Employer Health Plans – Is there a Future?

May 30, 2009

Is there a future for employer based health insurance?

This is not a rhetorical question.

This is not an anxious question from an employee benefits professional.

This is not wishful thinking by a single payer advocate.

In the Call to Action by the Senate Finance Committee,  Chairman Senator Max Baucus (D-MT) calls for “Strengthening the Employer-based system.  We must ensure the continued viability of the employer-based system – the principal source of health coverage for most Americans.”

Fine words.  But the weak point in the statement is the phrase “continued viability”.  It is fair to ask whether the current system is viable and whether it can continue.

Both the percentage and the number of people covered by employer provided health insurance and the percentage of firms offering health insurance has declined over the last two decades. 

There are fundamental contradictions in the commitment of conservatives and employer groups to employer based health care plan.  And the two are not entirely in sync.

Conservatives for ideological reasons cling to things “private” and abhor government intervention, even when it makes markets work better.

Employers are a bit more practical in their approach.  But for the most part don’t seem able to see their way out of the box they are in.  They may have an ideological aversion to government action, or they may just not be willing to give up their current way of doing things.

But some employers are willing to question the current system.  Jonathan Weber, CEO of New West, challenges the assumption that employers should have a responsibility to pay for the health care of their employees.

He writes:

Why is this my responsibility? 

Quality health care is a societal good, so why should it be the obligation of private-sector entities to provide it?

 A recent Reuters article by Andy Sullivan describes how “job lock” inhibits entrepreneurs, an argument also made here.  He quotes Todd Stottlemeyer, former CEO of the National Federation of Independent Businesses (NFIB).

 “There are lots of factors that go into why somebody starts a business or doesn’t start a business: Do I have a good idea, do I have capital, do I have risk tolerance?,” said Stottlemeyer, now an executive at a hospital chain. “Being able to get health insurance … should not be one of those determinant factors.”

But even if they acknowledge the box they find themselves in, employers are schizophrenic about their way out of the box.  Few employers would go as far as Jonathan Weber.

A 2007 article in USA Today by Julie Appleby observed discussions in Congress at that time to de-couple health insurance from employment.

The measures can be lumped into differing philosophies about the direction the USA should move: either toward a health insurance market in which people buy policies on their own while armed with tax credits or deductions, or one in which people are able to buy insurance through group-like “exchanges,” with some government oversight. Some of the plans likely would encourage employers to drop coverage because the employers would lose all or part of their ability to write off insurance as a business expense.

Noticeably absent is a public plan alternative, either the single payer proposal or the public plan option.

Employers also speak by their actions.  Two very clear trends indicate what employers really think about their obligation to provide for the health care of their employees.  The first is cost shifting to employees in the form of increased out of pocket expenses at point of service and increased deductions from pay for health care premiums.

The second trend is toward something resembling a defined contribution approach to health care financing.  This is characterized by High Deductible Health Plans and Health Savings Account, a favorite concept of conservatives in the last administration.  The theory behind the practice is that by giving employees cash instead of benefits, they will become wiser shoppers for health care services and thus help to constrain health cost inflation.

What is the conclusion?

Employers don’t want the responsibility for the health care of their employees.  They occasionally admit this.  They will concede that it is not good for small and new businesses.  Their practices clearly tell the true tale.

They just won’t admit it.  The just can’t get past old practices and ideological constraints.

But employers need to let go.  Health care needs to be de-coupled from employment.

Julie Appleby quotes Sara Horowitz, founder and director of the Freelancers Union whose members are independent workers in finance, non-profits, domestic services, publishing, advertising and health care – says something needs to change, because the working world has.

“The nature of work is changing: Jobs are much more short-term and flexible,” Horowitz says.

Employers need to catch up.  Maybe Congress will catch on.


The Baucus Plan: Reform or Bailout?

May 23, 2009

On Friday, I received an e-mail from someone who had just visited with several Capitol Hill staffers on health care reform. He was discouraged with the general response that health care reform was done – there was no room for new ideas.

He was promoting EMBRACE, the plan offered by the Healthcare Professionals for Healthcare Reform

Even more discouraging was the perception that Congress had a busy agenda and they were just eager to get this issue behind them.  In addition, he was disheartened by the lack of provider unity on this topic.

He made the comment in his e-mail, “This isn’t health care reform, it’s insurance reform.”

I beg to differ. It is not insurance reform; it is an insurance industry bailout. It is a status quo bailout. Read the rest of this entry »

Tax My Benefits? The Devil in the Details

May 16, 2009

Taxing everyone’s health care benefits seems to be a back in vogue.  But it is also a reality for some right now.  One of those situations can help us understand the real implications of taxing health care benefits.

Small Businesses

Many small businesses are acutely aware of the inequity in the tax code when it comes to health care.  A small business that files as an individual entrepreneur, files an individual return.  Like you and me, he or she must meet the 7% test.  Only health care costs that exceed 7% of adjusted gross income are exempt from taxation.  For most people with decent employer sponsored health care, that’s a tough threshold to meet.

For small businesses, it means that the they are paying taxes on the 7% of their income that they pay for health care.

But there is another even more relevant example of wage earners who pay taxes on their benefits. Read the rest of this entry »

Single Payer Gets a Voice Behind the Table

May 9, 2009

When reason fails shouting prevails.

From Senator Max Baucus, “We need more police.”

Voics from the back of the room

And more voices from behind the table.

Margaret Flowers, MD & Katie Robbins, Healthcare-NOW

Carol Paris, MD, PNHP

Adam Schneider from Health Care for the Homeless

Russell Mokhiber, Single Payer Action

Thanks to the brave organizers of this event!

Healthcare Reform: Thinking small, Part 2

May 6, 2009

When people think of HIPAA, they think of the privacy provisions of HIPAA.  Yet privacy is nowhere in the title – the Health Insurance Portability and Accountability Act, passed in 1997, was touted as a stake through the heart of one of the great evils of the health insurance market place – refusing to insure sick people.  The practice is called medical underwriting. 

“Portability”, the P in HIPAA, offered the promise that an individual undergoing treatment for a medical condition, would not have their treatment disrupted because of a “pre-existing condition” if they changed jobs and employer sponsored health plans.

 HIPAA has the same elements described in my recent post about Michelle’s Law: a good story line and a very narrow focus.  The Rube Goldberg fix over the simple, direct fix.

Anyone looking around at health care today might be surprised to learn that Congress even considered the subject. Read the rest of this entry »

Healthcare Reform? Think small…very small

May 2, 2009

Past efforts by the federal government to reform the health care system offer instructive guidance about future prospects for meaningful reform.


Lesson learned – why go for the simple fix when the Rube Goldberg fix will do. Limit the fix to only a small hole in the system. Make sure it has a good story line. Congress gets some political mileage with little down side. In addition, it keeps bureaucrats and lawyers busy figuring out what Congress intended.

Let me illustrate with two examples.

Thirty state legislatures have attempted to address a real problem – health care coverage for young adults. Young adults generally lose coverage as dependents on their parents’ plan when they turn 19. The technical term we in the benefits profession use is “age off.” Young adults who continue as full time students can generally continue on their parents’ plan if they and their college or university jump through some administrative hoops.

These ideas evolved in a quainter world when young people could find jobs at 18 or 19 that offered health insurance. Rarely true today. Read the rest of this entry »