Linking healthcare to employment is a bad idea

The health care bills currently under consideration do very little for Americans who are covered under their employers' plans. It gives them peace-of-mind, yes, in case they change jobs, get fired or decide to strike out on their own -- they will always be able to get health insurance. But if you remain at your job, then health care reform does very little for you -- current laws already prevent insurance companies from considering preexisting conditions when offering tax deductible policies.

This is by design -- Obama promises that "if you like your insurance you can keep it". People who like their insurance fall into two categories:
  1. The oblivious: Because employers pay for the plans, most Americans don't feel the impact of rising health costs. Few people realize that the reason their take-home income is stagnating is that their company is taking their raise and using it to pay their health insurance premium.
  2. The invincible: You don't know how good your insurance is until you actually have to use it. I collapsed at an airport a few years ago and had to be taken by ambulance to a nearby (25 miles away) hospital. The bill for the ambulance ride was $1000! My insurance company (Aetna, Delta or Blue Cross, I forget which one my employer had at the time) paid just $300, saying the ambulance was "out of network". I had to pay the rest. So much for the $400/month my employer pays.
So this aversion to change, from a politician who ran on the banner of "Change", makes no sense. It just means that health care reform is not going to do anything for us middle class folks earning wages.

Oregon Senator Wyden wants to remedy that and force all employers to offer a low-cost, high-value plan. I think he intends that this plan would be the public option: a plan that will take all comers, emphasize preventive medicine and have a large enough buying power so as to pay Medicare rates. But unfortunately, the mechanism he proposes won't work. He would impose:
one requirement on employers — that they offer their employees a choice of at least two insurance plans, one of them a low-cost, high-value plan. Employers could meet this requirement by offering their own choices. Or they could let their employees choose either the company plan or a voucher that could be used to buy a plan on the exchange. They could also simply insure all of their employees though the exchange, at a discounted rate.
The problem is that he is allowing employers to offer their own choices. That simply won't work.

You may remember that the Bush administration had a similar idea to reform health care -- make consumers realize the cost of health care by forcing employers offer high-deductible insurance plans and allow employees to save the premium difference into health care accounts that they could control. The idea was that if you are going to pay a hospital fee out of your pocket, you'd be a better informed customer. The idea was sound, but the execution was poor. My employer did offer a high-deductible HRA but its premium was higher than the normal plan. Now, why would you buy an insurance plan with a $5000 deductible if you could get an insurance plan with a $1000 deductible for less? The insurance companies did this because they were afraid that all their healthy customers would migrate to the high-deductible plan otherwise, leaving them with an unhealthy pool. Allowing the employers to offer the low-cost high-value plan will lead to the same fate -- the choice will not be a choice any more.

Health care should be independent of employment. I don't expect my employer to pay my car insurance premium. Why should they pay my health insurance premium? Instead, just raise my wages by the corresponding amount and let me buy health insurance on my own. But ... regulate the insurance plans so that they insure everybody and not just the healthy. And ... subsidize the plans for the poor so that they don't go to the ER for routine treatment.

1 comment:

  1. I agree with most of the points you made especially that linking health benefits to employment is a bad idea. However, in my experience, your situation with a high deductible plan costing more than a low deductible is a fluke. A serious look into the offerings should help.