EMPLOYER-BASED HEALTH INSURANCE: NOT A ROCK TO BUILD ON
by John Geyman MD.
Employer-sponsored health insurance (ESI) provided a solid foundation for health care financing for many years after it expanded rapidly during World War II. As the nation rapidly mobilized its war effort, three forces came together to expand the role of ESI: wage and price controls, worker shortages, and strong unions. Many corporations entered into a long-term social contract with their employees by providing them with health insurance.
That contract is long gone, an archaic relic of the past. Most employers can no longer afford the rising cost of insurance, loyalty to their workers has withered away, coverage when provided is less generous with more costs being passed along to employees in the form of higher co-payments, deductibles and out of pocket costs.
Although misguided, it is understandable that the Affordable Care Act of 2009 (ACA) sought to build upon ESI by requiring employers with 50 or more full-time-equivalent employees who work 30 hours or more per week to offer health insurance to them by 2014 or pay a penalty of $2,000 for each full-time worker, excluding the first 30. The ACA also exempted larger employers, who generally retain control over cost and benefits of coverage by self-insuring, from coverage requirements with one exception— — they are required to cover preventive services without a lifetime or annual dollar value limit.
But all this was a policy choice destined to fail, as these markers show:
• Large employers may offer plans that are so spare as to be meaningless, such as a policy offered by McDonald’s Corp. with annual limits of just $2,000.
• According to a recent survey of major U.S. companies, 44 percent of employers are considering offering high-deductible plans as their only benefit option to employees in 2014; this year, average deductibles in-network are $1,230 and $2,110 out-of-network.
• Even when meeting the ACA’s requirements to offer coverage, many workers will find that their benefits are very limited, since the ACA gave wide latitude to the states to determine minimal benefit packages required of insurers.
• Many small employers cut workers’ hours to less than 30 hours a week to get around the cost of insuring them; some public employers, such as schools, may also use this strategy under the pressure to cut costs.
• It is already apparent that many low-income workers will not be able to afford coverage even when offered by their employers, and that their “take-up rate” will be low.
• Job lock is an ongoing problem for many insured workers, who fear being unable to regain insurance if they change jobs.
• Some insurers, such as UnitedHealth Group and Humana, are offering small businesses, who want to self-insure, limited benefit plans that would avoid the ACA’s coverage requirements—such as plans without surgery, X-rays, or hospitalization.
• ESI has been declining for many years; today it covers just 60 percent of employed Americans.
• Even with ESI, there are many reasons to feel insecure about ongoing coverage, including if one loses his/her job, health status, income level (to afford rising costs), whether or not the insurer covers claims, and new caps on benefits.
So the time is past due when we abandon the idea that ESI can provide coverage that workers and their families can count on. Employers can’t afford to continue such coverage, and will pay much less when we shift to a single-payer publicly-financed system of national health insurance. Many other industrial countries hold a competitive advantage with one or another form of such insurance, as the auto industry found years ago—a 2005 study found that General Motors was paying $1,500 per car for health insurance versus Canadian manufacturers across the river in Toronto paying little more than $200 and Toyota in Japan paying just $97. None of the provisions of the ACA will change or eliminate these basic problems of ESI, so let’s move on to a financing system that is sustainable and will work for all Americans regardless of their age, health or employment status.
1. Kuttner, R. The American health care system: Employer-sponsored health coverage. N Engl J Med 340: 248-52, 1999.
2, Tully, S. Documents reveal AT&T, Verizon, others thought about dropping employer-sponsored benefits. Fortune. May 6, 2010.
3. PwC Health Research Institute. Medical cost trend: behind the numbers 2014, June 2013.
4. Maltby, E,. The new math for health insurance costs. Wall Street Journal, June 7, 2013: B1.
5. Weaver, C, Mathews, AW. Rx for health law: self insure. Wall Street Journal, May 28, 2013: B1.
6. Report of Robert Wood Johnson Foundation. Number of Americans obtaining health insurance through an employer declines steadily since 2000. Princeton, NJ,< April 11, 2013.
7. Taylor, M. Applying the brakes: UAW deal to affect providers as well as workers (United Auto Workers union). Modern Health Care 35 (43): 14, October 24, 2005.
TAGS: ACA access to care Accountable Care Act Accountable Care Act (ACA) Affordable Care Act Affordable Health Care Cost of Illegal Immigration David M. Gimlett Don McCanne M.D. Employee Medical Benefit Employers Medical Coverage employer-sponsored health insurance Fee-for-service (FFS)