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Wednesday, February 13, 2008

Employers Pay Workers to Get Their Own Health Coverage

More employers are dropping their group coverage in favor of offering employees stipends to purchase their own insurance, according to an article in USAToday

In this scenario, the healthiest employees may get coverage for less than they pay now, but employees with health conditions may have a difficult time qualifying for health insurance. Right now, the percentage of companies that have taken this step is small; however, I can see it becoming more common for smaller employers who often have to choose between showing a profit and paying for healthcare costs.

The money saved can be significant, as evidenced by this example from the article:

Bret Berneche, chief executive officer of Cardinal Homes in Wylliesburg, Va., used Zane benefits to help get health insurance for himself and his 112 employees.

In August, Berneche told his employees that their group health insurance would end that month.

Between premium increases and mounting state and federal rules, offering insurance was costing the company too much — $846,000 a year.

"It was certainly a blow," Berneche says. "The choice was having the health plan we had or going out of business."

Even if Berneche carries out his plan to nearly double the size of his company, he still expects to save at least $360,000 this year with the new program. Zane Benefits handles the accounts and reimburses employees out of their individual accounts for medical expenses.

I don't think this is necessarily going to be a sweeping trend, but the economic realities might make sense for some businesses.

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