About those companies dropping insurance…

From MIKE KING

UPS, Delta, now Home Depot. There’s a lot going on in the employer-based insurance market. And because the changes these companies are enacting come at the same time Obamacare is rolling out, it’s easy to connect them to the new law.

Today’s story is just the latest

But, as these stories unfold, it’s important to keep a few things in mind before jumping to conclusions:

* This is the time of year all large companies, including those that are self-insured, make changes in their employee benefit plans. Changes like dropping spouses from the employee plan if the spouse qualifies for a plan because he/she works for another company that offers group health benefits have been accelerating in recent years. There’s nothing new about this change, but with health insurance about to become much more widely available it may make sense for some companies to do this.

* Go back over the last 10-12 years and think about how often during open enrollment employees were shocked to read about higher premium costs, higher deductibles and higher co-pays, just to keep the plans they had. Then consider that for many workers those costs continued to rise year after year while wages stayed stagnant, and in many cases (because of furloughs and other cost-cutting measures), were cut. It was during those years that momentum began to build for major reforms in the system.

* Keep in mind that the employer-based insurance market has fluctuated widely in the plans available to part-timers. They go from bare-bones plans that don’t cover much and don’t cost much (for employees, as well as their employers) to more traditional plans that can come with a hefty price tag for both. Again, with the insurance exchanges about to open up, it only makes business sense for companies to think about whether they want to continue to offer a plan to their part-timers that may not be as good, or even as affordable, as one the employee will be able to buy on the exchange.

*Speaking of part-timers, it’s important to remember that if the job at Home Depot, or Wal-Mart, or anywhere else that hires a huge volume of part-timers is the only job the employee has — for whatever reason he or she can’t find full-time work — then these employees will more than likely qualify for a subsidy to help pay for their insurance. And because these plans must meet basic minimum benefit standards — paying for preventive care, prescription drugs, etc. — the employees could be much better off buying on the market than having to re-enroll in the plan they now get on the job. Unfortunately, because some states have decided they would rather try to obstruct the new law by any legal means necessary, Home Depot workers in California will more than likely find a more affordable plan on their state exchange than Home Depot workers in Georgia. That’s why it was important for states to create their own exchanges, so they could negotiate with insurers on behalf of consumers for a more competitive marketplace. Georgia didn’t do that. State officials couldn’t muster up even that little amount of political courage to help the state’s residents get a better deal. So Georgia consumers will have to take the prices Ralph Hudgens and his friends in the insurance industry stick them with. Still, it’s better than nothing…but, wait, I digress, that’s another post on another day.

* From the perspective of recent history anyway, it’s also important to remember that many of these large, part-time-employee-based companies were pretty damn late to the notion that while they were fat and happy they ought to be providing decent benefits to this huge volume of workers. They may have been good about providing those benefits to supervisors and full-timers, but it wasn’t that long ago that workers advocates and others shamed these companies into providing at least something to part-timers. In other words, if it took them years to start offering their employees a health plan, it shouldn’t surprise us when they choose the first opportunity they can to get out of it. Only this time, with the new law in place, their employees won’t be left out in the cold. In fact they could be better off.

So read these and future stories about employer changes in health care plans carefully. No doubt, with the market about to change so dramatically, some of the decisions being made by companies are being implemented because of the new law. But more than likely they are the result of accountants showing executives how the bottom line can be improved by diminishing — if not eliminating altogether — the continuing cost of insuring some of their employees. Come to think of it, when hasn’t it always been that way?

 

 

 

4 thoughts on “About those companies dropping insurance…”

  1. Well M.Rex, you’re half right; which is not to say that you’re half wrong.
    IMHO everything you’ve said is right, but doesn’t go far enough. In the end, businesses are even more reliably rational in policy and decision-making than consumers: IOW, they’ll always steer toward the lowest-cost /highest-value equation that they can find for their owners.
    Case in point, think back to just before IRA/401Ks were introduced and most employers were struggling with the mounting costs that attended their generous pension plans. Then along came Uncle Sam to the rescue with a perfect excuse for companies big and small to “cap” (if not wiggle out altogether) of retiree costs. Fast forward to now, expect to see a steady parade of “defined contribution” announcements: Many employees’ long-term laments will be off-set by their percieved freedom to dial-in their own plan with company cash; others (and/or their union leaders) with longer-term perspective, will see the diminishing employer exposure for what it is–more risk/cost on themselves!
    FWIW IMHO this is all good; many of my more leftist friends, however, will rationally disagree;-)

  2. First, Doug, count me among those lefties who would feel entirely comfortable if this starts the processes of de-coupling health insurance as a benefit employers pay to their workers. But I quickly would add that we have to be extremely careful during the transition, more careful and deliberative than we have been in transitioning from defined benefits to 401(k)s. The true cost of health care has always been hard to measure because so much is hidden in the contracts between employers and their underwriters — what we learn is usually limited to what we hear about each year during open enrollment and what we decipher when we can’t get a claim paid for a benefit that we thought should have been covered. That’s not the transparency that consumers need to make a reasoned choice for coverage. But, as you know, getting from what we have now to a truly consumer-directed marketplace will take a lot of work, education and innovation. (For those of you who don’t know, this has been passion of Doug’s in recent years and one that I hope he’ll be talking a lot about on this blog.)
    Second, welcome to all the Missourians who have joined us thanks to the shameless promotion of John Shaughnessy. (John, Doug and I all went to school together — well, at least we attended school together. It’s questionable how much we learned.) In the months ahead I’ll try to find out more about what is happening in Missouri so I can help answer questions from you. Good luck there and keep the faith.

  3. Why thanks M.Rex
    Of course I’d be happy to wax on about CDHP (consumer directed health plans, a.k.a., Patient-centered…) as, depending upon when/if the Republicans ever regain traction, we’ll be hearing a lot more about this common sense approach.
    In its simplest description, CDHP empowers and (financially) motivates individuals to become a lot smarter buyers of their own health care; it may even provide some with the impetus to stay well better/longer (e.g., material bonus payments for effective weight control, cholesterol management, etc). With millions of folks looking harder (just as they do with everything else) better deals materialize and overalol costs decline.
    The implementation specifics get as complex as the plans themselves are varied; for now, suffice it to say that companies that have implemented CDHP schema (a.k.a., “defined contribution”) have reported savings in the 23-30% range (generally shared in one way or another with their participating employees).

    I’d be happy to outline several of these unheralded success stories further; and/or interested readers may want to take a look at the Institute for Healthcare Consumerism web site http://www.theihcc.com/ But `lest I not take a constructively parting shot at the ACA (a.k.a. Obamacare), the main reason that CDHP advocates hate is that it hates them! IOW, among the myriad parts and sub-parts of this way-overly complex act are several which, taken together, will deal a short-term death knell to CDHP. Again, the whole story goes quickly into the weeds from here (but, I’d be happy to expound with the hard facts if you’d like). Moreover, the same story could just as quickly launch into philosophical left/right debate: e.g., how much real freedom, and personal responsibility, can Americans really handle?

    With that, I’ll leave it to you good webmaster to steer the discussion as you will;-)
    Stecore non donamus;-)

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