Print PDF

 CHICAGO | Tue Jun 7, 2011

(Reuters) – At least 30 percent of employers are likely to stop offering health insurance once provisions of the U.S. health care reform law kick in in 2014, according to a study by consultant McKinsey.

McKinsey, which based its projection on a survey of more than 1,300 employers of various sizes and industries and other proprietary research, found that 30 percent of employers will “definitely” or “probably” stop offering coverage in the years after 2014, when new medical insurance exchanges are supposed to be up and running.

“The shift away from employer-provided health insurance will be vastly greater than expected and will make sense for many companies and lower-income workers alike,” according to the study, published in McKinsey Quarterly.

Many U.S. employers to drop health benefits: McKinsey | Reuters

Print PDF

Much fuss has been made of health reform’s “individual mandate”.  It is the favorite target of tea baggers.  Several states have filed suit against the federal government to block its implementation.

There are debates about whether the individual mandate is legal, and more important, whether it will be effective.

These questions may take on even more significance if employer-sponsored health insurance (ESI) does not survive.   There are some, including this author, who question whether it will survive?

Shamrock on First Day of Spring

Confusing Incentives

What will be the incentives under ACA (the Affordable Care Act) for employers to continue to provide health insurance?  During the debate leading up to its passage a year ago, employers clung to the promise that if more people paid for their coverage it would lower the costs to employers.

But employers resisted efforts at a strong employer mandate.  So absent a strong mandate and any certainty of cost containment, what incentives does ACA hold out to keep employers in the game?

It’s confusing.

There is a $2,000 fine per employee if employers don’t offer “qualified coverage”.   BUT ONLY:

IF the employer employs more than 50 employees (I am sure the regulators will have many, many paragraphs splitting the hair between the 50^th and the 51^st employee.);

AND IF one of those employees purchase their health insurance from one of the new health insurance exchanges;

AND IF one of those employees who purchase their health insurance on the health insurance exchange requires a federal subsidy.

THEN the employer would have to make an “assessable payment” of $2,000.   BUT ONLY:

- On the number of employees in excess of 30 employees.

Let’s do some math

An employer with 60 employees covered under a group health insurance plan could easily pay $500,000 with an average group policy.  If one of this company’s employees exercised their presumed right to get his or her health insurance through an insurance exchange, then the company would be required to make an “assessable payment” of $60,000.  That is the 30 employees in excess of the first 30 times $2,000.

But wait!  If all 60 employees get their insurance from the exchange, the company’s “Assessable payment” will be — $60,000.

Hmmm?  Oooops!

Of course, it’s not quite that simple.  It never is.  The company would have paid the overwhelming majority of that $500,000.  In the exchange, the employee would have to pay the full cost – minus any government subsidy.

So if a company were serious about moving its employees onto the exchange, it would most likely have to consider:

• Increasing the employee wages by the amount now paid by the employer for health insurance.
• That amount would need to be “grossed up” to account for taxes on the employee wages so that the net pay increase to the employee would cover the cost of health insurance.
• There would be additional tax and other consequences to the employer for increasing wages to its employees.

There are two considerations that would likely be decisive for the employer:

1. Medical inflation.  Health care costs for employers have historically been higher than general medical inflation and two to three times higher than the general rate of inflation.  If the ACA does not flatten that cost curve, companies could well calculate that it is to their long term advantage to take the cost hit in the first year for a more predictable cost curve in the future.
2. Competition.  Once one large company make that decision, all of its competitors will jump on that bandwagon to the basement.  No one will want to lose its competitive advantage on account of health care costs.

There are further complications in this analysis and those don’t make it any more favorable for employer sponsored health insurance.

I will explore those additional wrinkles and the false dichotomy between individual and employer group health coverage in future posts.

Photo Credit:      FLICKR CameliaTWU

Print PDF

Can one have too much health care coverage?

Much of the debate for expanded health care coverage and for a single payer financing and delivery system arises out of concern for people without access to the traditional portals into the health care system: employment, old age, or poverty.

Abundance

But some people can have a whole lot of a good thing and still their medical bills fall through the cracks.

Take Dinah for example.

Consider the ways she had access to health care.

She was employed and had access to employer sponsored health insurance.

She was married and had access to health insurance as a dependent on her husband’s plan.

Her husband died and she became eligible for coverage as a survivor through her husband’s plan.

Her husband also had a retirement from a previous employer and she had access to coverage as a survivor on that plan.

She retired and had access to retiree health insurance from her employer.

She remarried and access to her second husband’s health insurance as a dependent.

She also had Medicare.

And still she could not get her bills paid.

There were mix ups in signing her up for some of those programs and the ones she was enrolled in could not decide which paid first, which was her primary insurance.  She came to us in tears, wanting to discard the insurance she had been paying for because it was “no good,” convinced her only option was to go on Medicaid.

Confusion reigns.

And even when people and systems have it right, confusion reigns.  Each year we get calls from people during Medicare Part D open enrollment?  They are confused and some of the vendors seem to offer extremely misleading and inaccurate information.  Why does it need to be so complicated.

Take Frank for example.

Frank was taking care of his older sister’s affairs.  She was in a nursing home and had access to Medicaid, Medicare Parts A and B and D and her retiree insurance with our plan.  Yet she could not get her prescriptions paid for.  Why?  It seems that the private pharmacy used by the nursing home did not know how to submit claims to any other payer than Medicaid.  That was straightened out.

But Frank made an astute observation.  He said each time he called one of these “pieces of the pie” as he called them, he would get a little bit more information.  He complained that each of the pieces barely understood their own role and no one understood how all of these pieces fit together.  “If they can’t see the whole picture, how do they expect an ordinary person like me to figure this out?”

Or the members who battle workers’ compensation in part to pay the medical bills for their work related injury and also to have income to pay the insurance premiums that pays for the medical bills for their non-work related medical bills.

Single payer is needed not just to provide for the have-nots, but also to bring order into a chaotic system for the haves.

Photo credit:    Stijn

Print PDF

This past week two gatherings addressed health care reform.

Liberty Bell in Philadelphia

The International Federation of Employee Benefit Plan (IFEBP) hosted its Annual Conference in Honolulu, HI.  Approximately 5,000 representatives from employer sponsored benefit plans and from benefit trust funds, as well as the professionals and vendors that serve them gathered to hear speakers address the changing world of health and pension benefits.

A major topic of discussion was the short and longer term implications of the Patient Protection and Affordable Care Act (ACA).  What do employee benefit plans need to do this month or this year?  What will the ACA mean for the longer term viability of employer sponsored health care?

The other gathering was much smaller. About 135 activists, most of them unpaid, met for the Healthcare-NOW! Strategy Conference in Philadelphia to discuss how to organize and build for another, very different, future for health care – single payer.

Anxiety about the future

The wonderful Hawaiian weather could not mask the anxiety felt by many plan sponsors over the future of employer sponsored health care.  Speakers tried to compare the ACA with ERISA, the landmark 70’s law that reshaped the landscape for pension plans adding stability and some legal protections to employer pension plans.  Yet thirty five years ago pension plan sponsors were very nervous about ERISA.

But not all attendees were buying it.  I sat next to one Trustee of a Taft-Hartley plan while we listened to a speaker explain grandfathering and who was not included in the age 26 coverage requirement.  He asked, “Was all of this worth it?”  I asked what he had in mind.  “Wouldn’t it be a lot simpler if we had a   Canadian style system?” he replied.

Speakers privately confessed to concerns about what will happen to employer sponsored plans when the exchanges go live in 2014.  Many answered questions from the audience about whether a single payer alternative would be better.

The anxiety is also reflected in a recent study released by the Employee Benefits Research Institute (EBRI). The percentage of respondents who were extremely or very confident health benefits will continue to be offered fell from 59 percent in 2009 to 52 percent in 2010. It had been as high as 68 percent in 2000.

The alternative vision

But if the long tradition of employers as the backbone of health care financing may be waning.  But what will the transition look like?

Will employers abandon the hubris that allows them to think that they can actually control health care costs?  Not control their own health care costs; that is easy, cut benefits or shift the costs to the employees; but actually control the cost of a $2.3 trillion industry.

Will they come to the realization that the current system undermines the US economy by draining resources that could be put to more productive use?  Will they suddenly realize that employer financing of health care distorts the labor market for themselves and their employees?  Will small businesses drop their ideological blinders and recognize that a uniform system of health financing and access could be a huge boon to entrepreneurism?

Not without some help.

And that is what the single payer activists at the Healthcare-NOW conference are trying to provide.

A small and dedicated group of volunteers is attempting to build a movement for a more rational health care system – one that will not only benefit patients and patient care, but also benefit the biggest  obstacles to change – corporate sponsors of health care plans.

Photo Credit:        Wally Gobetz

bl

Print PDF

Can you really trust computers?

The New England Journal of Medicine recently reported on a Rand study that concludes that the Accountable Care Act will result in a large net increase in employer-sponsored insurance offers.  They predict that the number of workers getting insurance from their employers will rise from the current 60% to 86%.

The Rand study was based on computer modeling.  Is there reason to think that the model is based in reality?

Yes and No

The study itself points to the reality of the experience in Massachusetts where employer based coverage increased after passage of a similar health reform initiative.

In addition, there is this little quirk in the recently released Kaiser Family Foundation 2010 Employer Benefit Survey.

Katherine Hobson writes about it on her blog at the Wall Street Journal.

The number of firms offering health insurance increased dramatically from 60% to 69%.  If these numbers are to be believed, the US economy in one year reversed a trend that occurred gradually over the preceding ten years.  The researches speculate that the spike may be because smaller firms that traditionally do not offer insurance were more likely to have gone out of business during the recent recession.

But more credible than the Rand survey is the tenor of comments to Hobson’s article.

We can not afford to pay for the insurance because the cost of the insurance took away more than half of the pay check and the income of our business can not afford to pay half of the cost as larger companies do.

Nothing has changed. Cannot afford decent insurance without HUGE deductibles and co-pays.

Our company has 75 ee’s and we had to discontinue coverage for all. The premiums were out of control

I have a very small family owned business with one other full time employee…he doesn’t have insurance through us…we would have to cut his pay as well as ask him to pay half the cost of the insurance in order to offer it to him.

Is it a good idea anyway?

Even if there may be marginal evidence that the PPACA will increase employer-sponsored health insurance,  would this be a good thing?

The Kaiser study also reports that employers are reducing coverage and increasing employee out-of-pocket expenses.  Is that a good thing?  Will that serve the public goal of increasing access to health care?

Small employers don’t offer health insurance, not just because it is expensive.  They don’t offer health insurance because they don’t have to.

A small business in New York City or Chicago can’t escape paying rent, but rent is an expense that is comparable in the same market place.

A shop owner who pays little more than minimum wage now has zero incentive to take on the costs of health insurance premiums that could represent a 30-40% increase in his labor costs.  He will only do that when there is no competitive disadvantage to doing so.  That will only occur in a system that requires all employers to provide health insurance, as in Hawaii, which does have a mandate.

It is still not a good idea

The doctor physician relationship needs to be a long-standing continuous relationship.  Patients need to have a comfort level with their doctor and doctors need to understand the whole patient.  This is behind some of the reform initiatives in the PPACA.

Yet the employment relationship is inherently discontinuous.  It makes absolutely no sense to condition a continuous relationship upon a discontinuous one.

Employers want to hire healthy workers.  Someone who is sick and cannot work, cannot afford health insurance and may not be able to get it anyway.  How does this help employers.

The question is not whether the ACA will expand employment based insurance.  The real question is how quickly can we transition to a single payer system where everyone is covered and pays according to their ability to pay.

Graphic Credit: NEJM

Print PDF

Labor Day weekend is a good time to ask, “how has health care reform affected American workers?”

Remember President Obama’s line, “if you like your health insurance, you can keep it.”

Click here to view the embedded video.

The members of the United Steelworkers Local 7-669 In Metropolis, IL wanted to keep their benefits.  Understandable.  They wok in a chemical plant owned by Honewell, Inc. that produces uranium hexafluoride, a highly toxic material regulated by the Nuclear Regulatory Commission (NRC).

In front of the Honeywell plant, the union has erected 42 crosses in memory of those members who have died of cancer.  This is that same Honeywell company that brought you that little round thermostat that keeps your home comfortable.

Lock out

But Honeywell wanted its workers to give up the comfort of its retiree health care benefits and to turn up the dial on their out of pocket maximum to $8,500.  The union liked their benefits and were willing to extend their existing labor agreement.

The union’s unwillingness to yield to those demands prompted Honewell to lock out the 230 members of the Local 7-669.

They have been walking a picket line since June 28, 2010 – over 2 months without work holding out for the benefit of themselves, their family and their community.  So far the union has strong community support.

Go here to express your support for the true supermen and women in Metropolis.

Honeywell is no different

The Steelworkers in Metropolis are only one bad example of an overall trend in employer sponsored health coverage.

The most recent version of the Kaiser Employer Benefit Survey underlines the point I have made here before – employers are not interested in providing for the health care coverage of their workers.

While the percentage of workers receiving health care coverage from their employer has remained relatively stable, even if less than impressive, at 59%;  employers have reduced the scope of coverage and increased the out of pocket expenses of those workers.

• 30% of employers have reduced coverage
• 23% have increased cost sharing.

The percentage of workers enrolled in plans with a deductible greater than $1,000 increased dramatically from 22% to 27% from 2009.

They want to keep their benefits

The Steelworkers in Metropolis are being asked to increase their out of pocket maximum to $8,500.  That is a bit extreme.  The Kaiser Family Foundation Survey reveals that only 31% of workers are in plans with out-of-pocket maximums greater than $3,000.

Out of pocket maximums are notoriously confusing to plan participants because they frequently do not count co-payments, or balance billing amounts and other items.

Honeywell maintains that health care premiums doubled in the last ten years.  That is consistent with the KFF study that reveals average premiums increased 114% since 2000.  But during that same period Steelworkers share of that premium tripled.  That is more than the 147% increase of worker premium sharing reported in the KFF survey.

The KFF survey reports that just in the last year when premiums for single and family coverage increased by 3% and 5%, workers’ share of those costs increased by 15.4% and 13.7%.

According to the Washington Post

Since 2005, employees’ premium payments have gone up 47 percent while overall premiums have risen 27 percent. Over the same period, wages have increased 18 percent and the consumer price index, a measure of inflation, has risen 12 percent, the foundation and trust said in a news release.

This Labor Day weekend, there will be a lot of workers wishing for a health reform that would allow them to keep their insurance the way it was.

Print 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?

Photo credit:  James L. McGee

Print PDF

For all of the fuss about “big government” and about 2,000 page pieces of legislation, you might think there would be more pressure for legislators to take the simple route.

Not!

Take the provision in the Patient Protection and Affordable Care Act that extends care to dependents up to age 26.

HR 676 – the single payer legislation that is still before the House of Representatives – has this to say about eligibility:

All individuals residing in the United States (including any territory of the United States) are covered under the USNHI Program entitling them to a universal, best quality standard of care.

Compare that with language in the Patient Protection and Affordable Care Act (PPACA) regarding eligibility just for those young adults up to age 26 who are children of parents with employer sponsored health insurance.

SEC. 2714. EXTENSION OF DEPENDENT COVERAGE.

‘‘(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child (who is not married) until the child turns 26 years of age.   Nothing in this section shall require a health plan or a health insurance issuer described in the preceding sentence to make coverage available for a child of a child receiving dependent coverage.

‘‘(b) REGULATIONS.—The Secretary shall promulgate regulations to define the dependents to which coverage shall be made available under subsection (a).

‘‘(c) RULE OF CONSTRUCTION.—Nothing in this section shall be construed to modify the definition of ‘dependent’ as used in the Internal Revenue Code of 1986 with respect to the tax treatment of the cost of coverage.

And the regulations mentioned in 2714(b)?  They are 67 pages.

What can you possible discuss in 67 pages?  Well let me remind you that hair splitting is difficult business.

To be fair, the actual regulation part of these 67 pages is really only seven pages times three.  The 67 pages include the interim final (don’t you love “interim final”?) regs for the Internal Revenue Service, the Health and Human Services and the Employee Benefit Security Administration.

What do the regs address?

Was the child previously covered?   -  Doesn’t matter

Was the child previously eligible for coverage? ?   -  Doesn’t matter

What is a dependent?  – Consult IRS rules

Does a dependent need to be dependent?  -  No

What was that last one?  A dependent does not need to be financially dependent, they only need to meet the family relationship test.  They could be married, employed and have access to employer sponsored health insurance.

Married?  Yes, the language quoted above in the PPACA was eliminated in the Health Care and Education Reconciliation Act of 2010.

What if the plan is “grandfathered”? ?   -  Almost doesn’t matter.

Does the dependent or parent pay more for this coverage?  -  In short, no.  But that answer is less than precise.

When are these changes effective?

This is perhaps the most confusing part.  The regs are fairly clear.  The changes are effective the first day of the plan or policy year after September 23, 2010.  For most people that means January 1, 2011.

Confusing?

It is the public perception that is confused.  And justifiably so.  Several insurers have announced different approaches to early implementation of these rules.   What is an individual to think when the health insurer that provides their employer sponsored health insurance announces that will begin early implementation of the rules concerning coverage of dependents up to age 26.

That employer sponsored plan may be covered by state insurance regulations that also have jurisdiction.  If it is regulated by ERISA, state regulations do not apply.  If it is a government sponsored employee benefit plan, neither ERISA or state insurance regulations may apply.

Eight pages of these regulations describe “take up rates”.  Of the 29.5 million young adults in the 19-25 age cohort, the rules are expected to extend coverage to 2.83 million people.

Meanwhile the rules have no effect on 9.5 million people in that age group because those 9.5 million young adults either have no parents or have no parents with employer sponsored health insurance.

Get the picture?  67 pages of rules to extend coverage to 8% of an age group that represents 10% of the US population.  Sixty seven pages on how to cover less than one percent of the population.

Should I remind you that eight of those 67 pages are devoted to the Paperwork Reduction Act?

Photo Credit : FLICKR: Don Solo

Print PDF

“If you are among the hundreds of millions of Americans who already have health insurance through your job, … nothing in this plan will require you or your employer to change the coverage or the doctor you have. Let me repeat this: nothing in our plan requires you to change what you have.”

How much longer?

President Barack Obama used these words on September 9, 2009 before a joint session of Congress.

On other occasions the President has stated more bluntly, “If you have insurance you like then you will be able to keep that insurance.  If you have a doctor that you like, you will be able to keep your doctor.”

Read my lips

I predict that within five years these words will be tacked up along side, “Read my lips!  No new taxes!”  as examples of presidential overstatements.

To be more precise, after the insurance exchanges are up and running, I predict that one of the big private employer plans, bowing to competitive pressures and other “economic realities”, will pull the plug on its employer sponsored health care plan.  That will start a mass exodus that will topple the private employer sponsored market in a very short time.

Was the President naive?

The President’s words were more likely an audacious misstatement or misunderstanding.  The statement  presumes – incorrectly – that employees have the final say on keeping the health insurance – or the doctor – they like.

Even as the President was speaking, workers at SK Hand Tools in Chicago were on strike because their employer had unilaterally stopped paying for their employees’ health insurance.  They may have liked their insurance.  They may have liked their doctor.  It really didn’t matter.  Their employer did not want to pay for it anymore.

Why do I think employers will bail on health insurance?  Le me rephrase that question.  Why do I think private employers will bail on health insurance?  After all, didn’t our politicians repeatedly reassure us that the employer sponsored health insurance was the “foundation” of our health care system?

The buzz

It is not this quote from a story in Time magazine

But now that regulations about existing employer-sponsored plans have been issued, it’s becoming clear that many of the 160 million Americans with job-based coverage will not, in fact, be able to keep what they currently have.

Much of this noise is consternation from some employers and conservatives  that the PPACA restricts employers’ ability to raise costs or cut benefits to employees.  Poor Karl Rove is beside himself about this.

Jonathan Cohn has the proper retort to this:

Insurance changes all the time. And it’s not usually for the better. In recent decades, as the cost of health care has skyrocketed, millions have become uninsured while additional millions have become under-insured. The point of health care reform is stop and, eventually, reverse this trend–to make sure everybody has access to an insurance policy, to make sure insurance policies actually provide adequate protection, and then to make sure coverage is affordable both for individuals and the country as a whole.

I am not concerned that plans won’t be “grandfathered”.

What are employers thinking?

The chief executive of UnitedHealth Group says he does not think the federal health reform law will force large employers to end their health insurance plans.

Stephen J. Hemsley, the company’s CEO and president, gave the forecast at the Sanford C. Bernstein investor conference, according to a report on the Dow Jones Newswires.

“We really don’t expect a significant movement…with respect to a broad exodus from commercial benefits into the exchange version,” Hemsley was quoted as saying.

Mr. Hemsley, it seems , is reacting to concerns about the small group market.  Why is he couching his response in terms of the large group market?

New rules

Two things have changed that affect the framework for employer decisions.

The first is an employer mandate.  Employers are weighing the cost of providing health care coverage to the alternative of paying the penalty.  For most employers, especially smaller employers, that could be an easy decision.

The second factor is the existence of an alternative.  The health insurance exchanges will give employers an alternative that did not exist before.

Large employers will be weighing additional factors.

Will health care reform reign in cost increases enough to offset some of the other additional costs that will flow to employers such as adding young adults to age 26 and the removal of certain benefit limits?  One of those costs that employers will be watching will be the tax on drug and medical device manufacturers that will surely pass through to employers.  If the net result is not a reduction in the medical benefit cost trend, the tower starts to tip.

Then there is the tax on Cadillac health care plans benefits.  This may prompt the work force, especially the unionized workforce, to press for offsetting wage increases putting additional cost burdens on the employer.  that tower tips a bit more.

It is easy to imagine that the cumulative effect of these cost pressure will prompt one large and especially vulnerable employer to pull the plug on its health care plan.  It is also not hard to imagine not just a race to the bottom, but a free fall.

It is why single payer advocates need to keep the heat on legislators.  When the “foundation” crumbles and the tower tips over,  Americans will be screaming, “We want to keep our health care coverage – and our doctor.”

Photo credit:   Im Pastor Rick / Flickr

Print PDF

Mr. Gay Burke, writing for the Denver Post asks the question, “Why should employers pay for health care?”

To Mr. Burke:

An upside down world

Right question.

Wrong answer.

Employers tend to be a smart group.  Otherwise they would not be running successful businesses.  But on health care, they have been stupid, blind and stubborn.

I can say that, in part, because I have spent nearly thirty years in the employee benefits profession.

The stubborn follows from the blind and stupid.

So let’s look at stupid first

Mr. Burke is onto something when he questions the role of employers in providing health insurance to employees.  This is an admittedly illogical system.  For starters, the doctor patient relationship is one that relies on continuity.  Fostering that continuity is one of the major ingredients in proposals for health care delivery reform.

How can that strategy be successful in a system where entry into the system is through a relationship that is fundamentally discontinuous – the employment relationship?  But how ill it be improved in a market of individual policies.

But upside down logic doesn’t stop there.  I frequently encounter two kinds of questions from our participants who work physically demanding jobs:  “I’m sick or injured.  I can’t work.  I therefore have no money.  I can’t afford my health insurance so how can I get better and go back to work?”  or  “I’m better now, but in order to come back to work, I need a statement from my doctor.  But I haven’t worked in months,; where am I supposed to find the money to go to the doctor so I can return to work?”

Does this system make sense?

Then there is the business perspective.  The current system distorts competitiveness.  Less than half of private sector employees get their health care coverage from their own employers.   That means that some employers gain a competitive advantage by not offering health care coverage.  Others are subsidizing those same employers by offering coverage to dependents who work for companies offering no or inferior health care coverage.

This very unlevel competitive playing field affects employer access to talent or the ability to get the best talent.  Some employees are not able to do the kind of work they would rather be doing because they need health insurance.  Other employees are locked into jobs because they need the health insurance.  This restricts employee mobility and employer agility.  And it is not keeping pace with the demands of the 21^st century workforce.

Then there is blind

Mr. Burke is suffering from a popular misconception that if the consumers bore more of the cost of health care, that some how “market forces” would lower the cost of health care.

Mr. Burke observes that employers would rather not offer health insurance.  This is certainly reflected in efforts to shift costs to employees over the past decades.

But there is no evidence to suggest that this has curbed health care cost inflation.  Yes, it has cut employer costs.  But that is more than a bit short sighted.

It has become a rhetorical mantra that the United States pays more for health care than any other country.  But consumers in this country also pay more out of pocket than most other industrialized nations.  And we have more people declare bankruptcy as a result of health care costs

Paying more for less

Shifting more of the costs to consumers has not worked.  Shifting the full cost as Mr. Burke suggests positively will not work.  How do people without money pay the full cost of insurance?  There is only approach that makes sense – payments based on income.

Back up Mr. Businessman and ponder this.  Our European counterpoints pay less.  Their governments pay less, their citizens pay less out of pocket and their employers pay less.  Let’s leave aside for the moment that they get better outcomes:  they live longer, have lower infant mortality, lower maternal death rates, and lower rates of avoidable deaths.

Just from a services perspective, Europeans visit the physicians more often; go to the hospital more often; spend more time in the hospital; and they take more drugs.

Higher costs, fewer services.  Even a non-businessman can figure this out.  I am not aware that doctors and hospitals are flush with embarrassing riches. And poorer outcomes to boot?  So where is the extra money going?

Let me help you out here.  You are paying for the inefficiencies in this system that you refuse to let go of.

This is where stubborn enters

How many times have you heard or used the phrase – think outside the box.

But when it comes to health care, you refuse.  You are locked into a business that is not a core function.  It is fundamentally illogical and against basic business impulses.  But the only way you see out of it is to turn it over to a model of individual insurance that is the illogical conclusion of a business strategy that has not worked.

Face the reality.  There is only one way out of this box that works for you and for your workforce.  (Except for employee benefit professionals like me.)  It is a single payer system. You know from your own experience that no single employer has enough market power to move the health care industry, yet you stubbornly refusal to admit that government might be able to do a better job with health care than you have done.

There is still another model.  It is the model of the German health care system where employers and employees run sickness funds.  It is the same model that exists in the Taft-Hartley funds in this country.  Pay into the funds while the employee is working to provide coverage for periods of time when the employee is not working.

Both ideas require employers to abandon stupid and blind ideas about “consumer responsibility” and to take some real leadership that will stabilize business costs, make businesses more productive, the workforce more mobile and enterprises more agile.

The answer to the question is a smart, open-minded and forward moving approach.

It is a business solution that requires business leadership.