Apr 09, 2025

Employee Health Insurance: What's New?

Employer-sponsored health insurance is expected to remain a dominant part of benefits packages for working families, though affordability and access to care seem to prevail. Read through to learn about the future of employee health insurance.

Employer-sponsored health insurance is one of the — if not the — most common sources of private health insurance. There are many reasons for this, all of which come down to the fact that it is efficient.

With employer-sponsored health insurance, both employers and employees contribute to the insurance plan's premiums without being subject to income or payroll taxes. In that way, employer-sponsored health insurance plans provide substantial federal and state subsidies that are put toward the total costs of the plans.

Now, the tax policy — with the risk management and administrative advantages of group coverage — continues to contribute to the market dominance of commercial hospital and medical insurance. Still, premiums for employer-sponsored insurance have been increasing faster than the rate of workers' wages for years at this point.

How does cost sharing affect families?

Cost sharing places a financial burden on families. In fact, nearly half of those who have a hard time affording health care report that they decide to delay getting care or purchasing medication due to how much it costs. 

Ways to improve health care plans for employers and employees

If employers can negotiate lower prices for health care services, lower premiums can be secured for coverage. This approach benefits not only employers but also employees because their premiums decrease, as does the cost sharing.

Common strategies behind the improvement of health care plans include building coalitions around shared interests, obtaining data — and sharing it — regarding health care prices and informing employees about changes that are made to their coverage.

How did we get here?

The United States relies on voluntary and private health insurance as its primary source of coverage for U.S. residents who are not elderly, poor or disabled. Health insurance that is secured through the workplace comes with coverage options that working families can take advantage of — not to mention tax benefits too.

That said, employer-sponsored health insurance can result in uneven coverage, especially for people who work for low wages or who are employed by smaller companies. 

What did the drafters of the Affordable Care Act intend to provide?

Thankfully, employees can turn down a different avenue by purchasing health care coverage from an insurer directly. You can achieve this by either going through an agent or working with an online platform such as Healthcare.gov.

Since income-based premium assistance is available through the ACA, there is a foundation to provide access to an individual market that is otherwise out of reach for millions of people. This is possible thanks to the law's protections and financial assistance that make health care coverage affordable.

Healthcare.gov's health reimbursement arrangements

An HRA is an account-based health plan that employers can offer as a means of reimbursing employees for any money they have to put toward medical care expenses. HRAs that offer individual coverage are an alternative to traditional group health plans, and they offer flexibility for employees while maintaining the same tax-favored status for employer contributions that traditional group health plans provide.

HRAs can help cover the costs of copays, deductibles and other expenses that are not covered by the primary plan. This remains the case even if employees decline enrollment in a traditional health plan.

Most commonly, employers would fund health benefits for the people who work for them — and their families — in one of two ways. They could either purchase policies from a state-licensed health insurer, which is known as an insured plan, or pay for health care with employer assets, which is referred to as a self-funded plan.

Employers with self-funded plans protect themselves from unexpectedly high claim amounts or a large volume of uses by purchasing stop-loss coverage.

What else does a health benefit plan offer?

Among other health benefit plan options is a comprehensive benefit that covers the costs of hospital stays, physician appointments and prescription medications. There also are service-specific benefits, such as dental and vision plans, as well as supplemental benefits.

How do workers contribute to their own health insurance plans?

Employees put money toward their own health insurance plans through premiums, which are generally deducted from their paychecks. Cost sharing, via copays, coinsurance and deductibles, is another example. These are paid when employees use plan services.

Health maintenance organizations

Today, virtually all plans offer cost sharing for enrollees, which allows them to visit providers who participate in a preferred provider network. HMOs represent only 15% of covered employees, which is much less than other plan options.

HMOs do not provide coverage for nonemergency out-of-network services. Since providers aren't paid on a fee-for-service basis, HMOs are intentionally designed to dissuade employees from using them as a way of reducing costs.

Ultimately, employer-sponsored health insurance continues to exist as a means to access more-affordable health care coverage. Building collective market power, promoting data transparency and communication strategies, empowering and supporting employees, and continuing to look closely at the impacts of reforms are ways to lower employer and employee costs.

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