Thursday, September 26, 2019

Employer-sponsored insurance as we know it is unsustainable. Now what?

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Kaiser's 2019 Employer Health Benefits Survey, released yesterday, highlights a basic I noted a month ago (based on a Kaiser precursor report): employer-sponsored health insurance is deteriorating. Average family plan premiums have topped $20,000; average deductibles have topped $1,600. Family premiums have increased 54% over ten years. That's actually down from the previous ten years, when rates more than doubled. But the climb in excess of inflation has been relentless.

The system most consistently fails low income workers -- many of whom would be better off if the employer offered no insurance, rendering them eligible for ACA marketplace subsidies. KFF president Drew Altman lays out the basics:
  • Roughly 36 million American workers earn $25,000 per year or less — retail workers, personal care attendants, warehouse workers and many more.
  • Just 33% of workers at lower-wage firms offering health benefits are covered by their employer’s health benefits, well below the 63% share at other firms offering coverage.
  • These low-wage workers pay an average of $7,000 per year just toward the premium for a family plan.
  • Workers in low-wage firms also face much higher deductibles: a $2,679 annual single deductible, while at other firms, the average is $1,610.
My takeaways:

1. Employer sponsored insurance under the current regulatory regime is unsustainable because employers lack pricing leverage. Payers are divided and conquered. Employers will never control costs -- it can't be done without rate-setting and national negotiation of drug prices. Rate-setting is a sine qua non of affordable universal coverage: every country that has achieved that goal rate-sets by one means or another, with the recent exception of Holland.

2. A strong public option that everyone can buy into on an adequately subsidized basis, including those with an affordable offer from their employers, is the obvious workable U.S. path to affordable healthcare for all.  

3. This has been true since about 2003. The ACA was a collective Democratic flinch. As the party gained power 2006-2008, it had not yet absorbed the total corruption of the GOP, the impossibility of winning any Republican buy-in by embracing obviously less reliable (and underfunded) "market" solutions.

4. A strong public option (call it Medicare at Will) would either cause employer insurance to wither on the vine or subject it to effective rate control:
  • If everyone has access to affordable public insurance paying (adjusted) Medicare rates to providers, any private alternatives will have to pay competitive rates to survive. 
  • The Medicare for America bill, which offers a revamped/expanded "Medicare" to all who want it, explicitly stipulates that providers who accept Medicare must accept Medicare rates from commercial providers. 
  • Kamala Harris's plan faintly outlines an alternative: employer plans paid like Medicare Advantage plans, on a (presumably) capitated basis tethered to Medicare rates.
5. Our healthcare industries are too large a proportion of the entire economy, too powerful, and too dependent on commercial payers to pull the plug all at once in a swift transition to single payer. A strong public option would enable the system to adapt organically. 

6. Strong antitrust enforcement and disincentives for vertical integration are also vital cost control measures.

Update, 9/28: The hypothesis roughed out above can be compressed into a sort of theorem underpinning  the "Medicare for all who want it" reform model:

1. Employer insurance is deteriorating because employers (through insurance intermediaries) lack pricing power.
2. The "competition" needed to endow them with that power is a strong public option paying government-imposed rates
3. Once such a public option establishes de facto all-payer rates, we have space to determine whether private insurance adds any value
4. Under those revamped market conditions, we can afford to be agnostic as to whether private insurance survives or dies.

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