Here’s $5,000. Go buy your own health insurance.
Get ready to hear those words, or words like them, as we approach the final throes of employer-based group health insurance.
Fed up with escalating costs, whining workers and the possibility of getting sued by hustle-buck malpractice lawyers, many U.S. companies are weighing a decision to get out of the health insurance business.
Several already have, according to a front-page story in The Wall Street Journal last week.
Companies like Xerox Corp. have switched to the so-called defined-contribution method. The company gives a fixed monetary amount to every employee every year and lets the employee buy his or her health insurance. If the employee wants high-priced coverage, he or she pays the difference out of his or her pocket. If the employee opts for a bare-bones policy, he or she might have nothing to pay. And if the company voucher more than covers the premium, workers can apply the balance to some other benefit, such as dental or vision insurance.
Sounds great. Especially that freedom of choice.
But don’t you believe it.
For obvious reasons defined-contribution plans will be great for employers. No longer will corporate personnel officers have to run interference for employees trying to get referral slips from balky managed-care plans. If an employee chooses a bad plan or hooks up with Dr. Wrong, it’s their problem, not the firm’s. And if Congress, as many expect, soon passes a law to let patients sue health-insurance plans, defined-contribution companies will be fully insulated.
Defined contribution also will be good for young, spry workers with no problems at home. They’ll be sought after by insurance companies as good risks. Their premiums will be low.
The rest of us might not fare so well. Old workers with nagging-but-treatable aches and pains, workers with chronic conditions like diabetes or asthma, workers with an epileptic child at home–they’ll likely have problems.
America’s system of employer-based group health insurance, for all its troubles, has a communal logic to it. A typical large company is a random mix of the strapping young and the creaky middle-aged. An unfortunate few will encounter serious health problems–AIDS, say, or multiple sclerosis–and their treatments will consume an outsize portion of the costs incurred by the entire group. Risk-pooling is the basic theory of group insurance.
But these are not communal times. Choice, not mutuality, is the mantra of the Internet Age. Those who are able want to deal direct to get the best deal. Those who aren’t are on their own. Perhaps the government will create a subsidized high-risk pool for the actuarially unwanted. Perhaps it won’t.
Obviously the big corporations, as they move toward defined contribution, won’t pitch it as survival of the fittest. They’ll talk about choice and flexibility, about the ease of comparative shopping on the Internet, about the need to treat all employees equally. (Everybody gets the same voucher, see.)
Out on the campaign trail, candidate Bill Bradley already is proposing a federally funded voucher system that would enable lower-wage workers to leave their group plans and select from the menu of insurance options available to federal employees.
In Congress, Rep. Bill Thomas, the key Republican on health care, is talking about making defined contribution (read: vouchers) the watchword of future Medicare reform.
So it’s coming. Not soon but inevitably.
The good news is that the defined contribution era will not last that long.
The new system will only make worse the biggest problem of the old system: the 44 million Americans, most of them in working families, who don’t have any insurance. It turns out that Bill and Hillary Clinton had it about right back in 1993. The employer-based system does not work for everyone when some employers insure and others do not. It needs to be mandatory, like Social Security and unemployment insurance. But Congress will never pass an employer mandate because too many small businesses, and tight-fisted big ones, would rather let somebody else–the taxpayers, United Way, the hospitals–pay for their workers’ health care.
Here’s how it will play out: Once defined contribution catches on, once millions of high-risk families find their voucher doesn’t come close to their risk-adjusted premium, once the number of uninsured shoots past 50 million on the way to 80 million, there will be a political revolution in health insurance.
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The employer-based system will be scrapped and we will all (repeat, all) go on Medicare, though it will be called something snappier like “AmeriCare.”
The new system will be universal, comprehensive and all the other good things promised by longtime proponents of a single-payer system. Dr. Quentin Young, chairman of the Chicago-based Health and Medicine Policy Research Group, will be pleased.
But it also will be very, very expensive, because the president and Congress, who will run it, will want to give the American people what they want. And when it comes to health care, there is no limit to what the Viagra Nation wants.
So there you have it. You’ve been forewarned.
When your company announces its new, “flexible” health-insurance plan, be neither jubilant nor fearful.
It’s just the last stumble in our blind march toward national health insurance.
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