Because health insurance costs are increasing dramatically, some employers are switching from a plan that covers all employees for a specified cost to a cafeteria-type plan in which the employee chooses a particular plan that fits their needs. The average annual family health insurance plan costs an employer about $16,000, according to the Kaiser Family Foundation. Under this new arrangement, employees can pick the health insurance plan based on their needs. For example, a single, young, healthy employee could choose a high deductible, catastrophic insurance plan for minimal costs and pocket the difference between the premium cost and the cash the employer provides. The employee gets an immediate pay raise.
On the other hand, a married employee with several children could choose a plan with a low deductible and use all the cash the employer provides to pay the premiums. This is very similar to buying car insurance because the responsibility for choosing coverage is on the car’s owner. One can buy the minimum required liability insurance or add collision and comprehensive coverage, depending on one’s needs and the value of the car.
Similarly, the responsibility to choose health insurance is on the employee and the employee can tailor the insurance based on individual needs. When the person is held accountable and connected to the cost of health insurance, that person would most likely not “overuse” the medical service. This might also encourage healthier habits and behavior.
A teacher in the Anchorage School District costs the District and member more than $21,000 a year for health insurance. Both the teacher and the District could save money by changing to this cafeteria-type health insurance plan. The State of Alaska spent more than $600,000,000 on health coverage for current and retired employees last year. It is time for all public agencies, local and State, to investigate the cost savings to everyone by transitioning to this tailored health plan.
Read more on this new freedom to choose insurance idea.