Not only are employers prone to switching their health plans, but more are ending their group health benefits altogether, a sign of the growing importance of the individual market.
How many employers have stopped offering group health coverage this year isn't clear, but according to a survey of 1,000 insurance brokers by health benefits technology company Benefitter, it may be significant.
This year, 75 percent of the brokers surveyed had at least one employer client decide to end health coverage and instead urge their workers to buy insurance through public exchanges. In 2015, 17 percent of brokers expect to lose about a quarter of their group clients because of coverage cessation, according to the survey.
Perhaps the main contributing factor to the employers decision is rate increases, or the rates in comparison to the subsidized individual market.
Almost 75 percent of brokers surveyed saw premium increases for small and mid-sized businesses in the double-digits and more than one-third saw rate increases of at least 60 percent.
"It's becoming more apparent that individual rates are often much more affordable than group rates. It's no surprise that many business owners are responding to continued group rate increases with their feet," said Brian Poger, CEO of Benefitter, a venture capital-backed company that helps employers analyze their health costs.
Even amid a slowdown in rate increases recently, brokers surveyed by Benefiter said they have a palpable sense of employers rethinking their health benefits strategies, especially small businesses.
"With the economy in its current state, most of my clients are already struggling to get by," said one broker from the survey. Said another: "Every small employer I work with is scared to death about their healthcare costs. They are running out of options."
Small businesses have the option to encourage workers to use the public exchange, where they can get subsidies, and large employers have the option of using a defined-contribution model with private exchanges or even reconsidering who they offer health coverage to and whether they should pay the employer mandate fine and send some staffers to the public exchange.
Insurers, though, may not have many too choices when it comes to managing employer-sponsored business, other than to offer flexibility. One option is to raise premiums to keep up with medical inflation and increasing provider clout -- which can backfire, of course, and lead to lost clients. They can also start selling in private exchanges, increase self-funding options or partner with providers on low-cost value-based networks.
Either way, between retiring baby boomers and the rise of the subsidized individual market, commercial group insurance "is not growing," said Ken Fasola, a former Humana and UnitedHealth Group executive who now heads the individual insurance exchange and brokerage HealthMarkets.
Less than 60 percent of Americans now receive health insurance through their employer, down from 69.7 percent just 10 years ago, according to a study last year.
The commercial group market may remain large and more employers may be migrating to self-funding, but subsidized individual market and Medicare Advantage are really the two areas insurers are most likely to focus on.
"People thought it was the bottom end of the food chain," Fasola said of the individual market. "Now it's the other end of the food chain."