Though I still think individuals paying for their own healthcare (rather than employers) will improve healthcare service/costs, I'm going to walk back my assertion that it can result in significant cost savings. If health insurance companies were not able to do this, and it is in their interest to cut costs and save the difference between the premium charged and the services paid for, it will be hard for individuals who are not clued in to do that. Auto insurance is a case in point. There's still a lot of "fat" in repairs even though individuals pay for their own coverage. Since the payment goes through the insurance company (and is usually a lot bigger than the deductible), individuals don't often question costs.
Dr. Ezekiel Emanuel
, architect of the Affordable Care Act (ACA), says ACA will eventually end a majority of employer health care plans.
The "cadillac tax", which taxes high end health care plans, along with subsidies available to individual buyers will mean that an individual can get the same care for less money than the employer offers.
One can see a strong push for employers dropping coverage in Oregon approved rates
. The exact same plan costs more for an employer to buy than an individual--and that's before a subsidy the individual is eligible for but the employer is not.
A single 60 year old
will pay $352/mo for the Moda bronze plan. By contrast a small business
will pay $487/mo for that same individual for the Moda bronze plan. The math is pretty clear. The business pays $135 more per month ($1,620 more per year) for the same care for the same individual. The individual can get it a lot cheaper and may be eligible for a government subsidy to boot.
Won't the employer mandate penalties at $2,000 per employee be a major hedge against companies dropping health care? No. Because employers pay on average $5,884 for individual coverage and $16,351 for family coverage
. A business could save $3,884 per single employee and $14,351 per employee with a family even paying the $2,000 penalty. An employer could then give the difference directly to the employee as Walgreens
Walgreens will stop offering health insurance directly to its
workers in 2014, instead shifting them to policies in a private
insurance exchange, the company announced Wednesday.
Walgreens will subsidize the cost of the policies, and more than 160,000 workers will be affected
. . .
will contribute the same total share to health care benefits next year
as is did this year, though it is not disclosing the size of the
. . .
company's tab for health care costs for next year remained essentially
flat, allowing it to keep its contribution to workers level, he said. In
future years, the company's intention is to continue picking up the
same share of the cost as it does today, [Walgreens spokesman Michael] Polzin said.
sees a win for employer and employee as employers "pay the penalty, give workers a raise and shed the burden of providing coverage by sending workers to the public exchanges."
There's are other positive aspects of employers dropping and individuals assuming health care coverage.
First, losing your employment would not automatically mean a loss of health care coverage (or an eventual loss of coverage after COBRA benefits end).
Second, there is a better chance of holding health care costs down when the individual is involved in paying for actual benefits received.
Health care costs have been growing at an alarming rate
. That is due in part because the buyers are not the same as the users. The employer pays, and the employee never sees the money and does not usually know how much is spent on his behalf for the health care coverage.
On the other end, when the employee goes to the doctor, dentist or hospital, he almost never sees the itemized bill. So, most people have no idea when they are being overcharged
for care*. There's no challenge to huge mark ups for even simple items like tylenol
This will change as the patient becomes the payer and sees what he is actually asked to spend (especially with higher deductibles in the new plans). Even though ACA has not lowered premiums by the promised $2,500/year, the patient as buyer could actually impact that in the future.
As noted in a previous post
, employer costs are rising at a precipitous rate. Family care rates have almost tripled since 1999 (a rise of 280%), and individual rates have multiplied over 250%. The inflation rate
for the same period was about 40%.
I'm betting that most employees have no idea of extreme rise in costs. But, they will have a better idea when they buy their own insurance.
Third, American businesses were being pushed into an untenable situation. What started as a $42 and $111 per week health care benefit is now a $113 to $314 a week benefit for each employee for coverage the employee can get cheaper on his own.
These changes to individual health care coverage were bound to come anyway. The ACA has increased the speed of the process by forcing individuals and businesses to consider alternatives to the current way of buying health care coverage.
*Do you know how much hospice care
actually charges for their help? I just visited friends yesterday who are in an assisted living/care center. The husband is on hospice as well as receiving the constant care given at the center. Earlier this week hospice came and clipped his toe nails. Then yesterday they came and shaved him. That was it. According to the home visit costs linked above, those two services would have cost in the neighborhood of $146.63 each in 2010. How much more in 2014?
H/T Byron York