Health Insurance Articles

Why Many Companies Are Lowering Their Health Insurance Benefits

2011-12-23

According to many employees, the chance to participate in a group health insurance plan is one of the most important benefits of a job - right up there with a group salary. In fact, many rely on their employers to cover their entire families. Outside of a group plan, the cost of a health insurance policy can be astronomical, and most people live in fear of not only the high premiums, but also the low coverage options private plans bring. However, more and more companies are lowering or even eliminating their health insurance benefits because of high costs and future government policy changes.

Probably the biggest reasons why many companies are lowering their health insurance benefits are high costs. They are cutting benefits for the same reason that many companies have been implementing raise and hiring freezes, cutting personnel and even putting a cap on funds for non-necessary expenses like employee parties. It's all about the bottom line. With the recession in full force, businesses are being under pressure to make financial sacrifices, and companies are much more willing to scale back employee health coverage than they are to cut products or services that could cost them customers. Companies have to pay for their health insurance group policies for the discounts employees get, so to save money they stop paying so much into the pot and confer the cost to employees, who may still be covered but who have to pay more for the same coverage. However, in some cases, companies are cutting their health insurance benefits all together.

A second major reason why many employers are cutting their health insurance benefits is the change that they know is coming in the way health insurance is offered. The passage of Obamacare means that new policy changes will drastically affect insurance rates in 2014. Although the new policies do levy fines on employers who do not offer health insurance, the cost of purchasing a group policy plan will often outweigh the fine, so employers will choose to simply pay the fine and still offer no coverage. Other employees may offer coverage to avoid the fine but may keep it at a bare minimum, reducing their benefits to do so.

In the end, the reasons why many companies are lowering their benefits are one and the same: offering benefits is just too expensive. By scaling down or eliminating benefits, companies can save money that they can use to more efficiently operate their business. What does this mean for employees? It means that soon - if not now - employees need to begin the search for supplemental or alternative health insurance if they wish to have competitive coverage.