Technology has changed the way we’ve done many things over thelast 10 years. The way we listen to music, get news, communicatewith each other, pay bills and even make “friends” have all seendramatic transformations. So it should come as no surprise the waywe buy health insurance is changing as well. Americans buying theirown insurance already have been taking advantage of the new toolsand shopping platforms technology has enabled but soon, the way webuy insurance will experience a revolution that will affect mostAmericans. In addition to new innovations and inevitable marketforces, government legislation also will be a major catalyst thatwill usher in these changes.

To understand the future, we need a quick primer on today’ssystem. The majority of Americans get their insurance through theiremployer. The employer owns the policy and decides on the carrier,the plan design and how much of the premium will be required fromthe employee if they want to participate. Theseemployer-sponsored plans have been dropping in popularity andparticipation for the last 10 years.

This market shift has been driven by five major factors:

1. The higher costs of employer-sponsoredplans—this is driven by the higher requirements of theplans thanks to state and federal mandates as well as the migrationof the healthier population to the individual market andunderwritten health plans.
2. Desire to choose—choice of carrier, plandesign, and premium differential helps individuals and families getthe most for their money.
3. No portability of coverage—when theemployer-based model began, most people went to work for a companyand stayed there their whole career. Now, the average Americanchanges jobs more than 11 times in their lifetime. In addition,less than half of small businesses even offer employer-sponsoredcoverage anymore.
4. Technology and innovation that make it easyand affordable to buy your own coverage.
5. Defined-contribution cafeteria plan platformsthat allow employees to buy personal health insurance plans taxfree—putting it on a level, tax-exempt status playing field asemployer-sponsored health plans.

Now let’s take a look at the present and the future. One of thecritical factors that will shape the health insurance market overthe next 10 years will be the action taken by the government.

If the Patient Protection and Affordable Care Act remains thelaw of the land, the CBO estimates the purchase of personal healthpolicies will double over the next five years. This estimate willturn out to be low. The PPACA includes many incentives that kick in(come 2014) for people to purchase their own coverage and foremployers to stop offering employer-based coverage. These includestate exchanges with government-paid premium subsidies based onincome and a minimum requirement for employers that will make it aneasy business decision to pay a penalty and let employees look tothe state exchanges and personal health plan market to fulfilltheir health insurance needs.

If PPACA is found unconstitutional or is repealed and isreplaced by the ideas offered up by leading Republicans, then theemployer-sponsored model will be shifted to the individual marketin the form of defined-contribution plans combined with refundabletax credits employees can use toward the purchase of personalhealth plans. Some proposals also have included a similartransformation of Medicare, Medicaid and Tricare.

Whichever way the political winds blow, the employer-sponsoredhealth plan is going the way of the employer-paid pension plan, andwill be virtually nonexistent after 2014. Here is a picture of whatthe market place will probably look like going forward.

Employers set up their employee benefits by deciding eligibilityand a dollar amount to contribute instead of choosing the carrierand plan for all the employees.

Building on the technology in use now, brokers offer a privateexchange solution for employees to shop for the best plans fortheir needs. Personal health plans as well as personal supplementalor ancillary benefits can be packaged and tailored to fit thoseneeds. Brokers also might offer non-major medical plans on a groupvoluntary chassis for better pricing, underwriting and plan designchoices.

Employees make their own decisions on plans and are able topayroll deduct, tax free, any of their own money needed to covertheir premiums.

This simple, free market-based system will allow for benefits.Both employers and employees will get the most for their dollar andemployees will have portable coverage they can take with themregardless of their job situation.

Plus, there will be more competition among insurance carriersdue to the employee paying the full costs of their policies.

There will, of course, need to be a safety net for individualswith preexisting conditions. This could be provided bystrengthening the state high risk pools right now.

The bottom line is that a fundamental change in how we purchaseinsurance is coming. One that if done correctly, can actuallyimprove the quality and affordability of health insurance foremployers and employees, and not create an additional burden on thefederal and state government’s coffers.

Joshua Hilgers is president of Health Partners America inBirmingham, Ala. He’ll be speaking at the Benefits Selling Expo inMay in San Antonio.