Workers Opting Out Of Employer Health Coverage

Employees in the Kansas City, Missouri, area are opting out of employer-sponsored health insurance in favor of individual coverage, a trend that could spread to other regions, according to brokers and the local offices of BlueCross BlueShield of Kansas City.

Roger Foreman, chief marketing officer at the health insurance organization, says a surge in applications for individual health insurance during the past year has coincided with small employers dropping coverage and large employers shifting more of the cost to employees.

Foreman says 18 percent of the group’s customers have chosen individual coverage, compared with the 9 percent average across BlueCross BlueShield plans nationwide.

The rise in the cost of family coverage is a major factor, he says. Parents are opting to be covered as an individual under their insurer, then buy health insurance for their children in the individual market. This has caused a boom in the number of individual policies being taken out for children, which represents 40 percent of new business in the individual market, Foreman says.

“As we spoke to people, they would say dependent costs are getting so high, I can’t afford to cover my children,” he says.

It costs about $60 to $80 a month per child to buy health insurance through BlueCross BlueShield of Kansas City. For parents with one child, individual coverage can be less expensive than family coverage through an employer, especially if an employer offers a high-deductible health plan, says Jim Heckman, a broker in Kansas City.

“It’s the same cost if a person has one kid or four,” he says. “Especially if you have one child, it’s less expensive to go on an individual plan rather than a group plan.”

In recent years, health care cost increases have stabilized, allowing small employers to continue to offer health care. The cost that employees pay in premiums has increased at a higher rate at large companies, according to the Kaiser Family Foundation. Premiums paid by employees at large employers increased by 6.4 percent last year; at small employers, the increase was 5.5 percent.

Employees opting out could increase health care costs for employers, says heath care consultant Brian Klepper, if sick children remain under an employer’s health plan while the healthy ones turn to cheap individual coverage.

“The way it often works is that if you have a fragmented market, the people who hang in there are the ones who can’t get coverage anywhere [but through their employer],” Klepper says. “And that ends up being bad risk.”

Klepper says companies are better off finding health care savings in ways that don’t shift costs to employees.

In anticipation of what BlueCross BlueShield believes will be a growing market, the health insurer developed, with the help of health care technology company Benefit Focus, a Web service called Blue Direct, which makes it easier for people to apply online for health coverage.

“In the next three to five years, you are going to see a lot more about this market,” he says. “It’s the only real growth opportunity in the insurance business.”

—Jeremy Smerd