Borrowing a phrase from Mark Twain, Robert Galvin says reports of the death of employer-sponsored insurance have been greatly exaggerated.
“I don’t think employee-sponsored insurance will die. I don’t see it,” Galvin said, during his keynote address last week at the National Business Coalition on Health’s annual conference in Washington, D.C. Galvin, an M.D. and CEO of Equity Healthcare, noted that while the Patient Protection and Affordable Care Act offered employers an “exit option” from providing health coverage, for many employers it’s more of an “exit fantasy.” In 2014, when health care exchanges exist in every state, employers could in theory stop sponsoring health insurance, but most wouldn’t be able to even if they wanted.
“Turns out,” Galvin said, “the government wrote a pretty smart bill,” because “the government doesn’t want employer-sponsored insurance to go away … Someone’s got to pay for this.”
He added that even for employers who are tempted to pay per-employee penalties rather than provide health insurance, “the math really doesn’t work out. They [employers] found out that you can’t split the workforce. That’s a discrimination issue.”
He recounted talking to one company’s executives who were very excited to shed their health care costs by dropping employee coverage and sending workers to purchase care in state exchanges. “You know,” Galvin recalled telling them, “you can do this, but you’d have to go to the exchange, too. You can’t split the workforce.”
The CFO blanched and said to Galvin, “Me? On a public exchange?”
Granted, there will be some companies that shed coverage, Galvin said, citing widely varying estimates of how many would do so, from as few as 5% to as many as 30%. Galvin thinks those most likely to keep offering health care benefits are employers that:
* Are in sectors with high labor competition.
* Have strong cultural (or CEO) beliefs in health as a business strategy.
* Are in the health care industry.
As employers make their pay-or-play considerations, Galvin advised against a shift to full defined-contribution health care.
“The argument, of course, is [that’s] what we did with retirement,” he said. “I think those are very different. You don’t feel the consequences of [retirement benefits] until the person [isn’t] working for you anymore. What’s going to happen with health care is going to impact your employees today. It’s not only going to be labor competitiveness; it’s going to be awful stories about people in your workforce not being able to afford health care, kids being sick, etc. So, I think that the saying that ‘We did it in retirement, we’re going to do it for health care’ is a shaky argument.”
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