A Thing of the Past?
Published in The Journal Record
May 6, 2015
Why does your employer provide you with health insurance? After all, the idea of an employer taking the financial risk for their employees’ health is a uniquely American concept.
So why do we do it? One reason is, perhaps, employers think it’s the right thing to do as a service to their employees. I believe the real reason is that it would be impossible to hire skilled and talented people without providing health insurance. The idea of employer-based coverage has become so ingrained in the American psyche that employees who have a choice will simply not work for organizations without it. On the other hand, unskilled workers lacking education or training, and thus no leverage in the marketplace often find themselves working for employers with no coverage
Therefore, if our real reason to provide insurance is to compete for skilled employees, what happens if that motivation is removed? Under the Affordable Care Act most employers will be required to furnish health insurance or pay a fine to the federal government. If the latter is chosen, employees will then go to an exchange for insurance financed in part by their organization’s penalty.
The first time a competitor chooses to drop insurance sending their employees to an exchange and nothing happens, then the whole world changes. If your competitor can go the exchange route and continue hiring skilled employees then the employer motivation to provide coverage diminishes rapidly. After all, providing health insurance is expensive and often a source of employee dissatisfaction. Employers are shouldering this extremely expensive fringe benefit while angering their employees every time deductibles or premiums increase, or choices are limited. Given an alternative that provides coverage and doesn’t diminish the ability to hire will rapidly become a very popular decision.
There is one alternative to this scenario and that is for employers to develop their own exchanges. The employer could simply provide a monthly stipend and let each employee make their own decision around the details of a plan. This is an opportunity for employers to let their workers choose for themselves the details of their plan such as deductibles, coverage, and cost while at the same time retaining some participation in the granting of this benefit.
In either case, employer based insurance as we know it may soon be a thing of the past.