One HUGE but rarely mentioned problem with HCR - Erosion of employer-based coverage

[inna]

This issue gets little coverage, but it's critically important.

One of the biggest and often overlooked problems with the Senate Bill (which is likely to be the basis of any future legislation) is that, while strengthening and enshrining the parasitic for-profit insurance industry, it will also result in

***

weakening/eroding employer-sponsored coverage and shifting financial burden to individuals/families

*** .


Some points to consider:



1) All analyses indicate that employer-based health insurance system is increasingly unsustainable, especially in the current economic climate. As shocking as it may sound, the average annual family premium for employer-sponsored health insurance was $13,375 in 2009, while costs continue to skyrocket.


2) Strong individual mandate vs. weak/nonexistent employer mandate in the Senate Bill: in effect, this will STRONGLY encourage employers to drop coverage:

Employers who fail to provide any coverage for their employees will only have to pay a puny $2,000 per employee in penalty (for failing to provide health insurance) - and that only applies to employers with >50 employees and excludes the first 30 employees over 50, as an additional perk. Employers with less than 50 employees are exempt from any penalties for failing to provide insurance, altogether.

In other words, the maximum penalty for failing to provide coverage is $2,000 (or ZERO penalty for small businesses).

A $1,000,000 question: In this economy, would struggling businesses rather pay $13,375 (and skyrocketing) for health insurance premiums per employee or a $2,000 penalty (per employee) for failing to provide coverage (especially since now the employees will be mandated to buy their own insurance via Exchanges)? (And remember, it's not as if employers have to entice the potential employees with benefits these days; unfortunately, in this kind of economy, benefits are disposable; people are desperate for any kind of job, with or without benefits).


3) Make no mistake, the bill gives employers all reasons to drop coverage for their employees. However, even those employers who choose to keep coverage (think union jobs) will be forced to dramatically downgrade coverage thanks to a new (and now infamous) draconian and anti-union 40% excise tax on so-called "Cadillac plans". (For more info on "Cadillac tax", see this, for example.)


4) Currently, employer-provided plans have an actuarial value of 80-85% on average. However, the Senate Bill sets a "new standard" at 60-70% actuarial value:

Benefit Design

Essential benefits package
• Create an essential health benefits package
that provides a comprehensive set of services,
covers at least 60% of the actuarial value
of the covered benefits

I could go on, but the point is that.... the Senate Bill, by design, will dramatically weaken/erode employer-based coverage and shift the financial responsibility to the individuals/families (think "individual responsibility"!), while placing the massive financial burden disproportionately on the working middle class families (those ineligible for subsidies).

[KharmaTrain]

1. 6 Of One, Half A Dozen Of Another

There will be some employers who will drop policies and leave it up to the individual to insure themselves and from one whose worked on both sides, I far prefer my current arrangement of being self insured than when I slaved for a company I didn't like simply cause I needed to insure my family. I was never sure what the group plan would cover while with my current policy, I am very aware as to deductables and exemptions. Personally, I look forward to the day when all can manager their own health care policies rather than to leave your fate in the hands of an employer...especially a large corporation.

The other side of this coin is we can go back to where a benefit was truly a benefit...where employers competed against each other with the best policy as a lure for prospective hires. Making insurance affordable for small businesses will mean increased competition for workers and some will use "Cadillac" plans as an incentive.

[Nikki Stone1]

17. Not really. Employers can afford better coverage per worker for less money b/c of the group rate

Individuals pay much higher premiums for the same insurance on the whole. Now, if you hate your job, that's something else all together. But if you don't know what your employer based health care will cover you need to find out, and that's on you, not on your employer.

[Capn Sunshine]

47. ITS OBVIOUS BY NOW NO ONE WANTS TO HEAR ABOUT ANYTHING GOOD IN THIS BILL

They just regurgitate every negative thing they see, much of it put out there by Insurance Industry clones.

I never thought I'd see the day that progressives, especially so many who worked with me for Howard Dean, would end up doing the dirty work of the Insurance lobby for their own convoluted tweaks on how someone isn't liberal enough.

But here we are.

[hay rick]

46. Competition in the employment market.

Currently, our economy is experiencing a 10% unemployment rate with no sign of a meaningful recovery of employment levels on the near horizon. There are approximately 6 job-seekers for every job opening. There may be some competition among businesses for individuals with rare skills, but the more typical situation is competition between job-seekers for scarce jobs. In this environment companies will jettison health care benefits- because they can.

[stopbush]

54. I am for anything that gets rid of the employer-based model.

Workers have NO SAY in what plan an employer will pick. They have no say when an employer switches plans, often in the middle of the year negating the workers meeting their deductibles. They have little say in what their premiums will run.

Employers added health care coverage in part to attract talent - "come work for us, we'll give you health insurance." If they don't offer it, it makes them less desirable in attracting talent. What they don't offer in insurance coverage they will have to make up for with larger salaries. As one who has switched jobs a lot in the past ten years, I would have much preferred having my own insurance that I could have taken with me, rather than going through different plans & expensive COBRA coverage to keep a continuity between all those jobs.

I don't see how the worker loses in such a situation. If anything, it will lead to the demand for a PO or even single payer as more and more people are forced to buy their own coverage.

[SmileyRose]

2. I'd love to see employer based insurance die

which is why I want universal access single payer medical care. (not insurance)

[pampango]

3. Agreed. Plus it would make our companies more competitive internationally if they don't have

to pay for medical coverage that companies in other countries don't have to pay for. Single payer is not only good for people, it's good for the economy (which is in turn good for people).

[Monk06]

8. The president of the Atlas Copco Mining division in Canada said exactly that to me

in an interview in 2003.

The fact that employees had universal govt funded
health care in Canada gave Canadian mining companies a
competitive advantage over other jurisdictions during
periods of low commodity prices.

It is no accident that when the NAFTA agreement was
being drafted American negotiators tried to claim
that Canadian Health Care represented an unfair
government subsidy.

That's right American business interests tried to
use the NAFTA agreement as a pretext to dismantle
the Canadian Public Health Care system.

And they are still trying with the cooperation of Harper
and his Tory hacks such as Newfoundland and Labrador
Premier Danny Williams. Williams went to Florida to have
his heart surgery because the Tories under Harper are
determined to create a two tier medical system in Canada
similar to the UK.

The aim of course is to destroy single payer health care
and allow health insurers to sneak back into the Canadian
market.

[inna]

15. Interesting!

"That's right American business interests tried to
use the NAFTA agreement as a pretext to dismantle
the Canadian Public Health Care system."

They never stop, do they!

"And they are still trying with the cooperation of Harper
and his Tory hacks such as Newfoundland and Labrador
Premier Danny Williams. ...

The aim of course is to destroy single payer health care
and allow health insurers to sneak back into the Canadian
market."

Wow, I didn't know about that. Hopefully, they won't stand a chance - aren't you guys pretty happy with your Health Care system?

Also, I know very little about Canadian politics, but I hope Harper will be replaced with someone more progressive...

[Monk06]

19. Harper will be Prime Minister until the Liberals find an electable leader

Unfortunately Ignatief did not work out

[RC]

9. Correct, Single Payer, not any kind of public option.

Public option as it is offered in any of the bills, is just another scam to benefit the insurance companies.

[inna]

4. I would be all in favor of weakening/dismantling employer-based coverage...

...if it was a shift to single payer or other form of universal health care.

What's taking place instead looks more like a Republican/libertarian dream - shift to "individual responsibility"! "ownership society"! "you're on your own!" - with some minor positive modifications such as subsidies for the low-income individuals/families.

Shifting to "individual responsibility" is a step in the OPPOSITE direction from universal health care, it deforms the already grossly inadequate system that we currently have in place.

[inna]

7. Which reminded me of....

I am not the first President to take up this cause, but I am determined to be the last. (Applause.)

...

There are those on the left who believe that the only way to fix the system is through a single-payer system like Canada's -- (applause) -- where we would severely restrict the private insurance market and have the government provide coverage for everybody.

On the right, there are those who argue that we should end employer-based systems and leave individuals to buy health insurance on their own.

http://www.cbsnews.com/stories/2009/09/09/politics/main5299229.shtml

[leftofcool]

10. Let's wait until we get a single payer plan first (never happen)

that way I can keep on getting cancer treatments with my employer based insurance

[stray cat]

12. So far employer based insurance treats people I know better than Medicare

and my insurance keeps hospitals in business because Medicare doesn't pay their own bills.

[harun]

16. Totally agree. Death to employee based coverage = Freedom to

individuals.

[Dappleganger]

32. Yes!

We can pretty much guarantee a huge increase in small businesses when that happens, too.

[SoCalDem]

35. Until it does, we will NEVER have single-payer

As long as the "best of us" has access to it, most people just coast along kvetching about costs, but never fully realizing that the "employer's share" is YOUR RAISE...the raise that you never got for all those decades.. It's extortion...ask for real money in your check, in the form of a raise, and you get instead.. "we wanted to give you a raise, but hey.. at least we did not have to cancel your insurance option...but it's going to cost YOU $20 more <or any other amount here> a week".... and your co-pay went up $10 too.."

Employers no doubt get to deduct their share too..somewhere along the line at tax time..but the employee cannot..

they gave up raises, in place of insurance they still have to pay for in part, themselves, and when they use it, they still have to pay co-pays & pay for uncovered procedures..and all it took was for them to forego real raises for decades...

But then, the "YOU HAVE BEEN PRE-APPROVED plastic they got daily in the mail was always there to make up the difference... until they maxxed out & the rates got jacked up to 29%(or more) interest..


When the suit & tie crowd lose their employer provided insurance , there will be enough outcry for single payer..not before..

[Nickster]

5. Yes, excellent points. Then my portion of the insurance cost will skyrocket because of the

new mandate. I wondered when someone would point out that my company would pay so much less for the penalty and the mandate would triple my monthly insurance expense as the burden was shifted to my back. I'm sure wages will go up to make up for the difference right?

[Skidmore]

6. Perhaps if your company could get out of the business of

haggling with you and/or your union over insurance benefits, you could haggle over a pay increase. And the added purchasers of health insurance could help drive the premium rates down in the market.

[Nickster]

28. Sure in a perfect world, but with 10+ percent unemployment, most likely, they'll tell me to deal

with the lower wage and the new mandated insurance payment.

[Vinca]

11. I've decided to support the current health care bill because

it appears things will have to get much worse before we get serious consideration - make that ANY consideration - about single payer. Getting rid of the health insurance burden would be a bonanza for business and if your prediction is right, would force something other than this idiotic enshrinement of a failed, for-profit, insurance system.

[inna]

14. Actually, the worst thing about the bill is that it does exactly what you said -

"this idiotic enshrinement of a failed, for-profit, insurance system".

Weakening of employer-based health insurance would be a great thing if employer-sponsored coverage was replaced with single payer or some other form of universal health care. However, what this bill does is simply shifting the costs directly to individuals and families, and placing the massive, disproportionate burden on the middle class.

The only defense of the bill is that it would benefit and provide relief to those who DON'T have employer-sponsored coverage and currently buy their own insurance, particularly to those eligible for subsidies and having preexistent conditions.

On the other hand, the majority of the population who is currently insured through their employer, will see their employer-sponsored coverage worsen as the costs will shift to individuals and families.

[marmar]

13. That's why, in the end, universal single-payer is the best option.

nt

[kenny blankenship]

23. But apparently we will have to suffer and die under all the other broken systems first

Thanks Dems, you're real pals.

[laughingliberal]

18. Great post, inna! K & R. nt

[mdmc]

20. The GOP wins if medical costs go up for working people

We win if costs go down..

[leftstreet]

21. K&R

[amborin]

22. K&R yet another negative consequence of this corporate bailout

[G_j]

24. K&R

thanks

[Egnever]

25. The upside is

if the situation you describe does indeed happen, which I don't think will.

Is that more people will be eligible for the exchange which includes more options than a traditional employer picked plan. It will also come with subsidies for many that Will make the plans in the exchange much more affordable for many.

However I think the employer tax incentives to provide coverage will likely offset and probably surpass the numbers that will be dropped in favor of paying a fine.

[inna]

26. Just saw this: the Union (UE) ran the numbers and concluded that,

"if the current bill passes, employers will dump coverage en masse":

Health Care Bill's Hidden Pitfalls

The proposals allow companies to cancel workers’ health insurance if the company pays a penalty ($2,000 per worker under the Senate/Obama plan).

The UE has calculated that in an average shop of 100 workers with a decent but not extravagant health plan, an employer could save $395,000 by canceling insurance and paying the penalty instead. In a shop of 2,000 workers the employer would reap $6.37 million.

Found via the comment on FDL:

... we need to dig deeper and use the actual math of what this will cost workers. For a brief summary of how my union has done this see Peter Knowlton’s article of a few days ago on the Labor Notes web page.

Run your own numbers; if the current bill passes, employers will dump coverage en masse and you can calculate the savings when they merely pay the minuscule $2,000 or $3,000 “penalty” per worker, per year. If you know what your own insurance coverages cost your boss, run your own numbers by A) multiplying your premiums family/single (total cost annually including what the boss and worker pay)times the number of workers. Then B) multiply the same number of employees times $3,000 for a lower wage shop (less than $10 hour and full time), $2,000 for better. Subtract B from A and this is what your employer will save by canceling your insurance and kicking you out into the exchange. Many will even give you a letter blaming the “federal government” for making them do this.

At UE we seem to be the only union that I know of that feels the need to “run the numbers.” Why? Perhaps it’s because any union that does this will find itself incapable of supporting the current scheme and therefore put in the position of defending the membership over defending the Dems. ... The labor “movement” behavior on this has been appalling, truly appalling. A new low in my 31 years in the labor movement.

Chris Townsend
UE Washington Office

[New Dawn]

27. K&R

[Vermontgrown]

29. There will be employers, like the one

I worked for in the past, that can afford better coverage, but chose to keep more profit out of greed. Than there will be some that are truly hurt by the bill, especially new start up compnies.

[quaker bill]

30. No employers currently provides insurance

because federal law requires it. This is because current federal law does not require it.

So, your theory is that going from the current situation where there is no requirement on any employer of any size to provide any insurance benefit to any employee at any level without penalties for failure to do so, to a situation where there is a requirement with a penalty for failure to provide the benefit, will reduce coverage. Read this slowly and think about it. Currently, business gets a far better deal, they can drop coverage and save the entire $13,375, without penalty.

Businesses provide this benefit when they wish to be competitive in the market for the best labor. Businesses that do not find this necessary generally have been shifting to the lower wage, part time employment, no benefit model. An individual mandate will have no impact on this behavior because it is currently done in the utter absence of rules to require it.

You are correct that the penalty is generally insufficient to drive many employers to offer the benefit more frequently, since it is far cheaper to pay the penalty than pay the benefit, but it might in a few cases.

[icee]

31. Yes, and that's what many will do. And employees that bitch about

it will be replaced by lower paid workers from other countries who have family support groups. I could go on and on. Obamacare is a disaster... Wait until you see the new suicide rates when this piece of garbage starts hitting. But, then, if it is too bad, the Republicans will somehow reverse it. I think they are pooling money to do that now.

[quaker bill]

39. The disaster

is the status quo. The bill will be an improvement. Just not as large an improvement as will be needed.

There is no need to go to foriegn workers to pay lower wages, there are plenty of unemployed right here, thanks to republican policies.

[raccoon]

33. Thank you! Some people think employers "have to" offer you medical insurance if you're full-time.

Newsflash: they don't.

[quaker bill]

40. So then, why do they do it?

And deeper yet, why would this law affect that motivation?

The answer is that it won't.

What will affect that motivation is if the expense keeps going up.

[inna]

51. It's true that employers are not required to provide benefits to employees.

However, it's wrong to assume that businesses will *continue* to provide the current levels of coverage, in fact ALL evidence and data indicate that they won't.

Employer-based health care has been in decline for a while, and the trend is accelerating. The current system is unsustainable and is beginning to unravel. Of course, *some* businesses will retain their currently high levels of coverage, in order to, as you pointed out, "be competitive in the market for the best labor". However, such cases will be an exception rather than a rule, since the trend (dropping coverage or decreasing the scope of benefits) has been clear, and over 80% of employers are planning to shift costs to employees in 2010.

This would happen with or without the Health Insurance Reform, however the reform will:

1) place a strong mandate on the INDIVIDUALS to buy their own coverage (and no mandate on employers) thus establishing and confirming the "expectation" that employees are responsible for their own coverage,

2) create the (largely false) meme that everyone will have an access to "affordable" health care (via subsidies from the government) thus making employer-sponsored coverage "unnecessary",

and

3) downgrade the standard of coverage from 80-85% (current average actuarial values for employer-provided plans) to the "new standard" of 60-70%, encourage "cost-sharing" (shifting costs to employees) and force employers to scale back on decent plans via the excise tax.

[h9socialist]

34. The only reason to assume this a problem is . . .

. . . if you want to leave employers the right to opt out. In the long run the fix for this is a healthcare system funded by truly progressive taxation. It may mean the complete and utter destruction of the
Republican Party -- but, I've wanted that all my adult life! It would be nice if it were accompanied by the collapse of the AMA and the U.S. Chamber of Commerce.

[jonathon]

36. Excellent, Excellent post.

[jwirr]

37. That has been happening ever since it became clear that the American

people wanted HCR. Over the last several years many businesses have dropped coverage for their workers. While they claim cost I think they merely want to dump them on the government if they can get away with it.

[Edweird]

38. The IBEW does not support the benefit tax or the individual mandate.

[slipslidingaway]

41. knr thanks n/t

[ProSense]

42. This is rich!

When the unions opposed Wyden's amendment for vouchers claiming that it would erode employer based coverage, people slammed the unions and advocated getting rid of employer based coverage.

How many large employers who now offer coverage to employees are waiting to drop that benefit when premiums go down? They can drop coverage now and not be subjected to a penalty, why would they suddenly opt to pay a penalty? How will they remain competitive if they don't offer health care?

Isn't this the fastest way to a government-run/single payer plan?

This entire notion is absurd.

[Cleita]

43. I don't think that's a bad thing. Tying health care to employment creates

health are insecurities if the employee is fired or gets too sick to work and is let go, then his insurance gets lost with his job. I would rather employers paid a percentage of their payroll into a health care fund and employees could enroll in the health care of their choice with a co-payment with their health plan going with them no matter whether they work or if they work. That get's us closer to single payer and gives health care security to the employee and his family.

[inna]

49. Oh, uncoupling employment and health care is something that absolutely should be done -

- however, in this case, this is being done from a completely wrong angle (from the right-wing/libertarian perspective if you will).

The costs are being shifted directly to the individuals/families who will face a new and massive financial burden and will be forced to buy an inadequate and absurdly overpriced product from the parasitic for-profit private insurance industry.

Shifting to "individual responsibility" is a step in the OPPOSITE direction from universal health care, it only worsens the already grossly inadequate system that we currently have in place. It is deeply anti-progressive and is based on the typical right-wing "ideals" of "individual responsibility", treating health care as a commodity, and protecting private profits at all costs.

Ironically, this is what Obama was referring to when he said:

There are those on the left who believe that the only way to fix the system is through a single-payer system like Canada's -- (applause) -- where we would severely restrict the private insurance market and have the government provide coverage for everybody.

On the right, there are those who argue that we should end employer-based systems and leave individuals to buy health insurance on their own.

Well... Guess whose side is winning now...

[yellowwood]

44. Health Care Programs Drive Companies Out

We live in a city which had a huge industry with wonderful health benefits. Now there is no industry here and no health benefits.

Industries simply move out or go broke when the health insurance costs get so huge that they are no longer profitable.

This is also one of the factors that drives industries out of the country so that the jobs are no longer here, let alone health benefits.

[bertman]

45. Has SOMETHING MAJOR changed in the Senate bill?

I've been swamped at work for the last few day (HALLELUJAH!!) so I've missed out on what has transpired in the negotiating on the bills.

A few days ago I got a mass email from the National Home Builders Association reminding its members that there is a provision from Sen. Merkley that requires, yes that is REQUIRES, ALL construction companies with FIVE OR MORE EMPLOYEES to provide health insurance for their employees. That is MORE than FIVE, but FEWER than FIFTY.

I read about this provision a while ago but forgot about it in all the brouha about other elements of the bill. So, I'm hoping that it has been withdrawn as a provision, or it's not true that the small construction companies are now the ONLY companies in America REQUIRED to provide health insurance to their employees.

For the life of me I cannot figure out how a Democratic Senator even came up with something so onerous for small businesses.

DISCLAIMER: my small contracting firm of eleven employees (including myself and my business partner) does provide our employees with compensation for one-half of the cost of a premium for an individual policy. We would love to cover ALL of the costs but it would be a burden and would certainly put us at a disadvantage vis-a-vis other similar contractors with fewer than five employees. Our monthly individual policies through our company plan cost about $260 a month for our employer half, so twelve months cost the company $34,000. We would add another $34,000 to our operating costs if we had to purchase full coverage for everyone.

[AngryAmish]

48. I'm a small businessman and if this is true, I'm totally dumping

That is why we have a government, no? Health insurance is totally expensive. I figure I'll save about 60k a year. And when I say save, I mean 60k to blow on fun things.

[ourbluenation]

50. I run a non profit with a staff of 20. My choice next year is continue bene's or lay off staff

Our health plan went from $85,000 per year 2 years ago to $135,000 this year for the same plan. We had to switch to the econo plan and it sucks. Moving into next year, here in calif, I have to choose less staff w coverage, or same staff with no coverage. I hate this.

[quiller4]

52. We should be killing employer-based coverage and coverting

non-cash benefits to wages.

[inna]

53. Yes - and making a transition to a universal, publicly funded health care system.

Like the one all civilized countries in the world have in place.

[grantcart]

55. Governor Dean disagrees strongly

He makes the case that employer based health care makes protability difficult and undermines true reform that has to be citizen based.

The allusion that it should be job related undermines the argument that it should simply be a right.

[2Design]

56. employers have been dropping coverage for decades or shipping

jobs overseas - now the only ones left with it are small business - this is a trend that would have happened anyway

[matt819]

57. The goal should be elimination of employer-based coverage

This has been one of the problems. Quite apart from the current job market, the fact is that people have been shackled to jobs they can't stand, or otherwise want to leave, because they need the insurance. I can appreciate the businesses in recent years have wanted to shift the cost of insurance to their employees. In some cases, especially with small businesses, this has been critical to the survival of the company or to avoiding layoffs.

Granted, this bill is not health care reform but rather health insurance reform. But from what I've read the reality is that there will be incentives for small businesses to provide health insurance, and employees, or self-employed people, will be able to obtain insurance more easily, with credits in place to keep the costs under control. Will it work? I don't know. Would single payer universal health care have been better? Probably. I've been in favor of medicare buy-in, but as long as doctors can opt-out if reimbursement rates aren't high enough, then that's not really a realistic option. But what's being voted on is an insurance plan. Will this benefit the private sector? Sure it will. Will this eliminate obscene bonuses? Probably not. Is that fair? No. But will you be able to purchase insurance at subsidized rates? Yes. Will insurance companies deny claims? Probably, but at least now there will be some recourse. And, with respect to the original post, will you be tied to an employer because you can't afford to lose the insurance? No. (You may be tied for other reasons, e.g., to avoid unemployment, but it won't be because of insurance.)