Can insurance still be employer-based?

Published 9:49 pm Friday, September 5, 2014

1. Blue Cross Blue Shield reports ACA enrollees tend to be sicker

This will likely be the end of health insurance as we know it. Analysts now say that one consequence — intended or unintended — of the Affordable Care Act is the elimination of employer-based health insurance.

Michael Thompson of S&P Capital IQ, a financial news service, says companies have less and less incentive to offer health insurance to their workers.

“The companies will really be hard-pressed to justify why they would continue to have to spend the kind of money they spend by offering insurance through corporate plans when there’s an alternative that’s subsidized by the government,” he said on Fox News recently.

He predicts that as a direct result of the ACA, 90 percent of employer-based health insurance plans will disappear.

This comports with what Jean Card found when reporting about the ACA for U.S. News & World Report.

“With both small and large employers feeling cornered by costs that are out of control, one can easily see a future where employers get out of the health care business completely (perhaps to the point where larger firms will actually choose to pay the fine associated with the employer mandate rather than be saddled with exploding costs), leaving most individuals to shop in the exchanges and choose their own plans,” she reported in May.

That’s not the only trend leading to the collapse of the employer-based insurance model. That model doesn’t work when fewer and fewer of us are employed.

The Baby Boomers are retiring, the number of working-age Americans on Social Security Disability Insurance is at an all-time high, and recent declines in the unemployment rate are mostly due to people who have stopped looking for work. According to the Bureau of Labor Statistics, the workforce participation rate is at a 35-year low.

Now add to these trends the fact that the Affordable Care Act provides incentives for employers to push workers onto the ACA exchanges, and the end of employer- based insurance is that much more likely.

“The road to comprehensive health care reform will be littered with casualties. One of them might be employer-provided health coverage,” writes John Wasik in the Fiscal Times.

Wasik explains that employer- based insurance is a relatively new thing. Many employers began offering insurance in the 1940s and ’50s when the federal government offered them a tax break to do so.

“The health-insurance write-off came about as an indirect way to incentivize employers to keep wages stable after World War II,” Wasik notes. “Fringe benefits such as pensions and health plans took on a life of their own as employers increasingly upped the ante to attract and retain desirable employees.”

The ACA upends this system. And because it includes a “Cadillac tax” on more generous health insurance policies, government is now providing disincentives to employers who offer health insurance.

Meanwhile, more and more Americans are covered by Medicare and Medicaid.

The real point here is that employer-based insurance may no longer be a workable system. Are we ready with an alternative?

We’d better be.