PDF In an article in Employee Benefit News, Nancy Bolton expressed some of the concern, confusion, and questions of many in the employee benefits profession right now.
Where are we going?
Will health care reform be good for employee benefit plans?
Readers familiar with my musings and rants will know that I will not mourn the demise of employer sponsored health coverage. But I am also no fan of an individual mandate.
Good guys
Nevertheless, Bolton’s perspective is an interesting one. Like me, she administers a public plan. She asks the question, “Aren’t employers the good guys?”
Why didn’t the politicians who loudly proclaimed support for employment based health care, do more to underwrite its cost.
This translated to me, as a purchaser of an employer-sponsored health plan, that any reform would have to contain incentives to encourage employers to stay in the game.
I suspected post-reform employer-sponsored insurance would resemble a Medicare Part D subsidy on steroids, since the anticipated cost just to cover the nation’s estimated 30 million uninsured is staggering.
I find this argument curious, since her plan is already a public plan supported by county tax dollars.
Going against the grain
She is justifiably proud of the role her employer has played in providing health care security to 5,000 families. As she navigates the changes imposed on employer-sponsored plans, she questions the future of that plan and that tradition in her community.
She finds herself in the unpleasant role of calculating the opportunity costs of continuing to provide health care coverage and she finds the results a bit disturbing.
The cost of coverage is four times the cost of paying the fine.
As I noted previously, this logic is curious. Prior to fines, the alternative dollar cost of not providing coverage was zero. There was, and is for now, the cost of not being able to recruit talent. Will the insurance exchanges of health care reform make that argument go away? If so, will fines or other incentives be the only reason to persuade employers to stay with their own plans? Bolton is not the only one making that calculation.
A poll by the Society for Human Resource Management reveals that:
Respondents at nearly half of the organizations (46 percent) said they have decided not to drop health care coverage for employees as a result of the new health care reform law.
What about the other 54%?
As Bolton observes, there may be some consequences to the wage side of that calculation that may make the math for terminating coverage less favorable. But a straightforward comparison of the fines to the cost of coverage does not make a compelling case for continued coverage.
During the health reform debate, organizations purporting to support employer sponsored health care coverage opposed a strong employer mandate. That includes the American Benefits Council (ABC), the Society for Human Resource Management (SHRM), the Chamber of Commerce, the National Federation of Independent Businesses (NFIB) and others. All of these organizations were more interested in protecting the “right” of businesses to not offer health insurance.
It may well turn out that the absence of a strong employer will create an economic mandate to end coverage.
The end of the world?
As I argued in a previous post, the end of employer-sponsored health insurance will come when a large national employer, citing competitive pressures, abandons its health care coverage. Others will quickly follow suit.
But a public employer does not have those competitive pressures.
So when a public employer is considering, even reluctantly, the option of discontinuing its health plan; this is ominous.
Bolton writes that health care reform reminds her of the REM song, “It’s the end of the world as we know it (and I feel fine)”.
The world of employer sponsored health insurance is changing. But if an individual market is the alternative should we really feel fine?
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