30% of US Employers Intend to Drop Healthcare in 2014

[Dreadnaught]

Mission accomplished?

HEALTH INDUSTRY | JUNE 8, 2011

Study Sees Cuts to Health Plans

By JANET ADAMY

A report by McKinsey & Co. has found that 30% of employers are likely to stop offering workers health insurance after the bulk of the Obama administration's health overhaul takes effect in 2014.

The findings come as a growing number of employers are seeking waivers from an early provision in the overhaul that requires them to enrich their benefits this year. At the end of April, the administration had granted 1,372 employers, unions and insurance companies one-year exemptions from the law's requirement that they not cap annual benefit payouts below $750,000 per person a year.

But the law doesn't allow for such waivers starting in 2014, leaving all those entities—and other employers whose plans don't meet a slate of new requirements—to change their offerings or drop coverage.

Previous research has suggested the number of employers who opt to drop coverage altogether in 2014 would be minimal.

But the McKinsey study predicts a more dramatic shift from employer-sponsored health plans once the new marketplace takes effect. Starting in 2014, all but the smallest employers will be required to provide insurance or pay a fine, while most Americans will have to carry coverage or pay a different fine. Lower earners will get subsidies to help them pay for plans.

In surveying 1,300 employers earlier this year, McKinsey found that 30% said they would "definitely or probably" stop offering employer coverage in the years after 2014. That figure increased to more than 50% among employers with a high awareness of the overhaul law.

Behind the expected shift is the fact that the law will give Americans new insurance options outside the workplace, and carriers will no longer be allowed to deny people coverage because they have been sick. McKinsey found that reduced the moral obligation employers may feel to provide coverage.

The Obama administration says it is working to encourage employers to retain coverage. An administration official, Nick Papas, described the McKinsey report as an outlier amid other research suggesting that employers overwhelmingly would keep coverage.

"History has shown that reform motivates more businesses to offer insurance," he said. "When Massachusetts enacted health reform, the number of individuals with employer-sponsored insurance increased."

The nonpartisan Congressional Budget Office, in a March 2010 report, found that by 2019, about six million to seven million people who otherwise would have had access to coverage through their job won't have it owing to the new law. That estimate represents about 4% of the roughly 160 million people projected to have employment-based coverage in 2019.

However, the CBO estimated that the overall number of Americans with coverage will rise by 32 million because of new subsidies and other steps.

The law contains a disincentive for employers to drop coverage. It requires all employers with more than 50 employees to offer health benefits to every full-time worker or pay a penalty of $2,000 per worker, though it doesn't apply to the first 30 workers. Health-policy experts have questioned whether that is high enough to discourage companies from health coverage.

McKinsey found at least 30% of employers would gain economically from dropping coverage even if they completely compensated employees through other benefits or higher salaries. The study suggests the fallout would be minimal, with more than 85% of employees remaining in their jobs even if their employer stopped coverage.

Nearly half the employers said they would consider alternatives to their current plan after 2014. Besides dropping coverage, those included weighing a switch to a defined-contribution model of insurance, in effect offering coverage only to certain employees.

Write to Janet Adamy at janet.adamy@wsj.com

http://online.wsj.com/article/SB1000...092308600.html

Was dismantling the employer-based health system the point of all of this? Can't tell if this is the point or a classic case of unintended consequences.

[Hazir]

Don't know if it was, but it sure sounds like a smart move to dismantle employer based health care insurance. That's just a brake on the job market.

[Draco]

By mission accomplished you mean Obama and co wanting to make even more people/citizens dependent on the government (and hence continue to vote in his crap), then yes.

[EyeKhan]

Mission accomplished?



Was dismantling the employer-based health system the point of all of this? Can't tell if this is the point or a classic case of unintended consequences.

The employer based system is an awful failure, like the for-profit health insurance system that's bleeding us dry. It should be dismantled, all of it, and replaced with single payer.

[Loki]

The employer based system is an awful failure, like the for-profit health insurance system that's bleeding us dry. It should be dismantled, all of it, and replaced with single payer.

Pray tell who'll pay the trillions necessary to keep such a system afloat.

[EyeKhan]

Pray tell who'll pay the trillions necessary to keep such a system afloat.

Who pays to keep the mess afloat we have now?

[Lewkowski]

The employer based system is an awful failure, like the for-profit health insurance system that's bleeding us dry. It should be dismantled, all of it, and replaced with single payer.

And what happens when costs run higher. Will government cut care? And if they won't then what incentive do people have to price shop? At what point is too much spending on medical care by tax payers?

[Aimless]

And what happens when costs run higher.

Your costs are running high because of your present dumb system. If you'd fixed this system your costs would not have run this high. Your question should be answered the way my second grade teacher answered all such questions: "What if a rocket flew in through the window?"

No-one price-shops sensibly when it comes to their life and health. What they do is avoid important care until it's too late and then no-one can deny them emergency care. This is another reason why your present system sucks. You're slowly working towards a system where healthcare providers will have incentives and means to provide better and more cost-effective care (something they truly lack today). Hopefully. If not this time around then the next time.

[LittleFuzzy]

You're slowly working towards a system where healthcare providers will have incentives and means to provide better and more cost-effective care (something they truly lack today). Hopefully.

I would like that, but I'm not at all certain that we are. I'm pretty sure legislative action over the last few years has actually been retrograde. It's only progress if one can view "making the system break down faster" as progress under the assumption that when it does collapse, something sensible will HAVE to be what arises in its place.

[EyeKhan]

And what happens when costs run higher. Will government cut care? And if they won't then what incentive do people have to price shop? At what point is too much spending on medical care by tax payers?

What happens when the costs run cheaper? Will conservatives come in office and cut funding rather than expand the services or build an emergency fund for when the economy turns down? Then when there is another inevitable economic downturn will conservatives point to the system and scream "see, it doesn't work!!!" and try to outsource it to their industry buddies?

[Lewkowski]

What happens when the costs run cheaper? Will conservatives come in office and cut funding rather than expand the services or build an emergency fund for when the economy turns down? Then when there is another inevitable economic downturn will conservatives point to the system and scream "see, it doesn't work!!!" and try to outsource it to their industry buddies?

Did Medicare run cheaper?

[Aimless]

Did Medicare run cheaper?

Did medicare's performance perhaps have something to do with how totally broken the rest of your system is?

[EyeKhan]

Did Medicare run cheaper?

Run cheaper than what? Was Medicare ever run by a myriad of companies duplicating administrative efforts that required doctors comply with a complex and inconsistent patchwork of coverage and paperwork? No, of course not. Private insurance companies would never take on a pool of only high risk, guaranteed high claims people. Which is why the government got stuck with it - nobody else would cover old people at a price they could afford. And that is also why there should be a single payer system for the entire country requiring healthy people to participate. The high risk people can't be covered at a reasonable price without the gigantic pool of low risk people paying in to balance the costs. Duh.

[Aimless]

The Obama administration says it is working to encourage employers to retain coverage.

But why...?

[Loki]

For the most part, employers.

[GGT]

The law contains a disincentive for employers to drop coverage. It requires all employers with more than 50 employees to offer health benefits to every full-time worker or pay a penalty of $2,000 per worker, though it doesn't apply to the first 30 workers. Health-policy experts have questioned whether that is high enough to discourage companies from health coverage.

$2,000 per worker is cheaper than contributing to their health insurance. And the "disincentive" for individuals is a fine cheaper than carrying insurance. Although I'm not sure if it's cumulative. If you don't have insurance for ten years but show up in the ER, is the fine a one-time deal or times ten?

I agree it should be decoupled from employment, but insurance companies act as expensive middle-men that haven't done anything to reduce spiraling costs of care.

[EyeKhan]

--- but insurance companies act as expensive middle-men that haven't done anything to reduce spiraling costs of care.

Insurance companies add cost with their profit motive, with their duplication of administrative structures, and through their inconsistency in paperwork standards and requirements which forces doctors' office management to understand and be able to do a large variety of billing methods with differing back up data requirements, differing coverage levels, etc. The waste in having this large number of duplicate for-profit beauracracies employing an inconsistent patchwork of processes has to be gigantic. And all this complexity surely has to make fraud easier to get away with - spotting anomilies and irregularities has to be difficult when there is no standard. But on top of all this, your point is key - nobody is addressing why the costs keep rising. Just allocating less money to pay for medical care doesn't fix anything at all. It just takes a nasty problem and makes it worse in additional ways.

[GGT]

Insurance companies add cost with their profit motive, with their duplication of administrative structures, and through their inconsistency in paperwork standards and requirements which forces doctors' office management to understand and be able to do a large variety of billing methods with differing back up data requirements, differing coverage levels, etc. The waste in having this large number of duplicate for-profit beauracracies employing an inconsistent patchwork of processes has to be gigantic. And all this complexity surely has to make fraud easier to get away with - spotting anomilies and irregularities has to be difficult when there is no standard.

Absolutely.

Strong reason we've lost solo and small-partner primary care and family medicine physicians, that turned into massive managed care groups. Insurance companies partner with physicians, hospitals and outpatient services (phlebotomy, radiology, physical therapy, outpatient surgeries) and lure them under a large umbrella---providing and coordinating their office staff, medical billing, physical upgrades, transition to digital records, guaranteed time off and vacations, and paying their exorbitant professional liability insurance.

In a small region like mine, with one large level one teaching hospital and a smaller community hospital, it's become a monopoly in many ways. Not much competition at all. Wellspan is also buying up rehab centers, extended care facilities and nursing homes. The only group of docs with enough money and clout to "oppose" that model are orthopedic surgeons who opened a private Sports Medicine outpatient facility. Also provide spinal injury and disease treatment. They have their own imaging, lab and surgery suites, all inclusive.

But on top of all this, your point is key - nobody is addressing why the costs keep rising. Just allocating less money to pay for medical care doesn't fix anything at all. It just takes a nasty problem and makes it worse in additional ways.

Agreed. One solution might be to fund government R & D even more, so that everyone can benefit from the newest and most expensive innovations. Not just major medical schools or big pharma with their expensive cutting edge discoveries (and wanting to take advantage of patents and profits for their efforts and costs). Admittedly, I have no idea how to make that work in practice. Especially at a time when anything connected with "the government" is considered evil and inefficient.

[Aimless]

Agreed. One solution might be to fund government R & D even more, so that everyone can benefit from the newest and most expensive innovations. Not just major medical schools or big pharma with their expensive cutting edge discoveries (and wanting to take advantage of patents and profits for their efforts and costs). Admittedly, I have no idea how to make that work in practice. Especially at a time when anything connected with "the government" is considered evil and inefficient.

You guys need a primary healthcare system. And then you need to focus on public health. You need a healthy, unstressed, well-educated populace. Nanobots come later

[GGT]

One solution might be to fund government R & D even more, so that everyone can benefit from the newest and most expensive innovations. Not just major medical schools or big pharma with their expensive cutting edge discoveries (and wanting to take advantage of patents and profits for their efforts and costs). Admittedly, I have no idea how to make that work in practice. Especially at a time when anything connected with "the government" is considered evil and inefficient.

Government funding + private innovation has worked well in the scenario of this deadly E. coli outbreak. Notice the importance of government funding and/or global coordination:

http://online.wsj.com/article/SB1000...LEFTTopStories

"It's a semiconductor device that senses chemistry, so it can directly read off the DNA," said Jonathan Rotheberg of Life Technologies Corp. of Carlsbad, Calif., which sells the ion torrent device.

The way that the genetic data of the 2011 E. coli strain were disseminated globally suggests a more effective approach for tackling public health problems. Both groups put their sequencing data on the Internet, so scientists the world over could immediately begin their own analysis of the bug's makeup. BGI scientists also are using Twitter to communicate their latest findings.

[EyeKhan]

For the most part, employers.

Then use that same revenue source but don't limit it to the company's employees only. Use it to provide care for everyone.

[Enoch the Red]

Then use that same revenue source but don't limit it to the company's employees only. Use it to provide care for everyone.

I'm sure that will work.

[EyeKhan]

I'm sure that will work.

I'm glad you agree.

[GGT]

Who pays to keep the mess afloat we have now?

For the most part, employers.

Large employers who pay part of employee insurance haven't really paid a fair share, though. Neither have the employees. They have out-weighted group bargaining for provider and reimbursement rates that leads to falsely low premiums and cost-shifting. Ironically, the same kind of complaint lodged against unions and their members, and government workers with platinum plans.

But we also have tons of small businesses, self-employed, part-time and contract workers. Didn't we have data from BLS showing the majority of workers aren't employed by large companies at all? Part of the reason we have ~ 50 Million uninsured is because (a) they don't get it from employers, and (b) it's too expensive to buy independently.

[Aimless]

Can someone explain why Obama wants employers to keep doing what they've been doing?

[GGT]

That's SSSSocialism.




Time for a Palin-fist yet? Yes, I think so!

http://www.huffingtonpost.com/2011/0..._n_873062.html

[Dreadnaught]

I can't help but think that this is making the most extreme/conspiratorial of right-wing prophesies seem true. I've always argued that this law would be wildly more expensive than intended, and would lead to potentially endless subsidies. But it seems almost plausible to believe that the goal is to create an incentive to put more people on the government-subsidized medical dole.

I don't support an employer-centered system, but that system exists primarily as a result of government distortions of the health insurance market. To further distort the market like this would make the $1 trillion initial price tag of Obamacare seem like a cute underestimation.

[GGT]

I can't help but think that this is making the most extreme/conspiratorial of right-wing prophesies seem true. I've always argued that this law would be wildly more expensive than intended, and would lead to potentially endless subsidies. But it seems almost plausible to believe that the goal is to create an incentive to put more people on the government-subsidized medical dole.

Conspiratorial? Is the Insurance Industry "right or left" wing?

I don't support an employer-centered system, but that system exists primarily as a result of government distortions of the health insurance market. To further distort the market like this would make the $1 trillion initial price tag of Obamacare seem like a cute underestimation.

Are you sure about the origins of distortions coming from the gov't....or did they come from your most-loathed unions....or did the insurance industry monopoly play a part?

[Aimless]

McKinsey found at least 30% of employers would gain economically from dropping coverage even if they completely compensated employees through other benefits or higher salaries.

hmmm

[Dreadnaught]

It makes sense —*offering health insurance requires paying employee premiums to some extent as well as tons of administrative costs.

In a better world, they could just pay people more in cash and those people could purchase the health insurance they want in a more competitive market. We may not get the more competitive insurance market, but we may get the cash-instead-of-insurance thing. Except Obamacare will subsidize insurance purchases for people with incomes up to $88,000 or so.

Are you sure about the origins of distortions coming from the gov't....or did they come from your most-loathed unions....or did the insurance industry monopoly play a part?

We all know why employer-funded health insurance came about. It's just been exacerbated by legislative inertia, insurance companies looking for a handout [that is blowing up in their faces] and the heaping-on of bad ideas.