Thursday, May 30, 2013

U.S. employers want to provide health insurance

The Wall Street Journal has a good article today, by small business reporters Emily Maltby and Sarah Needleman, about three smallish businesses grappling with the the Affordable Care Act's employer mandate, which charges employers with more than 50 employees $2,000 per employee (excluding the first 30) if they don't offer coverage.  None of the business owners opt not to offer coverage. Here's the head of a small pizza chain with 90 hourly workers:
Next year, Mr. Stark intends to offer a health-insurance plan for the first time to comply with the law. "At the end of the day, if we take care of our team members, they will take care of the guests," he says. "I philosophically believe people having health care, regardless of age, is positive."
A consultant with 93 employees adds:

"I could make more money in the short term if I cut benefits," says Steven Laine, president and chief executive of business consulting firm Future State, but he fears he would lose employees. 
The young head of an IT services firm, currently employing 40 and expecting to grow to exceed the 50-worker cutoff, is also motivated to provide coverage:
Mr. Mongeluzo says he has always offered his employees health benefits, in part because he believes it helps with retention, and he stresses that turnover at his firm is low.
These sentiments are in keeping with messages I've heard from labor and employment lawyers presenting to corporate clients. With regard to keeping employees' hours under 30 per week so that they're not counted as full-time, and therefore don't trigger the mandate, one mantra was "careful you don't end up training your competitors' employyes."

While anecdotal, these sentiments suggest a response to Josh Barro's recent attack on the employer mandate, and the ACA's general commitment to leaving our employer-based system in place for the present. Of the mandate, Barrow writes:
This will discourage hiring, encourage employers to limit employees to part-time work, and give small firms an advantage over large ones. This last distortion is the real reason employers like Papa John's are complaining about the law. Their beef is not so much that Obamacare will raise their costs as that it will do so without raising the costs of the small pizzerias they compete against, meaning they won't be able to pass higher costs on to consumers.
 Taking these worries at face value, Barro complains:
Policy wonks across the political spectrum knew what had to be done to avoid these problems: abandon employer-based coverage. Most liberals would prefer a single-payer system where everybody gets health insurance from the government. Senator John McCain, among other Republicans, has proposed abolishing the tax subsidy for employer-provided coverage in favor of a uniform tax credit, which would encourage people to buy health insurance on the individual market. Democratic Senator Ron Wyden and former Republican Senator Robert Bennett for years promoted a universal health coverage plan that would have thrown most Americans into Obamacare-like insurance exchanges.

Those plans would have very different fiscal and distributional effects (and the McCain plan would still leave a lot of people uninsured), but they have two important things in common: they would lead to fewer employment distortions than Obamacare, and they would deny a lot of Americans the option to keep a health plan they like. They are all approaches that recognize that our current system encourages employers to buy overly-expensive health plans, and that helping Americans keep those plans is a bad priority.

While there was no good policy rationale for promising Americans that they could keep their existing insurance, there were two clear political rationales. One was risk-aversion: most Americans already have health insurance and are inclined to view health reforms as a threat.

The other is that a system that relies on an employer mandate reduces fiscal cost by cutting the number of people who get direct government subsidies for insurance. Instead of levying taxes to pay for people's health insurance, the government orders businesses to provide health coverage or else face a fine. This reduces measured spending on Obamacare, much like a minimum-wage increase looks "less expensive" than an increased Earned Income Tax Credit. But shifting the cost of coverage expansion away from taxpayers toward businesses doesn't make it go away
Policy cannot be so easily separated from politics, however. There is much to be said for incremental change to an existing system when the "installed base" is so huge and unwieldy. Voters' risk aversion with regard to their existing employer-based coverage is not irrational.  Given the intensity of the GOP's demonization of the conservative and incremental Obamacare reform to our existing arrangements, imagine the response if Democrats had proposed to tear up the existing employer-based system. Nor does Barro offer any evidence that employers are particularly disposed to offer "overly-expensive plans."  In fact they're shifting costs to employees as fast as they dare -- sometimes intelligently, providing well tailored incentives not to overutilize, and sometimes wholesale.

Moreover, Barro neglects to take into account a particularly powerful constituency that fiercely opposed any attempt to loosen our existing implicit employer mandate -- that is, Americans' expectations that a "good" employer will provide health insurance. That constituency is employers themselves.

In the fall of 2009, Ron Wyden, co-author of the plan Barro recounts above, proposed an incremental step in the direction of loosening the implicit employer mandate.  He proposed a Free Choice Amendment to the bill in progress in Max Baucus' finance committee, which would have enabled all employees to opt out of their employer's health care plan and buy insurance on the insurance exchanges established by what later became the Affordable Care Act.

Big business shot the amendment down.  Democratic operative Matt Miller expressed incredulity:
Big business thinks that giving employees this choice would be a calamity. To which one can only ask: Have these business lobbies lost their minds?

When the post-mortems on the health-care reform debate are written, the biggest mystery will be why big business fought so hard to stay in the health-care business even as soaring health costs surpassed corporate profits and diverted executive time better devoted to actually running companies.
The attitudes expressed by organization large-company opposition, however, are not unlike those voiced by the entrepreneurs cited by Maltby and Needleman, Miller's disapprobation notwithstanding: 
The language used in a letter sent Tuesday to the Senate Finance Committee from something called the "National Coalition on Benefits"—a body controlled by corporate HR execs—reveals the confusion and paternalism still permeating the executive suite when it comes to the employer's role.

Mr. Wyden's proposal, the coalition asserts, would "fundamentally frustrate employers' attempts to administer integrated health improvement strategies." As a factual matter, this is incorrect. But why should "health improvement strategies" be the job of American businesses? Sounds more like a job for American doctors, in conjunction with their patients.

The status quo crowd also writes that Mr. Wyden's measure "would likely harm employer-employee relations because most employees have a longstanding expectation that their employer will be their primary source for health coverage." But employees already chafe at the shrinking coverage now available on the job. And who wouldn't want more options?
We seem to have developed a widely shared cultural expectation that employers will provide insurance. In the short run, at least, the ACA will strengthen that imperative. Ultimately, if the exchanges work well and the Cadillac tax on expensive employer-based plans bites deep, that tide may start to move out.  Meanwhile, though, businesses (and employers generally) remain important labs for continued innovation in healthcare delivery. 

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