Wednesday, June 15, 2022

When Did Companies Start Offering Health Insurance

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How Much Does Offering Health Insurance Cost Employers

Do most start-ups offer health insurance?

The cost of providing health insurance can vary widely. Employers typically get better rates when they have more employees to insure. This means that Fortune 500 companies will typically have access to lower rates, more plan options, and better coverage for employees, while small businesses can end up paying hundreds of dollars per employee for limited offerings.

The Kaiser Family Foundation reported in its Employer Health Benefits Survey that the average cost for employer-sponsored health premiums in 2021 was $7,739 for individuals and $22,221 for families. The way this premium is split between employers and employees varies. Employers typically cover most of the premium for employees and around half of the premium for dependents.

The cost of providing healthcare can add up, particularly if you are a smaller business unable to access the most competitive rates.

Benefits Of Providing Coverage

What are the added benefits when employers begin to provide health insurance to their workers? Employers themselves may experience reduced costs in areas such as workers compensation, ease in recruiting and retaining workers or increased productivity due to reduced absenteeism. Workers and families of workers who were previously uninsured may experience greater access to medical care services and better health outcomes. In addition, society in generaland taxpayers especiallymay benefit from a healthier citizenry and a reduction in the tax burden associated with uncompensated care provided to the uninsured.

Employer Benefits

Research from the UC Irvine identifies several possible arguments upon which the business case for offering health insurance might be made. The report discusses the economic logic pertaining to each argument and summarizes the relevant empirical evidence. The analysis is based on a review of academic literature regarding the impact of employer-sponsored health insurance on total compensation, employee turnover, workers compensation costs, employee absenteeism, health and morale. Read The Business Case for Employer-Provided Health Benefits.

Worker Benefits

Benefits to Society

Growth And Change In Health Insurance Products

The importance of these developmentsthat is, the defeat of national health , government decisions favorable to employer-based insurance, the success of the Blue Cross concept, and the switch of unions from opposition to support for employer-based insuranceled to further rapid growth of employment-based health benefits in the 1950s. By 1958 an estimated three-quarters of the 123 million Americans with private health coverage were participants in employment-based programs, and about 36 million of this group participated in plans that were collectively bargained . In 1960, 79 Blue Cross and 65 Blue Shield plans had been established, 250 to 300 and other independent plans existed, and over 700 commercial insurance companies were selling individual or group coverage or both .

The growth in commercial was particularly notable after World War II. At the end of the 1940s, Blue Cross plans had larger enrollment than individual and group insurers combined by the end of the next decade, commercial group enrollments exceeded Blue Cross group enrollments. The serious entry of commercial insurers brought important changes: new products, different rating practices, and significant competition.

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No Medical Underwriting On Small Group Plans

Prior to 2014, insurers could base a small group’s premium on the group’s overall medical history although some states limited or prohibited this practice. The ACA has prohibited health insurance carriers from using a small group’s medical history to determine premiums. Again, in most states, this applies to employers with 50 or fewer employees.

How Peos Help Deal With Crucial Health Insurance Factors

Do Companies Have To Offer Health Insurance : Do all ...

While a business can research and obtain health insurance for its employees, getting insurance on your own can be tedious. You’ll need to research your options and build a relationship with an insurance broker or provider. Working with PEO can be an easier path, providing an organization with insight, detailed knowledge and better pricing.

Here are a few crucial factors to consider when obtaining health insurance for your business and how PEOs can help.

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Beginning Of American Life Insurance System

The American life insurance system was established in the mid-1700s. But the first of what could be called individual health insurance plans became available in the United States during the Civil War. The plans were accident insurance providing coverage for injury related to travel by railroad or steamboat.

The late 1800s and early 1900s were full of medical advances, from the identification of inÂfectious agents to the development of antitoxins, vaccines, and new medical technologies such as X-ray radiography and blood pressure meters. The abunÂdance of innovation transformed the public image of medicine, and people began to place more trust in medical institutions.

The Case For Individual Health Insurance Reform

As demand increased for individual health insurance, limitations in the individual health insurance market were exposed. These limitations included medical underwriting, application denials, and a lack of standardized plans. At the same time, the small business health insurance market was in crisis as employer healthcare costs doubled in the 2000s.

Together, the individual and small employer market challenges led to the creation and ultimate passage of the Affordable Care Act on March 23, 2010. Many of the laws major provisions overhauled the individual health insurance market.

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Children’s Health Insurance Program

The Children’s Health Insurance Program is a joint state/federal program to provide health insurance to children in families who earn too much money to qualify for Medicaid, yet cannot afford to buy private insurance. The statutory authority for CHIP is under title XXI of the Social Security Act. CHIP programs are run by the individual states according to requirements set by the federal Centers for Medicare and Medicaid Services, and may be structured as independent programs separate from Medicaid , as expansions of their Medicaid programs , or combine these approaches . States receive enhanced federal funds for their CHIP programs at a rate above the regular Medicaid match.

Foster A Healthy Company Culture

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Providing small business health insurance can show your employees that their health is important to you. By offering a group health plan as an employee benefit, you can demonstrate that you value your employees and view them as an asset to your organization. This appreciation, in turn, could help to promote a positive and healthy company culture.

The benefits of a positive work culture

Drawing from a variety of studies, a Harvard Business Review article provided evidence of how positive work cultures are more productive for businesses over time. The HBR article discussed the worthwhile outcomes which may come from having a virtuous organizational culture, including:

  • Leading to an increase in positive emotion and well-being at companies.
  • Improving peoples relationships and amplifying their abilities and creativity.
  • Buffering against stress, helping employee resilience, and bolstering employee health.
  • Enhancing employee loyalty while bringing out their best strengths.
  • Contributing to higher levels of organizational effectiveness, including productivity, financial performance, customer satisfaction, and employee engagement.

Providing group health coverage could be one major way to promote a positive work culture. By investing in the well-being of employees, companies may be better able to encourage an environment of trust and a mindset of greater openness among their employees.

Increased attention to wellness

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Government Reforms In Healthcare Insurance

The existence of successful health insurance plans prevented government intervention until the mid-1950s. In 1954, Social Security coverage included disability benefits for the first time, and the market started to grow and in 1965 when Congress passed the Medicare and Medicaid Services Act.

In 1971 physician-sponsored plans, Blue Shield and Blue Cross merged into one company, as more expenÂsive medical technology and flaws in the health care system led to higher costs for health insurance companies.

In the 1980s, responding to higher costs and other challenges to the health insurance industry, employee benefit plans changed into managed care plans, and Health Maintenance Organizations emerged. ManÂaged care plans are unique in that they involve a particular network of healthÂcare providers that have been verified for healthcare quality and that have agreements with the insurer about price and related issues. HMOs were originally primarily nonprofit, but they were quickly replaced by commercial interests and managed care only sucÂceeded in temporarily slowing the growth of healthcare costs.

Types Of Medical Insurance

Traditional indemnity or fee-for-service

Early hospital and medical plans offered by insurance companies paid either a fixed amount for specific diseases or medical procedures or a percentage of the provider’s fee. The relationship between the patient and the medical provider was not changed. The patient received medical care and was responsible for paying the provider. If the service was covered by the policy, the insurance company was responsible for reimbursing or indemnifying the patient based on the provisions of the insurance contract . Health insurance plans that are not based on a network of contracted providers, or that base payments on a percentage of provider charges, are still described as indemnity or fee-for-service plans.

Blue Cross Blue Shield Association

Health Maintenance Organizations

The term managed care is used to describe a variety of techniques intended to reduce the cost of health benefits and improve the quality of care. It is also used to describe organizations that use these techniques . Many of these techniques were pioneered by HMOs, but they are now used in a wide variety of private health insurance programs. Through the 1990s, managed care grew from about 25% US employees with employer-sponsored coverage to the vast majority.

Rise of managed care in the US

Year
28%
Network-based managed care
Other managed care techniques

Blurring lines

New types of medical plans

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Why Do Employers Offer Health Insurance

Originally published on April 27, 2012. Last updated August 16, 2018.

Why does your employer offer health insurance? Is it because they care about your health?

NOPE. The primary reason companies offer health insurance today is for recruiting and retention purposes. That is, health insurance is a valuable form of compensation because:

  • It is tax deductible to the business
  • Employees get the benefit 100% tax-free
  • As a result of this enormous tax advantage, $1 in health benefits may be worth $1.50 – $2.00 in pay to an employee depending on his or her family’s tax bracket.

    Additionally, the $1 in health benefits costs the company less than $1 in pay.

    So, when did health insurance become tax deductible to businesses?

    The ’50s Through The ’80s: Vision Dental & Medicare

    Can you offer health insurance to certain employees only?

    The 1950s saw the expansion of healthcare coverage options, as strong labor unions began to bargain for better benefit packages. Major medical plans evolved during this era, with vision care becoming a popular option in 1957 and dental benefits becoming an offering in 1959.

    This created a serious situation for retirees, however. Because employer-sponsored healthcare had now become the cornerstone of the entire American healthcare system, health costs fell victim to inflation, and retired Americans found themselves unable to afford private coverage.

    In 1965, Lyndon Johnson created the Medicare and Medicaid systems to address the issue of healthcare for retirees and for those working in low-paying jobs for companies that did not offer healthcare benefits.

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    Late 20th Century Regulations

    As time went on, there were more federal regulations centered on the health insurance to ensure Americans protection and coverage. The 1973 Health Maintenance Organization Act required most employers that offered HMOs to offer ones that were federally qualified and met certain benefit and financial regulations. In 1974, the Employee Retirement Income Security Act of 1974 was passed which established certain standards for employee health plans if they expect to keep their tax exempt status.

    The 1978 Pregnancy Discrimination Act requires employers to treat medical conditions associated with pregnancy the same as any other medical condition or disability.

    Another important regulation associated with employer-based health insurance was the 1986 Consolidated Omnibus Budget Reconciliation Act of 1985, more commonly referred to as COBRA, which requires companies that employ 20 or more people to continue offering health insurance to employees that have been terminated, as well as their dependents. The amount of time these terminated employees are insured can vary from 18 to 36 months depending on the circumstances.

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    Access To Lower Monthly Premiums

    From a cost perspective, it may make sense to offer small business health insurance due to the reduced price of a group health plan. Generally, small business health insurance plans tend to have lower per-person costs on average, compared to health coverage in the individual market.

    According to a recent eHealth study:

    • In 2018, the average premium per-person through a small business plan was 7 percent lower than the average premium for an individual health insurance plan .
    • The average individual deductible for small business health plans was 31 percent lower than the average deductible for individual health insurance coverage .

    This means that enrolling in a group health insurance plan can be more affordable than individual insurance not only for employees and their families, but for the business owner and his or her family as well.

    Why are small business health insurance plans generally cheaper per person than individual plans?

    Group health insurance plans can cost less per person than an individual health insurance plan due the advantage of having a larger risk pool, or having risks spread out across more people. In other words, group plans often cost less per person, on average.

    This means that a larger group size may make your group health insurance plan cheaper. The eHealth study found that:

    Overall, group size and the number of employees receiving coverage can make a significant difference in terms of small business health insurance premiums.

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    All Plans Must Cap Out

    In 2021, all non-grandfathered, non-grandmothered health plans must cap out-of-pocket costs at $8,550 for an individual, and $17,100 for a family. And family plans must have embedded individual out-of-pocket maximums that don’t exceed the allowable individual out-out-of-pocket amount, regardless of whether the plan has a family deductible.

    The out-of-pocket limit only applies to in-network care .

    The provision to limit out-of-pocket costs applies to group plans as well as individual plans, as long as they’re not grandfathered or grandmothered .

    Initial Healthcare Insurance Forms

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    Massachusetts Health Insurance of Boston offered early group policies with a relatively comprehensive list of benefits as early as 1847. The earliest forms of health insurance, howÂever, did not emerge until 1850, when the Franklin Health Assurance ComÂpany of Massachusetts began providing accident insurance, to cover injuries reÂlated to railroad and steamboat travel.

    Individual accident insurance proved a successful venture, so these kinds of early plans began to evolve into more expansive programs that covered a broader range of illness and injury, including early versions of disability coverage by the end of the 19th century.

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    The Ease Simplicity And Value Of Ehealth

    For all the right reasons, eHealth makes it easy to find group health insurance for your business. We let you quickly find and compare free small business health insurance quotes. Once you provide some information, including zip code and number of employees , you instantly get access to a great selection of group health plans offered by multiple insurance companies.

    eHealth is committed to helping you achieve your health coverage goals as a small business. Once you find a plan that works for you, our licensed insurance agents can guide you toward the next steps for implementing and enrolling in a group health plan, all with no broker fees.

    After enrolling in your new small business health insurance plan, eHealth will still be available to help answer your questions for the entire time you have your plan, at no additional cost to you. eHealth will also be your advocate when you need to resolve questions with the insurance company.

    For all your small business health insurance needs, visit eHealth.com or speak with one of our expert health insurance brokers today.

    This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.

    Controls On Payments To Providers

    During the financially difficult years of the 1930s, contracting and sharing with providers were important economic elements of arrangements and some health plans. For example, most Blue Cross plans through their guarantee of rather than payments had provisions for some sharing of risk by their contracting hospitals . Strong contractual relationships that included some risk sharing or limits on payments to providers, however, were hard to establish and maintain .

    The expansionary postwar decades stimulated hospital restiveness with the contractual relationship that guaranteed service to Blue Cross enrollees at a negotiated price. Physicians, moreover, continued to fight plans and other forms of contracting and sharing. Some physician associations took a less negative approach. To compete with prepaid group practices, they established foundations for medical care , beginning with the San Joaquin County Foundation in 1954. By 1973, there were 61 FMCs in 27 states . Those FMCs that involved physician acceptance of limited financial risk are predecessors of today’s independent practice associations . The push for prepaid group practices, IPAs, and similar health planscollectively christened HMOs in 1970as a cost containment strategy began in earnest in the 1970s .

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    The Future Of Employer Sponsored Healthcare Plans

    Employer-based healthcare came out of a market-driven response by employers after World War II. It grew out of a strong economy, low unemployment rates, and intense competition for talent. Now, employer-based health benefits is the most common form of health coverage in America, with approximately 167 million people under 65 in 2017receiving employment based healthcare.

    But what will happen now that the economy is wobbling due to Coronavirus and rising unemployment rates? As of September 2020, unemployment remains above 8%. While this is much improved from the 14.7% highthat was reached in April of 2020, its still higher than any time in recent memory.

    The Families First Coronavirus Response Act , enacted March 18, and the Coronavirus Aid, Relief and Economic Security , enacted March 27, expanded coverage requirements for all health plans, including employer-sponsored group plans, whether self-insured or fully insured.

    Most of the major health insurance carriers, including Aetna, Cigna, Humana and United HealthCare, as well as Blue Cross/Blue Shield in many states, announced they would go beyond the requirements of this new legislation and waive cost-sharing for hospitalizations related to COVID-19 treatment for fully insured plan members. The carriers gave self-funded plans for which they serve as third-party administrators the option to do the same.

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