Tuesday, January 25, 2011

Employers Aren't Going to Stop Offering Health Insurance

One of the fears that certain critics of the Affordable Care Act are trying to hype is the idea that employers will stop offering health insurance, preferring instead to pay a penalty and to have their employees obtain insurance through the exchanges. First, let's remember that except as a result of contract, companies are under no present obligation to provide health insurance to their employees. Most companies that do offer insurance recognize that providing comprehensive health coverage helps them attract and retain talent. If a company with talented workers says, "We're dumping you into the exchange; we're not interested in providing you with better coverage than you can obtain there," their competitors will see opportunity. Further, employers get a tax break for offering health insurance and the "cost savings" of ending employer-sponsored coverage would have to take into consideration the associated loss of that tax break.

I grant, there are employers who have lower-wage employees, and who struggle to provide something approximating decent health insurance, and those employers may find that it makes no sense to try to offer insurance when their employees can get better coverage at a lower cost through the exchanges. But we're talking about the bottom end of the job market. Further, there is no reason those workers will have to purchase insurance through the exchanges - they will remain able to purchase insurance privately, and some may prefer to purchase high-deductible, low coverage insurance, the type of (largely non-) coverage that critics of healthcare reform seem eager to foist off on everybody but themselves.

Let's recognize also that we're dealing with a slippery slope argument. With due respect to arguments about what could happen, the slippery slope can be applied to any situation. The big question is what will happen and, as previously noted, there's no reason to expect a significant change in the status quo. If change comes it will be for a different reason - that continued inflation in the cost of health insurance renders it increasingly unaffordable as an employee benefit. If that happens, and although we're still dealing with a hypothetical future there actually is evidence that healthcare inflation could bring about this result, it should be noted that under Canada's single payer plan, many employers offer supplemental health insurance as an employee benefit - perhaps then the "free market" solution that will save private insurance will turn out to be single payer?

Also, many of the critics raising this fear are from the same crowd that crows against employer-sponsored health insurance. They argue that we would be better off if we obtained health insurance on our own, rather than through work - and there's merit to that argument. It becomes easier to switch jobs and to be self-employed. Coming from those people, it's difficult to believe that this argument is anything more than a dig at people who like their current health insurance - another version of "You'll lose your present coverage, and the government is going to decide what insurance you get," despite the ACA's being fashioned as much as possible to allow people to keep their present coverage.

Ross Douthat isn't content with the first slipperly slope, so he suggests that at the bottom of the first slide there could be another: that employers' "offloading their employees into the new health care exchanges" will "swiftly overwhelm[] the federal budget." Even if you accept the first slippery slope, what evidence is there for the second? Many of the workers who would be attracted to the exchanges would receive little to no subsidy. For every worker who obtained insurance through an exchange to replace an employer-sponsored plan, the cost of any subsidy would be offset at least in part by the loss of the employer's tax deduction from providing insurance and, for many employers, additional penalties.

Further, if you look around the developed world it will take you all of ten seconds to discover that there are nations that offer single payer health insurance, or where everybody obtains their coverage through the rough equivalent of the proposed insurance exchanges. For the most part they pay considerably less per citizen for health care than we pay in the United States, and obtain similar to better overall results. Finally, we already have single payer for one of the highest risk, most expensive populations in the nation - the elderly - and while I grant we have to take a hard look at long-term Medicare costs the continued stability of that program belies Douthat's conceit that insuring a population that is younger and, on the whole, considerably healthier will somehow break the bank. Finally, if the exchanges were such a threat to the status quo and to the profits of the nation's largest insurance companies, you might expect that the insurance industry would be speaking out on the issue - the major insurers uniformly silent.

So please, let's avoid the slippery slope and appeals to fear.

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