Thursday, September 26, 2013

HCR -- Job Lock is Coming to an End

It may or may not have been triggered by PPACA but a clear trend is accelerating for employers dropping dependent coverage, retaining it only for the employee. A brief search turns up these instructive links.

NY Times, June, 2010 (over three years ago)
To the list of letters that produce a groan when they arrive in your mailbox — a jury duty summons, past-due tax bills — add this one: a “dependent audit.” 
A what?
A dependent audit comes from your employer, who wants proof that the people you’re carrying on the company health plan really are your dependents. If you can’t prove they are, the company will drop them. 
The goal is to ferret out children who are over age 18 and not in school, ex-spouses, sometimes even nieces or nephews — people, in short, who do not meet an employer’s definition of dependent. 
If your company does not already conduct these audits, chances are it eventually will. And while it may strike you as an annoyance, do not ignore this task. Otherwise, eligible dependents could lose their health coverage. 
From an employer’s perspective, audits make good business sense. Health care costs have been rising by 5 to 10 percent a year for over a decade, and employers want to contain those costs.
UPS won't insure spouses of many employee
UPS will follow thousands of other companies this fall in ending health insurance coverage of employees' spouses if they can get coverage elsewhere.

Partly blaming the health law, United Parcel Service is set to remove thousands of spouses from its medical plan because they are eligible for coverage elsewhere. 
Many analysts downplay the Affordable Care Act's effect on companies such as UPS, noting that the move is part of a long-term trend of shrinking corporate medical benefits. But the shipping giant repeatedly cites the act to explain the decision, adding fuel to the debate over whether it erodes traditional employer coverage.
Rising medical costs, "combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost," UPS said in a memo to employees.
Companies cutting health insurance cost may mean dropping coverage for spouses
For two-income couples, it's been one of the little financial perks of marriage: Go on your husband's or wife's health insurance so you can avoid paying for two policies. 
But with employers looking to cut costs as key provisions of the Affordable Care Act begin to take hold, the benefit is heading for the endangered list. 
In one of the most far-reaching examples to date, UPS has told its workers that it is dropping coverage for about 15,000 of 33,000 spouses of non-union employees in the U.S. — if those spouses are able to obtain insurance from their own employers. Spouses who can't secure coverage through a job will still be insured through UPS, the company said.
Wall Street Journal, last month
By denying coverage to spouses, employers not only save the annual premiums, but also the new fees that went into effect as part of the Affordable Care Act. This year, companies have to pay $1 or $2 “per life” covered on their plans, a sum that jumps to $65 in 2014. And health law guidelines proposed recently mandate coverage of employees’ dependent children (up to age 26), but husbands and wives are optional. “The question about whether it’s obligatory to cover the family of the employee is being thought through more than ever before,” says Helen Darling, president of the National Business Group on Health. See: When your boss doesn’t trust your doctor 
While surcharges for spousal coverage are more common, next year, 12% of employers plan to exclude spouses, up from 4% this year, according to a recent Towers Watson survey. These “spousal carve-outs,” or “working spouse provisions,” generally prohibit only people who could get coverage through their own job from enrolling in their spouse’s plan.
Before everyone starts climbing into Ted Cruz's bandwagon, they need to know that this trend has been going on since before the passage of Obamacare. The legislation may have accelerated the trend by creating alternatives, but the rising costs of health care in America has been a financial burden for employers for years. Sooner or later it was going to happen. In the same way that many employers will retain their old-fashioned pension plans in addition to a host of employee-paid retirement arrangements that followed the first IRA's in the Seventies, some employers will continue to provide subsidies for employees. But on the whole employer subsidized health care plans for entire families will not be the golden handcuffs they have been for two or three generations. Portable insurance spells the end of job lock. 
...gone forever on January 1 will be an obstacle unique to America in the developed world -- job lock. An untold number of Americans for all practical purposes are indentured servants in large corporations, locked into jobs they don't like but won't dare quit because of their employer-subsidized health coverage. 
By making the discriminatory practices of insurance firms unlawful, which will bring to an end their ability to cherry pick only the policyholders they want -- the young and healthy -- the Affordable Care Act will give American workers the key to that lock.
Like all medicine, this is hard for most people to swallow. Except for a small handful of people with high-deductible private plans, most Americans have no idea what the actual costs of health care are unless they experience some horrendously expensive, often life-threatening medical condition. And by then it's too late to think about costs. For a family facing life and death choices, financial ruin is a welcome alternative to death or losing a family member for financial reasons.

I came across an interesting example of an institution requiring people to protect themselves from financial catastrophes by obligatory health insurance -- Brigham Young University.  Check out this list of questions and answers regarding students at that school, ending with this one: 
(Click for larger image)*

*Health insurance is not optional for students at BYU and has not been
since 1989. They don't call it an "individual mandate" but that is what it
actually is -- obligatory insurance paid for by the insured.  BYU is a well-
run institution of the Mormon Church.  Do we know any famous Mormon
presidential candidates who were Mormon?  Were any of them associated
with universal health care plans, like the one in Massachusetts, maybe?
One of the ironies of our time is that Barack Obama, poster child for all things Liberal, turned out to be an agent of change in much the same way that Richard Nixon, the toughest of anti-Communist American politicians, was the very one who famously was able to open the door to China. The landmark legislation now called Obamacare -- a derisive term he was quick to claim, insuring no one would ever forget who gets credit for enabling universal health care to America -- is, as all policy experts agree, an essentially Conservative, Republican construct.

In a recent post at The Health Care Blog, Ewe Reinhardt (one of those policy experts -- look him up) said exactly that.
My early introduction to the texts coming from conservative thinking on health reform was the Heritage Plan of 1989, Viewed through the prism of the ACA of 2010, its language seems eerily familiar. One provision, for example, proposed a:
  • “[m]andate all households to obtain adequate insurance. Many states now require passengers in automobiles to wear seatbelts for their own protection. Many others require anybody driving a car to have liability insurance. But neither the federal government nor any state requires all households to protect themselves from the potentially catastrophic costs of a serious accident or illness. Under the Heritage plan, there would be such a requirement” (p.5).
The Heritage Plan also called for income-related, refundable tax credits toward the purchase of private health insurance. Although it did not call for community rated premiums, it proposed means-tested public subsidies and toward high out-of-pocket expenses of individuals and families. It did not spell out the daunting administrative apparatus that would entail. But one can imagine the required new bureaucratic apparatus, replete with auditors to prevent fraud and abuse. Presumably, income-related subsidies would have involved the Internal Revenue Service (IRS) in some ways as well.
He underscored the point in the comment thread.
Most other nations have muddled through, one way or the other, and for sheer muddling the US wins the world cup prize. But even here the goal — at least the goal stated for public consumption — is that everyone who needs health care should have it, regardless of their own ability to pay for it, something the market just could not achieve. 
We can have endless debates over the exact mix of private and public activity in health care, and it will always be so. 
The irony is that Obamacare, copied for the most part from the play book of Republicans, should have been the platform for a bipartisan compromise. Sen. Baucus certainly tried. But, if you want to be honest about it, the Republican game was to prevent the President’s reelection, and they sacrificed their own health reform ideas for that futile pursuit. It was never about what might be helpful to the people, especially th millions of uninsured. 
What would Republicans do if, like a dog chasing a car that then stops, they should win the White House and the Congress? To get a clue, read S.1099, or the old Republican plans of the 1990s. they would legislate something like Obamacare, although perhaps smaller. And, to keep it elegant, they might just deficit finance it, as they did the MMA 03, a truly irresponsible act.
My conclusion is that we should thank Barack Obama for insuring that the end product now called Obamacare has self-funding mechanisms unlike the mindless, unfunded mandates crafted by Republicans, first by creating the budgetary nightmare which gave us that famous "doc fix" (requiring a perennial budgetary sleight of hand since the late Nineties) and The Medicare Modernization Act of 2003 which created the hated "donut hole" for seniors with Medicare "Part D" which bled out tax dollars to the drug industry with no recovery mechanism and nothing in return.

In addition to the like Dr. Reinhardt provided, here is another, also from American Enterprise Institute, describing in detail the need to separate health care from employment and examining a variety of mechanisms to bring it about. In some way this reads like a Liberal manifesto.
President George W. Bush's ambitious second-term agenda includes proposals to reform the tax system and, more specifically, to use it to make our increasingly costly health-care system more efficient. After explaining the decisive influence of tax policy in shaping the current system, with its preference for employer-based health insurance, this essay discusses the main options for altering the tax treatment of medical expenses and identifies three measures that could lead the way toward more comprehensive health-care reform.
Why did employer group coverage become the dominant form of health insurance coverage? There are two major reasons. First, a group of people working for a company provides a convenient and efficient risk pool for insurance. Insurance companies were willing to sell coverage for an employment group at a reasonable rate because they learned that, in most cases, the group could be expected to represent only an average level of medical risk. People go to work for companies for reasons other than health coverage, so insurers did not expect to attract a large proportion of high-cost workers. This was not the case with health insurance policies sold to individuals. Health insurance companies knew already (and still know) that people who expect to have higher-than-average medical costs are more likely to buy insurance coverage. To protect themselves against this adverse selection, companies selling individual insurance priced it at a higher level than equivalent coverage sold to an employer group.
Second, excluding employer-paid premiums and payroll taxes from taxable income accounts for the great majority of health-related tax preferences. The medical expense deduction (bottom) is relatively small compared to the effect of the exclusion. 
The tax subsidy is regressive, offering more benefits to those with higher incomes. John Sheils and Randall Haught of the Lewin Group estimate that those with family incomes over $50,000 got 71.5 percent of the value of the total 2004 federal tax expenditure of $188.5 billion. Those in families with income below $20,000 got only 3.4 percent.[4] This distribution also helps to explain the political popularity of the tax exclusion. The policy gives more to those who have higher incomes and who work for firms that offer health insurance--a powerful bloc of voters.
Unfortunately universal health care will remain a dream for millions of Americans who will for whatever reasons remain outside the system until they have a life-threatening emergency. The truly destitute will access whatever Medicaid provides in the states where they live, but for millions more living in states that have opted out of the Medicaid provisions of the new law (in accordance with that Supreme Court decision) the subsidies making insurance affordable through their state exchanges will not be available. 

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