Risk & Compliance

Will Employer Health Insurance Go Away? Don’t Bet On It

Rankly speculative predictions are flying that, within a few years, health benefits will largely be a thing of the past.
David McCannMay 2, 2014

First, Barack Obama famously declared with regard to effects of the Affordable Care Act on individuals, “If you like your employer-sponsored health insurance plan, you can keep it.” That didn’t turn out to be quite true.

Then came a few years’ worth of predictions by expert observers that few companies, especially large ones, would even consider discontinuing their health plans once the public exchanges were functioning properly. That didn’t turn out to be true at all; lots of companies have thought, are thinking or will think about doing just that.

Opinion_Bug7Now, predictions are popping up all over the place that within just a few years, the vast majority of employers will drop employee health coverage. I wonder if that will turn out to be true. Based on the track record of prior prognostications, I wouldn’t bet my savings account on it, modest though that sum may be.

How often it will happen that companies give the work force some kind of stipend for buying insurance from an exchange, then happily wash their hands of the sorry health-benefits mess, is very much open to question. It quickly turns bewildering, trying to add up and weigh all the variables that may come into play.

HR Demonstrater 2Just a few of the big ones: how well the government-run public exchanges will actually be run; where exchange pricing will settle; how well insurers profit from participating and their resulting interest in continuing on; what changes may be ahead for the ACA; what other impactful new laws and regulations might arise; whether demand for employer-sponsored health care remains strong and, concomitantly, whether companies that retain health benefits win major advantages in the hiring market; the extent to which private exchanges establish themselves as core options for a breadth of employers; how greatly medical costs inflate…. Get the picture?

To offer up something more concrete, consider the experience in Massachusetts, where the health-care reform law on which the ACA was largely based was passed in 2006. Actually, there were some notable differences in the two laws.

“The benefits we were giving guys who left employer-sponsored insurance were way more generous than what the federal plan gives them,” MIT’s Jonathan Gruber, a health economist who helped design the Massachusetts reforms and also advised on the ACA’s development, told The Washington Post. “And we didn’t have much of an employer penalty. I predicted employers would drop coverage.”

However, as a 2013 PricewaterhouseCoopers report stated, “In the seven years since Massachusetts enacted its law, the number of people covered by insurance through the workplace increased by about 1 percentage point, running counter to the rest of the nation, which saw employer-based insurance decline by 5.7 percentage points.”

As that statement indicates, a gradual shift away from employer-sponsored health insurance has been playing out for some time. But predictions that, within six years, 80 percent or 90 percent of private-sector workers will not have employer coverage are wildly speculative.

On the other hand, I wouldn’t bet my savings that such a scenario won’t come about, either. If a few huge, iconic employers that do business across multiple, disparate markets, like General Electric, Berkshire Hathaway, IBM and DuPont, have the gumption to take the plunge, it’s easy to imagine that corporate sheep would follow.

Still, we know little or nothing more in 2014 about how health care will be delivered in 2020 than we knew in 2010 (when the ACA was passed) about how the health-care sector, the economy and political discourse would be reacting to the law in 2014. I’m afraid that companies, which have been waiting for clarity on the direction of health care for years, can do little but wait some more.