"I Hear the Train a Comin"--What Does That Johnny Cash Refrain and the Employer-Based Health Care System Have in Common?
OK, maybe it's a stretch but bear with me.
I heard a senior exec from a big health plan say the other day that it's hard to believe we will ever see the end of health insurance distributed primarily through the workplace in favor of an individual-based health insurance system. In fact, much of the health insurance industry is lining up behind staying with the system we know best and the one who has been our customer all these years--the employer.
That is understandable. As someone who came up through the ranks looking at the employer as the customer and individual health insurance as a minor product subset I have the same reaction.
But I will tell you that this idea of moving away from third-party employer pay and to a system of individual responsibility--or moving from defined benefit health insurance to defined contribution health insurance--has been coming on us for some time now.
My recollection is that this idea all started with Stuart Butler and Bob Moffit at the conservative Heritage Foundation maybe 15 years ago. Then it spread to more limited proposals for medical savings accounts (MSAs) in the mid-90s and later to the HSA concept and the whole notion of consumer-driven care. George Bush took it the rest of the way with last year's State of the Union proposal to end the employer tax exemption in favor of an individual deduction for health insurance. John McCain has now refined that idea with his tax credit proposal.
Nor do liberals need to be afraid of an individual-based solution. Universal health care systems such as Germany, Switzerland, and Japan provide health insurance to all of their citizens through a structure that has the individual making choices from a list of private health plans.
The bipartisan Wyden-Bennett health reform proposal--a health care reform bill to watch--now adopts the concept as do others.
Now, the Massachusetts health plan, the stalking horse for the incremental expansion of the employer-based system that Barack Obama favors, is showing us incomplete results on the access front for what is turning out to be a very unsustainable cost.
The Massachusetts health law results are going to do even more to get people worried about expanding that plan for the whole nation. If not the Massachusetts formula for health care reform, then what?
My perspective is that this once far-out idea for an individual health care market is no longer so far out.
Is the country ready for such a leap from employer health insurance plans that generally work very well for the people lucky enough to be in them? Not today.
But a whole series of developments seem to be coming together--problems with Massachusetts, the unsustainability of the employer system in a global economy, a number of serious individual-based health care reform proposals, an imperative to structurally deal with health care costs not just dump more people on the existing system, and now a coming presidential debate that will put this idea front and center.
I hear the train a comin and its getting closer all the time.
3 comments:
Indeed so. I agree.
Employer sponsored benefits, according to statistics published in American Medical News, peaked in 2000, and has declined every year since.
Is it the rising premiums?
Is it the growth of small business instead of big business?
Is it something else?
Does it even matter?
The reality is that employers don't want to be in the health insurance game. It is costly, AND they have to hire HR people to administer this swamp.
Many have adopted CDHPs, effectively taking 1 foot out of the batter's box. How long before they migrate toward defined benefit or even just giving employees the cash and retiring from the field they hate so much?
IMHO, not long.
Soon, in the great American tradition, we individual Americans will go shopping for health care and or health insurance with our very own dollars.
And it is about time. If there is one thing that Americans can do as a civilization, it is SHOP. So let us unleash the power of the American consumer on healthcare.
As always, such rigorous competition will increase service and quality, and ultimatley decrease prices.
My only question is: why have we waited so long?
Moving to a defined contribution system of individual insurance is a viable alternative if it is coupled with a solution to pre-existing condition limitations and rates based on medical underwriting. It also will need to include some stop loss protection for the individual.
Any movement in this direction will require sliding scale subsidies for the poor. These hurdles all can be addressed.
What may be more difficult to reconcile in the short-term will be the recognition that those employers who have offered comprehensive healthcare will need to transfer those funds to the employee in order to permit purchase of insurance. If done transparently this will result in significantly higher salaries being paid by these employers when compared to those who previously offered no coverage. My guess is that this gap will shrink over time.
Great post! I agree completely. And to the last poster who correctly pointed out that employer sponsored coverage peaked in 2000, it has actually been quite a predictable 7-year cycle over the past 20 yrs. In fact, the last trough was back in 1993, when only 54.7% of the US was covered through their employers. In 2000, it was 64.2%, and in 2007 we were at about 60%.
Defined contribution health benefits will be the next generation of the poorly named, consumer-directed health plans. But, the uptake will be quite slow for the foreseeable future.
I think the critics of such a phenomenon incorrectly assert that it takes the employers completely out of the equation. In fact, it does not. They would still provide the funding, and the accounting structure through which employees (a.k.a. consumers) would purchase a plan that meets their needs. So the paternalism will live on to an extent.
The insurers are worried because it takes them out of their employer relationships. That's a problem because they haven't cracked the consumer code yet. In other words, they don't yet know how to manage B2C customer relationships.
Carlton Doty
Forrester Research
Post a Comment