a cash value. If you need it, you get it, if you don’t need it, so be it. I had no interest in paying someone extra only to tell them when their circumstances changed they would have to give up salary dollars to get the benefit. We were proud to offer health insurance to our employees and often were able to attract employees because we offered health insurance.
But now our contribution to a family health premium is $13,548.00 (75% of $18,066.00); total benefits and taxes on a salaried employee with family coverage are 27% of their salary and on a yard or hardware store employee the total is 42% of their wages. Every time we make a hiring decision we think about these numbers. For the first time, I’m considering paying extra salary dollars if an employee doesn’t need insurance through our group plan.
To change to the model where an individual purchases his health insurance directly, a few things will have to change. Initially salaries will have to be adjusted to provide an employee with the cash to purchase the insurance. Going forward the employer will not be deciding on a job candidate based on whether or not they need the company’s group insurance. Secondly, the tax deduction that a business receives for health insurance premiums will have to be moved to the individual. Third, the availability of comparable coverage must be available at lower prices. A family making $40,000 a year can barely afford to pay 25% of the premium by payroll deduction, $86.00 per week, and they cannot afford 100% of the coverage at $18,000.00 per year.
The main point of this piece is to make an argument as to why I believe individuals should be deciding on their health insurance and purchasing it directly. I also believe everyone should have coverage and our experience with health care reform in Massachusetts has shown that increasing the number of individuals covered has translated into increases in the access, use, affordability and quality of care in the state.
Eileen Miskell is the treasurer of TheWood Lumber Co., which she owns with her husband, in Falmouth, Mass.