The provisions of healthcare reform that are now in place have essentially put individual health insurance benefits on par with group policies and yet the cost of individual heath insurance policies remain significantly lower than group.  The primary reason for this cost disparity is that group health insurance policies are guaranteed issue no matter what health conditions the employees may have, whereas individual health plans are underwritten and if an underwriter deems an applicant a poor risk they are simply denied.  Group policies are also underwritten but since they must be accepted the rates are calculated according to the health of the employee population.  For a small employer just one high risk employee or dependent can cause the rates for the entire group to more than double.  This has created a tremendous incentive for small businesses to drop expensive group health insurance and instead pay for lower cost individual health plans for their employees through Defined Contribution Health Plans.  Since a high risk person coming off a group plan is a federally eligible individual for a guaranteed issue HIPAA health plan, instead of increasing the rates for everyone in the group only that person has a higher insurance premium while everyone else enjoys lower premium individual health insurance.  These lower health insurance costs are likely to last for the next three years until 2014, when individual plans are scheduled to also become guaranteed issue.  Of course, if the guaranteed issue part of health reform is repealed, which would most likely occur if the individual mandate is declared unconstitutional, this employer bonus could end up being permanent.


Ronald Haines, ronald@hcibenefits.com