Health Care Reform – Scrap Employer Health Care

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The American Benefits Council, the preeminent advocate of employer-sponsored benefit programs in Washington D.C., offers this prescriptions for health care reform – build on what works.

Fit for the Scrap Heap

Employer sponsored health insurance is not a system that works.  I say that as a 25 year employee benefits professional.

Despite what its proponents say in its support, their actions tell a different story.

Employers want out.

And the numbers over the last 15 years show they are getting out.

They are dropping their health care plans.  Fewer employers offer plans and those plans cover fewer employees.

From 2000 until 2007, the percentage of the population covered by employer-sponsored health insurance declined from 68.3% to 62.9%, a decline of 5.4% of a growing population, according to a study by the Economic Policy Institute.

Workforce numbers reveal an even more startling trend.  In 2007, 71% of all workers were covered by health insurance offered by their employer, down from 74.8% in 2000.

Pay attention to the words “offered by their employer”.  It does not include employees who have health care coverage through their spouse’s employer or through their parent’s employer.

Still 71% of all workers.  But only 55.4% of all private sector workers.  For all the ballyhoo about maintaining private plans, only 55.4% of private sector employees are covered by their employer.  I wonder just how many of them are covered by their spouse’s tax supported employer plan.  We rely on tax supported health care plans for government employees to provide health care for a significant percentage of the workforce.

In fact, according to Steffie Woohandler and David Himmelstein, when you included tax supported health care for government employees, the United States already pays more in taxes for health care than any other country on the planet.

That’s not all

Employers show their true disdain for the business of health care in other ways.

They are making their employees pay more.  Over the past year employer payments for premiums have increased at an average of 9% a year. While that increase is consistent with the overall increase to employers, it does not include the additional costs of higher out of pocket expenses resulting from higher deductibles, higher co-payments and co-insurances.

They are offering their employees more restrictive health care networks and more restrictive pharmacy formularies.

They are designing plans that are deliberately intended to encourage less utilization of medical services.  The result is that U.S. citizens go to the hospital less often, stay for shorter periods, visit the doctor less.  They do pay more, though.  Did someone say they were afraid of rationing?

These changes were not greeted eagerly.  Anyone remotely connected with collective bargaining over the last 15-20 years knows that health care benefits have been and continue to be the most contentious bargaining issue between labor and management.

Employers can still do more than write the checks

Employers can and do provide a constructive role in health care.  Employers have been a prime mover in creating pressure to improve the “value” of the money spent on health care.  They have  undertaken a wide range of initiatives to promote and improve workplace wellness.

But they do not need to sponsor their own health plans to continue those roles.  Many employers in countries with national health plans have developed wellness programs and the motivation for creating a healthy workforce extends far beyond decreasing claims costs.

So what keeps employers tied to this outmoded model.  For companies that can afford it, it is an attractive retention tool.  But smaller companies that are disadvantaged in the marketplace for talent should view things differently.  Are they so blinded by anti-government ideology that they can’t recognize a better more pragmatic solution?

Not all employers are willing to step outside the ideological box and ask the question posed by Jonathan Weber, the founder, publisher, and CEO of New West, a media company covering life and business in the Rocky Mountain West.

Why Should I Have To Pay for My Employees’ Health Care?

Let’s decouple health costs from paychecks.

But in today’s economy, the concept of the paternalistic employer is obviously outdated. We are all encouraged not to count on the company, to stay mobile and flexible, to start our own businesses, to be our own brands. So why the vestigial legacy of employee-provided health care, which severely inhibits the flexibility and mobility of the work force?

Good Question.  Ask the American Benefits Council.

Next week – An existing model that could be an example for the future.