The End of the Line on Employer-Sponsored Health Insurance

The End of the Line on Employer-Sponsored Health Insurance May 25, 2015

Three numbers:




That point to a major change in employer-sponsored health insurance in the United States.

2.3% is the percent increase, annualized, in the average employer contribution for employee health insurance, according to a study by the Center for American Progress, from the years 2007 to 2013.

2.2% is the CPI annualized index over that period, January – January.

1.8% is the the average wage increase for those years, based on the Social Security Administration data.

In other words:

I had said in prior posts that employer contributions to health insurance were going to decline, or, more precisely, that employers would keep pace with inflation but not with the higher rates of medical inflation, and that it’s simply not possible to go back to the status quo ante.  I had not realized until now that that future has already happened, that employers are already, on average, choosing to increasing their healthcare spending by CPI, and no more, with employees paying the remainder as increased premiums and higher out-of-pocket costs.

Now, the study I was reading doesn’t seem to understand this:  in their view, the “natural” way of providing health insurance is through a fixed employer/employee contribution cost-share, and that any decline in the employer cost-share level is “unfair” and must be fixed.  Their proposals for “fixing” this are a bit silly (require employers to disclose, each year what the change in cost-share is; require more no-out-of-pocket benefits, e.g., three doctor’s visits, which would just increase the total premium, absent other changes; and require “rebates” — which means that, after-the-fact, employers must pay to employees half the difference between their healthcare spending increase and the overall medical trend increases, a requirement which, if implemented, would simply mean that employers would factor this into their rate-setting).

And the AP article that directed me to this CAP study, “Democrats see skimpy insurance as the next health care issue,” focused on the net result, of both this change in employer-sponsored insurance as well as the movement in the Exchange plans:  high deductibles which make it difficult for low and moderate-income families to pay their out-of-pocket costs.  This is not really a surprise, or, at any rate, should not have been.  It should have been clear from the start that these individuals and families would still need sliding-scale clinics, payment plans, and general financial assistance; heck, my very first “vouchercare” post presumed sliding-scale clinics for those who can’t afford the deductible.

With Exchange plans, were the Democrats still in power, it’s easy to see the next debate being over a reduction in allowable maximum out-of-pocket costs, or a demand that the Actuarial Value levels associated with the “metal levels”, and the corresponding subsidies, be increased.

With employer plans, it’s hard to see precisely what happens next, when the relative subsidy level decreases as medical inflation continues to rise at greater levels than CPI and employer subsidy levels.  One hopes that, as the “private exchange” concept becomes the norm, consumers will at least have greater choice levels, but it’s hard to envision the 21st-century version of HMOs, as envisioned by Steven Brill, coming into wide prevalence as long as insurance is predominantly delivered by employers.

But here’s a potential next step:

What would happen if employers were able to offer a “voucher” to their employees, to be used for the purchase of health care/health insurance, on the same tax-free basis as when they offer health insurance directly?  Employees could use this voucher in whatever way gives them the “best deal” rather than being dependent on the employer’s selections, which may be more one-size-fits-all for their employee group.

And that’s all I’ve got for you tonight.

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