Health

The Chains of Employer-Provided Health Insurance – Spencer Hall

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Why Americans need to let go of their obsession with keeping their employers’ coverage

Spencer Hall

After decades of widespread acceptance in the public square, the “government is evil” Reagan-esque hegemony has begun to find itself in retreat in the battle of public opinion. Time was when the threat of being tarred red could cow legislators from pursuing anything more than incremental, “market-oriented” reforms in healthcare. But the winds of change have been blowing across Capitol Hill, and the establishment has begun to find that the mere invocation of “socialism,” like an exorcist muttering Latin imprecations, can no longer be counted on to quell public outrage over the exploding costs of healthcare. The unexpected backlash against the GOP’s attempt to repeal Obamacare in 2017 was a stern reminder that a new spirit has entered American politics, and recent polls have shown a sharp increase in the number of Americans open to guaranteeing healthcare as a right. Even among those skeptical of Medicare for All, precious few really believe anymore in sentencing people to a lifetime of spotty or non-existent coverage for the crime of having a pre-existing condition.

In rising fear of the new consensus, pundits and politicians have fallen back upon the oldest trick in the book for the suppression of underclass discontent: convincing them that, while things might not be great right now, to rock the boat would invite disaster. They’ve hastened to cite the study from America’s Health Insurance Plans (AHIP) indicating that 71% of Americans who received coverage from their employers last year were satisfied with their coverage, a statistic which represents the conundrum faced by politicians: Americans often indicate to pollsters that they know the healthcare system is bad and needs to be changed, but get scared whenever proposals start getting made about what to do about it. This dynamic has led to the political split between those who want to get rid of private insurance entirely and replace it with some sort of single-payer plan, and those who think, per the alleged affinity Americans have for their current plans, that private insurance should stay.

The divide over whether to keep private insurance isn’t just a divide between the two parties, though Republicans obviously are more committed to ensuring that the private sector is kept firmly in control of the healthcare system. Private health insurance has been one of the most contentious issues in the Democratic primary, repeatedly coming up in the debates of the last few months.

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Bernie Sanders, of course, has famously been pushing Medicare for All (M4A) for years, a single-payer plan that would almost entirely replace private health insurance with a single government-sponsored plan, and despite M4A being dismissed as wild-eyed radicalism in the last election cycle, it’s become the measuring stick by which all the other Democratic candidates are being judged — both by people who support the plan and by people who oppose it. While Elizabeth Warren recently came out as supporting the plan with her remark, “I’m with Bernie,” several of the other candidates have been more ambivalent.

In their proposals for moderated versions of M4A — mostly in the form of offering a public option but retaining private insurance, as Pete Buttiegieg and Kamala Harris have both proposed (after the latter got blowback early this year for appearing to support getting rid of private insurance) — Democratic candidates have repeatedly invoked the alleged majority of people who love their current plan and want to keep it, and conservatives, having suddenly discovered the concept of altruism, have repeatedly denounced Sanders’ proposal for “taking away people’s health insurance.”

Leaving aside the hypocrisy of right-wingers suddenly becoming concerned with people’s ability to keep their health insurance after ten years of attempting to throw the tens of millions of Americans with pre-existing conditions under the bus, conservative commentators are nevertheless touching on a critical issue: Americans are far less likely to support M4A when told that it would get rid of private insurance. In light of Americans’ suspicions about transitioning to a single-payer system, surely it would be better to just stay within the current, known system and tinker around the edges, rather than undergo a radical overhaul that reduces or even eliminates employer-provided coverage?

No. The present American system, in which over 88% of Americans who participate in some form of private insurance get coverage through their employers, and in which employer-independent private insurance is far more expensive for people above the poverty line, is morally and politically indefensible. It perpetuates structural injustices against the poor, exacerbating the healthcare inequities that already exist across race and class by making affordable access to health insurance contingent on getting and keeping a full-time job with benefits — hardly an easy feat from the standpoint of American poverty.

No discussion of American opinions on healthcare can afford to ignore two key factors. First, Americans are, on average, stupefyingly ignorant of the most basic facts about health insurance. A 2016 PolicyGenius survey published a few years ago showed that 96% of Americans could not correctly define all four of the terms “deductible,” “co-pay,” “co-insurance,” and “out-of-pocket maximum.” 58% of Americans did not know what an out-of-pocket maximum was; half could not even define a medical deductible. 64% of Millennials could not correctly define a single one of the terms, and Boomers didn’t do much better, with 53% unable to define any of the terms.

Americans’ understanding of healthcare law is fully up to the standards set by their grasp of health insurance. Over a quarter of Americans believed that Obamacare was overturned in 2018 (it wasn’t, although a Texas judge did rule it unconstitutional, a ruling which is now moving through the appeals process), and a quarter likewise wasn’t aware that the individual mandate was set to $0 effective the beginning of this year. Over 79% of Americans don’t know that the open enrollment period is beginning in a few weeks. And although a Texas federal district court judge ruled in December 2018 that the entire ACA was unconstitutional, a case which was argued before Fifth Circuit Court of Appeals in July and remains unresolved and possibly headed to the Supreme Court, a poll taken a few weeks later showed that only 44% of Americans were aware that the ruling had been made. A majority either did not know the outcome, or believed that the law had been upheld as constitutional.

Consistently, polls have shown that Americans’ opinions on key healthcare policies can be easily swapped from one side to another just by giving them a few key facts on the policy. In the case of the Texas lawsuit, of the 41% of Americans who initially said they approved of the ruling, 13% changed their minds and disapproved after being told that the ruling meant that people with pre-existing conditions could have to pay more for coverage or be denied it entirely. Similarly, people’s opinions on Medicare for All can be easily changed by huge margins depending on what they’re told about the policy. From the baseline of 56% of people saying they approve of M4A, you can drop the percentage of people approving the plan to 37% by telling them that it would raise taxes, and to an abysmal 26% by telling them that it would lead to delays in people getting some medical tests and treatments. If you tell them that it will guarantee healthcare as a human right to all Americans, or that it will eliminate health insurance premiums, you can get 71% and 67% approval rating, respectively.

Figure cited from Kaiser Family Foundation report under Creative Commons License as described here.

What’s alarming about this is that all of these facts are basic to even the simplest understanding of what the ACA and Medicare for All actually are. If you know that the ACA protects people with pre-existing conditions and that such protections did not exist before — both of which are matters of basic political literacy — and are told that the law has been struck down with no replacement, then it should be immediately apparent without needing to be told that people with pre-existing conditions will again be exposed to higher costs. And yet 13% of people approving of the ruling changed their minds by being told this fact. Even more remarkable of an instance of Americans’ inability to think clearly on healthcare is the flip-flopping by enormous margins on Medicare for All based on which facts they’re told about it.

What makes this frightening is twofold. First, the basic facts here — that the law is intended to guarantee healthcare as a right, that it will raise taxes, and that it will probably lead to some medical delays — are common knowledge among people who are even minimally informed about the law. People’s opinions changing based on being told these things suggests a large amount of ignorance about the issue that Americans consistently say is one of the most important to them. Second, even more strikingly, is the fact that even if you knew nothing about the law at all, it’s a matter of simple logic that if you expand coverage to millions more people, the money will have to come from somewhere, which means higher taxes. Similarly, if you have a certain number of doctors, hospitals, test facilities, etc., and you suddenly add several more million people into the healthcare system who were not there before because they weren’t covered, you will extend waiting times for at least some non-critical conditions. You don’t have to know much about healthcare or the law to figure these things out. You just have to be capable of basic logical thinking and arithmetic. And yet these polls suggest that huge numbers of Americans are, alarmingly, incapable of both of these things.

But the public opinion surrounding Medicare for All is even more complex than this, and ties into the second factor that must be kept at the forefront in understanding American opinion on health insurance: Americans are simultaneously aware that the current system is awful, and yet afraid of any substantial change. The reason isn’t hard to figure out: any talk of changing insurance, even by way of replacement, summons up the specter of losing health insurance entirely, a terrifying event that makes you vulnerable in a way almost nothing else does. For people with serious chronic conditions, it can be a death sentence; and for others, it is likely to lead to either foregoing needed treatment or going into huge amounts of debt. Americans unhappy with the present system are likely to reason that the devil you know is better than the devil you don’t, and be cowed away from supporting reforms if they’re told that the reforms will mean changing their insurance.

Writing in Vox a few months ago, Mark Schmitt tackled this point solidly:

Whether health reform takes radical or incremental form, whether it’s called Medicare-for-all, Medicare-for-anyone, or just an expansion of the Affordable Care Act, we will likely see a forceful backlash anyway. We’ve seen this play out again and again over 30 years.

That’s because health care isn’t like other issues. It’s inextricably linked to fear and anxiety, economic survival, illness, and death in our minds. Change, any kind of change, provokes an anxious response, even among those who dislike their insurance or the job that they need to keep their coverage. And that anxiety generally increases with age, which means it also corresponds to the propensity to vote.

…There’s an aphorism about American political opinion, dating back to research from the early 1960s, that holds that we’re philosophically conservative but operationally liberal — we say we prefer smaller government, but in practice we support programs that benefit us and even some that don’t.

But health reform seems to follow the inverse dynamic: People appear to support big changes in the abstract, but get skittish and reactionary when the realities of change come into focus, especially when there’s a loud, funded campaign to sow worry. When change does happen, people eventually become comfortable with a new system, and the new system itself changes interest-group dynamics — but it takes time.

The point of this extended digression into the two factors to keep in mind in considering American opinion on private insurance is not to bash Americans, or to suggest that the opinions of the average person don’t matter. The point is that what Americans tell pollsters they believe about a particular healthcare proposal very seldom comes from a place of informed study and consideration of all the relevant factors. Few Americans have invested time and effort into developing political principles and forming their own opinions on the major issues of the day. Far more commonly, American opinion in healthcare polls is a reflection of a combination of fear of change with lack of information.

As I noted above, I certainly sympathize a great deal with the fear of change. But as psychologically understandable as these fears are, the belief that employer-provided health insurance is worth keeping because of a fear of losing coverage is completely wrongheaded. It rests upon the fantasy that employer-provided coverage is a source of security. Nothing could be farther from the truth. Employer-provided health insurance not only creates worse conditions for people without full-time work with benefits, as will be discussed below, but is about as precarious and insecure a way of getting health insurance as it comes.

“If you like your plan, you can keep it” is a crock

If you get health insurance through your employer, you are practically guaranteed to lose your coverage. You will lose that coverage if you quit your job to start a business or go back to school. You will lose it if you are fired or laid off. You will lose it if you retire. You will lose it if your boss decides to switch to a worse plan that saves him money while shifting more of the costs onto you. In fact, unless you have a heart attack at your desk and die while still on payroll, you can take it as a certainty that your employer-provided health insurance is going away. As Matt Bruenig has pointed out in his invaluable columns on the subject in Jacobin, there are at least ten different ways in which you’re vulnerable to losing health insurance through your employer. After detailing the many ways of losing employer-provided coverage and the numbers in the tens of millions of people who lost coverage by each of these means in 2018 alone, Bruenig brings the point home:

The claim that “if you like your insurance, you can keep it” is the biggest lie in American politics. In most cases, it is not up to you whether you keep your insurance. It is up to your boss, who can get rid of your insurance or get rid of you at any time. When pundits and politicians talk about giving “people” the choice to stay on their current insurance, they are not talking about giving you a choice. They are talking about giving your boss a choice. (Emphasis original)

I won’t recite every point that Bruenig makes in these articles here, but I cannot recommend reading them highly enough.

The biggest takeaway here is that maintaining the current system in which the majority of Americans are insured through their employers doesn’t benefit the people generally. It benefits one particular class of people: the bosses. It isn’t a boon to you if your health insurance comes through your employer. It doesn’t give you more “choice” — quite the opposite. But it is most certainly a boon to your boss, who knows quite well that the threat of losing health insurance can be a powerful tool in persuading you to fall in line, obey orders quietly, and think twice before you consider quitting.

And yanking employees’ health insurance as a form of punishment isn’t just a theoretical possibility. It’s roared into public view in the General Motors strike of the last few weeks, where 49,000 United Auto Workers (UAW) employees at GM walked off the job last Monday after failing to secure a deal with management. In retaliation, the company ceased covering the health insurance of the striking workers, despite their continuing to be GM employees, before relenting and restoring their health insurance in the face of a national backlash. During the period without regular coverage, while the strikers were still part of the company health plan, they could access it only through COBRA, a system generally only brought into play if a worker is fired. As I’ll discuss in more detail below, receiving health insurance through COBRA means that you stay on the same health insurance plan, but your premiums skyrocket. Nationally, employers contribute around 70–80% of their employees’ annual premiums, which means — as will be discussed in detail below — having to take on the entire cost of the premiums is a crippling blow which many families can’t afford.

The effect here is chilling. As punishment for engaging in legally-protected unionization and striking, over 50,000 people (many of the workers have families) faced much larger premiums to maintain coverage until political pressure forced their employer to relent, where failure to meet them could result in losing coverage altogether. And if you think that situation is bad, consider the fact that the GM strikers have it better than your average American worker: because they’re unionized, the union could, at least for the time being, have covered their expensive COBRA fees to keep the strikers from losing their health insurance, though doing so would have quickly burned through huge funds.

For the vast majority of American workers, almost 90% of whom do not belong to a union, there is no safety net at all in a situation like this. If you’re speaking up in favor of better working conditions and your boss fires you, you’ll find yourself in the same position as the GM strikers, saddled with the thousands of extra dollars in premiums for however you’re on COBRA (assuming you’re lucky enough to have benefits in the first place), but without a union to cover the punishing load of hundreds or even thousands of dollars of health insurance premiums unleashed upon you by your employer.

Pete Buttiegieg has defended his combination of a public option with keeping private insurance (“Medicare for All Who Want It”) by saying, “(w)e don’t have to command people to abandon…hard-won union healthcare plans that people have bargained for and fought for.” But what good is a union plan if an employer can take it away when the union exercises its striking power? A union is only effective insofar as it actually has power to bring pressure upon the employer. If employers can shut down strikers’ will to continue with threat of loss of coverage — especially for unions in smaller companies that may not have access to the same kind of finances as GM’s union does — then power remains solidly in the bosses’ hands.

But the system is also terrible for people without employer-provided coverage…

It isn’t only employees in full-time benefits positions who are disadvantaged by the system of employer-provided health insurance. The system also systematically screws over Americans who, for whatever reason, do not have jobs with benefits, even if they do work. Premiums for employer-provided health insurance are often much lower than premiums for equivalent coverage bought on the ACA market. The reason for this is tied into the way that employers provide benefits for their workers: companies heavily subsidize their employees’ insurance plans. Nationally, employers contributed an average of 70% of the total annual premium in 2019 for family insurance plans, and 82% for single employee plans, i.e., plans where one employee is insured with no dependents.

By contrast, people buying private health insurance on the ACA market often have to pay much more than their employer-insured counterparts, because the federal subsidies provided to help these people tend to be far less generous than employer subsidies and decline steeply based on income, disappearing entirely as one’s salary passes 400% of the Federal Poverty Level. But with so many Americans getting health insurance through their employers, ACA plans lose out on tons of additional money from large numbers of healthy people who would otherwise probably be paying into the marketplace and lowering out-of-pocket costs and premiums — which then in turn harms the few Americans who, for whatever reason, can’t get employer insurance, Medicare, or Medicaid, and have to seek coverage on the ACA market or forego it entirely.

To use a concrete example, the average monthly premium for a nonsmoking 40 year old on a 2019 ACA plan in Miami, Florida is about $477 a month before subsidies. Under the ACA, people making below a certain income each year are eligible for tax credits that cover a portion of the monthly health insurance premium. The estimated tax credit for a Florida man of that description making $40,000 annually is about $120 a month, varying slightly by location, which leaves you paying $358 a month for health insurance — and that’s just on premiums. By contrast, the average total amount a single-insured employee paid on his monthly premium for employer-provided health insurance in Florida in 2017 was just over $120 a month — almost three times cheaper.

If you instead assume that someone is seeking insurance for her family on the ACA exchange, the costs increase even more — a family of four (two adults and two children) living in the same location and making $70,000 a year, with both adults in their 40s and both children around 12, would pay approximately $538 a month for coverage, after federal subsidies. And if all that isn’t bad enough, these estimates for single and family insurance on the ACA market assume that you’re looking at a silver plan. ACA plans come in four levels — bronze, silver, gold, and platinum. As you increase through the levels, your deductibles and other cost-sharing decrease, but monthly premiums increase. A family with a high medical needs child would likely need the highest level plan available to avoid starting off the year with staggeringly high out-of-pocket payments on the deductible, but would then end up paying even more than the $538 I just cited.

The average monthly premium for a family receiving insurance through an employer in 2019 was $501, so it might seem at first that the gap is narrowed enough that the family on the marketplace isn’t much worse off. But there are at least three reasons why the ACA marketplace is still a worse place to get health insurance than through your employer.

First, you are generally only eligible for federal subsidies if you don’t have the option to get insurance through your employer or a spouse’s employer, and without federal subsidies, health coverage is far more expensive than it typically is through an employer. In the case of the family I described above, without federal subsidies, their health insurance on the ACA market would cost about $1,430 a month — almost three times as much as the typical employer-provided premium. Suppose that both spouses are self-employed, making about $35,000 a year each, and one decides to move her work under the umbrella of a contracting agency that offers health insurance to its employees. If the couple wants to “keep their plan” — the very thing that Republicans and moderate Democrats suppose Americans want to do — they’ll find themselves suddenly ineligible for financial help and paying three times as much as before for coverage. This withholding of ACA subsidies to Americans who have benefits on offer from their jobs virtually guarantees that for all but the highest-earning workers, employees will be stuck with their boss’s plan whether they like it or not, and thus subject to the serious problems with employer coverage described earlier.

Second, unlike employer-provided premiums (in general), ACA subsidy amounts depend on income. They’re only offered for people making between 100% and 400% of the federal poverty level and decline in amount as income increases, which means if you make more than 400% of the FPL ($103,000 for a family of four, $49,960 for a single person), you’ll be footing the entire bill for insurance, and thus paying much more than you would for equivalent insurance from an employer. Under the ACA, if you make below 138% of the FPL, you should be eligible for Medicaid, but 14 states refused to expand their Medicaid eligibility. In these states, most childless adults are ineligible for Medicaid entirely, and for families, the median limit for Medicaid eligibility is obscenely low, at 43%, which for a family of three in 2018 was an annual income of $8,935. This means that a family of three making just $9,000 for the entire year would be ineligible for Medicaid assistance. But because that family also makes below 100% of the FPL, they are likewise ineligible for ACA subsidies, leaving even cheap ACA plans out of reach. People that fall into this unfortunate situation of making too much for Medicaid and too little for ACA assistance are said to fall into the “coverage gap,” and there are over two million of them in the United States, 92% of whom live in the South.

This further reinforces the bad financial plight of low-skilled workers. To take food services as an example, an industry with over 5.4 million American workers, almost 40% receive no health insurance benefits through their employer. Food service workers are also among the lowest paid professions in America, with median annual pay of around $20,000 a year. The perverse dynamic that the current system fosters is that people who are most in need of help in affording health insurance — low-skilled workers, people who can only work part-time due to illness or caretaking for a family member, entrepreneurs having to scrape by financially at the beginning in getting their businesses off the ground — are the least able to get such help, while highly-skilled and well-compensated workers are likely to get some of the cheapest rates for good health insurance because of their employers’ subsidies.

Third, and finally, the ACA market is an unsafe substitute for employer-provided health insurance because of the nearly constant attacks upon it from the Republican Party. The GOP has for years tried to expand the number of non-ACA compliant plans — i.e., plans that discriminate against people with pre-existing conditions, don’t offer complete coverage for things like prescription drugs, and often have extremely high deductibles — all of which are targeted at luring healthy people unable or unwilling to pay ACA premiums into buying the cheaper plans, while sick people are unlikely to be able to survive or even get covered on the non-ACA compliant plans due to their discrimination and high out-of-pocket costs. As more healthy people leave the ACA market, leaving a proportionately higher number of sick people, premiums and out-of-pocket spending will continue to increase. On top of all of this, there’s the risk that the Texas lawsuit mentioned before could potentially reach the Supreme Court and be upheld, in which case the entire ACA might be shredded all at once.

The pundits who cite the AHIP study about 71% of Americans being satisfied with their employer-provided coverage generally fail to mention the striking finding made in the same study that 56% of those polled indicated that their employer’s coverage is a key factor in their decision to stay at their current job. If this is at all generalizable to the population at large, it leads to the remarkable conclusion that around half of the full-time workforce would be more likely to change jobs if it were not for fear of losing affordable health coverage.

It should be alarming to anyone who professes to care about individual liberty — which conservatives and liberals both do — that so large a proportion of Americans can be threatened with loss of access to life-saving medication as part of termination or resignation. Whistle-blowing, standing up to harassment or unethical practices, or just leaving regular employment to start a business all become far more difficult when doing so will mean doubling or tripling cost of health insurance premiums if insurance is kept through COBRA or replaced with a market plan, at the same time that household income is slashed or even lost entirely.

All Americans should be able to agree that our employers have no business controlling our access to affordable healthcare. America is long overdue for a reassertion of workers’ rights, and the progressive movement is making important strides in that direction. Numerous areas need reform — more annual leave, better protections for people with disabilities, paid family leave, better wages, safer working conditions, just-cause firing laws, widespread unionization across both the private and public sector, and worker participation in firm governance, to name a few. But employers’ ability to hold workers’ health insurance for ransom to extract obedience, punish dissent, and discourage organizing or leaving must be brought to an end — not partially, not by half-measures, but completely. Health care is a human right. It’s time to start reclaiming what’s ours by right from the people writing the paychecks.

Which leads me to a closing request. If you’ve read this far, and you agree with the argument I’ve made here, please share this information. You don’t have to share this article specifically (though I’d certainly appreciate it). You could show people this op-ed in the Washington Post, or this one in the New Republic, or this one in The Hill. All of them make the same point I’m making here. Don’t absorb all of this information and then just wish that other people knew it too — educate others, and encourage them to do the relevant research too. Getting informed changes minds, and wide-ranging political changes like those needed in healthcare reform depend on understanding things like why keeping employer-provided insurance is a bad idea. Hand-wringing over pandering to “the moderate voter” is the kind of boilerplate concern-trolling that keeps the likes of David Brooks employed. Going out and changing the moderate voter’s mind with facts and patient discussion is how votes get changed and political reforms enacted. America needs to break free from the chains of employer-provided coverage. The time is now.

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