Technology has changed the way we've done many things over the last 10 years. The way we listen to music, get news, communicate with each other, pay bills and even make "friends" have all seen dramatic impacts. So it should be no surprise that the way we purchase health insurance is changing as well. Americans purchasing their own insurance have already been taking advantage of the new tools and shopping platforms that technology has enabled, but soon, the way we buy insurance will experience a fundamental change that will affect the majority of Americans. In addition to new innovations and inevitable market forces, government legislation will also be a major catalyst that will usher in these changes.
To understand the future, we need a quick primer on the current system. The majority of Americans get their insurance through their employer. The employer owns the policy and decides on the carrier, the plan design and how much of the premium will be required from the employee if they want to participate in the plan. These employer sponsored plans have been decreasing in popularity and participation for the last 10 years.
This market shift has been driven by five major factors:
- The higher costs of employer sponsored plans—this is driven by the higher requirements of the plans thanks to state and federal mandates as well as the migration of the healthier population to the individual market and underwritten health plans.
- Desire to choose—choice of carrier, plan design, and premium differential helps individuals and families get the most for their money.
- No portability of coverage—when the employer based model began, most people went to work for a company and stayed there their whole career. Now, the average American changes jobs more than 11 times in their lifetime. In addition, less than half of small businesses even offer employer sponsored coverage anymore.
- Technology and innovation that make it easy and affordable to purchase your own coverage.
- Defined contribution cafeteria plan platform that allows employees to purchase personal health insurance plans tax free—putting it on a level, tax exempt status playing field as employer sponsored health plans.
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