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Let's dive into a healthcare insurance pool

The employer-based system isn't working but would be preserved under the Senate reform proposal. It's time to try something new.

September 20, 2009|DAVID LAZARUS

The compromise healthcare reform proposal unveiled in the Senate last week accomplishes a number of things. But its main purpose is to maintain employer-based insurance plans as the bedrock of the healthcare system.

In this way, the bill by Sen. Max Baucus (D-Mont.) would ensure that what began as a historical accident ends up as one of the biggest bait-and-switches ever foisted on working Americans.

Since the employer-based system took root during World War II as a way for businesses to cope with a government-imposed wage freeze, the deal has been fairly straightforward: Employers would offer this great benefit as a way to attract and retain workers, and workers in turn would be guaranteed affordable coverage for themselves and their families.

Your basic win-win situation.

But things have radically changed as healthcare costs continue to soar and as employers cut back on coverage, or require workers to shoulder an ever-growing share of expenses. Or both.

As a result, what was once a win-win now works primarily in employers' favor. More than ever, their role as the provider of insurance for the vast majority of Americans serves as businesses' most powerful tool in maintaining a stable and complacent workforce.

At the same time, many if not most of us have been forced to settle for less-comprehensive insurance plans, higher premiums and co-pays, and higher deductibles.

In other words, we get less and less out of the bargain each year while employers arguably get more and more.

"Employers still have a big advantage in providing coverage to workers," said Judy Feder, a Georgetown University professor of public policy who specializes in healthcare. "But workers get the short end of the stick as rising costs eat up wages."

And it'll get worse.

The Kaiser Family Foundation released a survey last week showing that nearly 40% of employers say they're likely to boost the amount of money workers pay out of pocket for doctor visits. Almost as many say they will probably raise annual deductibles and increase the amount workers pay for prescription drugs.

Forty-two percent say they're likely to jack up workers' premiums; 9% say they may tighten eligibility requirements; and as many as 8% say they might drop coverage for workers altogether.

Meanwhile, Kaiser found that annual premiums continue to outpace inflation and wages, rising 5% last year. That may not sound so troubling until you realize that average premiums for a U.S. family have more than doubled over the last decade, from $5,791 to $13,375.

The portion of those costs borne by workers rose 128% from an average $1,543 a decade ago to $3,515. Wages over the same period rose by 38%, while inflation was up by 28%.

A separate report from the Business Roundtable, an organization of chief executives, predicted that annual premiums would reach almost $29,000 per worker a decade from now unless steps are taken to rein in costs.

"This is the single biggest cost pressure that our members cite as being uncontrollable," said John Castellani, president of the organization. "It's unsustainable."

This is especially true for smaller employers that lack bargaining muscle with insurance companies. But even for the big boys, runaway healthcare costs eat away at profits and competitiveness.

All things considered, you'd think all businesses would be eager to free themselves from the employer-based insurance system.

But when I asked some of the leading business groups whether their members have called for an end to the employer-based system, not one said yes. Just the opposite, in fact.

"Our members still want it," said James Gelfand, senior manager for health policy at the U.S. Chamber of Commerce. "Businesses that offer generous benefits get better workers."

Jeri Kubicki, vice president of human resources policy for the National Assn. of Manufacturers, echoed this sentiment.

"Our members are absolutely dedicated to providing healthcare to employees," she said. "It's a great benefit to attract the best and the brightest."

Yet both Gelfand and Kubicki acknowledged that many employers will have to cut back on health benefits and increase employees' costs to cope with rising expenses.

"It's unreasonable to expect employers to accept rising costs without passing them on to workers," Kubicki said. "We need to share the costs."

In other words, workers should share the pain of a dysfunctional healthcare system, while the advantages of employer-based insurance will be reserved solely for employers.

That's just wrong.

What's the solution? A public insurance plan would obviously address this growing disparity between employers and workers. But it appears increasingly unlikely that Congress will go down that road.

Here's what I propose instead:

Rather than having employers cut deals directly with insurers, they should contribute to a pool of funds that would be used for all U.S. residents to buy private insurance. The pool could be administered by the government or by a nonprofit organization.

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