The Private Option

Americans who have health insurance, we are told, are largely satisfied with it and terrified of losing it. Many of them assume that employment-based insurance—for all its flaws—is preferable to any other system. President Obama has gone out of his way to tell people who get their insurance from employers that they had nothing to fear:

If you are among the hundreds of millions of Americans who already have health insurance through your job, Medicare, Medicaid, or the VA, 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.

That's true. But powerful trends in the broader economy will. Even without reform, lots of people with employer-provided insurance are losing it. And those who still have it may find they'll be less satisfied with it in the future.

The latest report from the Census Bureau on income, poverty, and health insurance is full of interesting data. (For example, median household family income in 2008, at $50,303, was below where it was in 1998. Heckuva job, Bushie, Greenie, and the whole economic team!) Perhaps the most surprising census data are the significant evidence that, even absent a reform bill, the United States is slowly nationalizing health care. In 2008, enrollment in Medicare and Medicaid rose from a combined 81 million to a combined 85.6 million. Add in military health care, and some 87.4 million Americans in 2008 got health insurance directly from a government source—about 29 percent of the total. Meanwhile, health insurance became less tethered to work. The percentage of people covered by employment-based health insurance fell from 59.3 percent in 2007 to 58.5 percent 2008, and the percentage of those working full-time and part-time who lacked health insurance rose in 2008. The ranks of those getting insurance from employers include a substantial number of public employees—teachers, state workers, etc. (In August, government accounted for about 17 percent of payroll jobs.) Add those folks to the people receiving coverage from Medicare, Medicaid, and the military, and, as Jon Bon Jovi once put it, "we're half way there." Most of the Americans who have insurance may already be getting it through the government, one way or another.

Scroll down to Table C-1 on Page 59 and check out the long-term trends. Since 2000, a period of generally low unemployment, the portion of the population getting insurance directly from the government rose from 24.7 percent to 29 percent, while the portion receiving employment-based coverage fell from 64.2 percent to 58.5 percent.

These data don't tell the whole story about the decline of employment-based insurance. Not all insurance is created equal. If you're a top dog at Goldman Sachs, your employer will provide a gold-plated plan and pick up the tab, which can run up to $40,000. If you're a clerk at Whole Foods, your employer will offer a low-premium high-deductible policy—which is great for people who have extra cash and don't have much occasion to use health care services. For most workers, the experience is somewhere in between Whole Foods and Goldman Sachs: Employers and workers share the costs of a plan that provides decent coverage.

Economists have correctly noted that wages haven't risen more in this decade in part because companies are paying more for benefits like health insurance. True. But employers have also been passing on rising costs to employees. And according to a new report by Mercer Consulting, companies are planning on doing a lot of that in 2010. If employers simply re-upped existing plans, Mercer's survey finds, costs would rise by 9 percent. But according to preliminary findings, "respondents plan to shave three percentage points off their annual renewal rates through a variety of cost-saving actions, holding overall cost growth to 5.9 percent next year." How? The "first line of defense" is "shifting costs to employees." Mercer notes that between 2004 and 2008, the median family deductible for in-network services in the type of plan offered by the largest number of employers soared from $1,000 to $1,850. Translation: Employees who used their insurance plans with any frequency saw their wages reduced by $850 in that period. And it looks like there are more such "cuts" coming. Next year, Mercer reports, "nearly two-thirds of all respondents (63 percent) will again ask employees to pay a greater share of health plan costs." Forty percent say they'll ask employees to pay a bigger chunk of the monthly premium, and 39 percent will boost deductibles or increase co-payments. Oh, and 18 percent say they plan to get rid of "more generous health plan options" as a way to move into cheaper ones like consumer-directed health plans. The upshot: Most people who receive employer-based health insurance will either be paying more for the same plan or be offered a plan that shifts more costs on to them.

It's understandable that those who have insurance from their employers are concerned about reform and what they might lose. But those who expect to hold on to the same employer-provided health benefits at the same cost are living on a prayer.

© 2009