Just How Secure Is Your Employer-Based Health Insurance?

Last week, the Economic Policy Institute released a disturbing report revealing just how many white-collar workers have lost their employer-based health insurance in recent years -- even though they didn't change jobs.

Many workers believe that if they hold onto their job, their insurance is safe. Professionals with jobs near the top of the occupational ladder are especially likely to assume that their employer is not going to cut their coverage. That may well have been true in the 1990s, when the job market was tight -- but not today.

The EPI report shows that in just the first six years of this century, the share of U.S. workers with employer-provided health insurance (EPHI) fell from 51.1 percent to 48.8 percent. Moreover, workers in white-collar occupations -- including executives, managers and workers in professional specialties -- were just as likely as blue-collar workers to lose their safety net.

Perhaps this shouldn't come as a surprise, since employers typically pay a much larger share of premiums for higher-income employees. So as insurance premiums soar (up 78 percent since 2001), employers are beginning to chafe under the very costly burden of providing first-class benefits to white-collar employees. (Insurance premiums rose "only" 6.1 percent in 2007, but going forward, experts expect sharper increases because the cost of medical technology continues to skyrocket).

Most employers will just shift more costs to employees in the form of higher co-pays and deductibles. But some will decide that they cannot continue to offer insurance.

"No one is immune to the slow unraveling of the employer-based health insurance system," warns Heidi Shierholz, EPI economist and co-author, with Jared Bernstein, of the report "A Decade of Decline: The Erosion of Employer-Provided Health Care in the United States and California, 1995-2006."

"This dramatic loss of employer-provided health insurance since 2000 is not simply driven by the loss of high-quality jobs, such as those in the manufacturing sector," the report observes. "Rather, it is caused by the significant decline in employers providing coverage within existing jobs across the board. The burden of these employer cuts is not carried by part-time or marginal workers. Rather, the most dramatic loss is among workers with the strongest connection to the labor force."

Note, for example, the startling declines, from 2000 to 2006, in the share of workers covered by EPHI as shown in the bottom half of the table below (click for larger version). At the top of the job ladder, in the first three occupations listed, the percentage of executives, professionals and technicians with employer-based coverage fell by over 3 percent to 5.6 percent.

The top half of the table below shows what percentage of workers are employed in various occupations; the bottom half reveals what percentage in each occupation have employer-provided health insurance.

Click below to view larger table.

Drilling a little deeper, the bottom half of the table below tells you more about the people who lost their insurance. For example, from 1995 to 2006, workers with a college degree were just as likely to lose their EPHI as those who didn't have a degree. Meanwhile, from 2000-2006 the share of 45- to 54-year-old workers with EPHI -- which includes many people who are most likely to need health care -- fell by a fat 4 percent. (The small dip in the share of those over 55 with employer-based insurance is due to the fact that many people in this age group retire or partially retire, the report explains).


"EPHI is disappearing across the entire age and education spectrum, including prime-age workers and those with college degrees," the report's authors note. "These findings show that health insecurity is now a broadly shared American experience.

"As a consequence," they say, "the solution requires a broadly shared approach. The erosion of the employer-based system, with losses accumulating in even high-end sectors, along with the critical need to control healthcare costs, indicates that the provision of coverage needs to be at least partly 'taken out of the market.'"

As employers back out of the benefits business, individuals who try to get insurance on their own will discover just how expensive it is. Rates vary by state, but family coverage in a state like Virginia can cost as much as $24,000 a year.

This is why, in the very near future, "we will need 'universal programs 'that pool risk across large populations," Bernstein and Shierholz advise. Anyone who doesn't have EPHI (or doesn't like/cannot afford the EPHI that they have) could join these groups. In addition, if universal insurance is going to cover everyone at an affordable price -- even if they are sick -- the authors conclude that we will have to "mandate coverage, with subsidies for those unable to meet the mandate."

Although an individual mandate requiring that everyone join an insurance pool is not a popular concept, the report's authors are correct. Note that they are economists -- not politicians. And while economists can be dreary, the nice thing is that they are not worried about whether you will vote for them. And therefore, rather than telling people what they want to hear, they tend to address the reality of the numbers. Even better, these are excellent economists (I know Bernstein). So, not only are they confronting the numbers, they truly understand the numbers.

Unless a mandate requires that everyone have insurance, some young, healthy people would wait until they became sick to join a pool, expecting people who had been paying premiums into that program for years to now cover them. If that happened, ultimately only the sick and the elderly would buy insurance -- and prices would levitate to a point that virtually no one could afford it. If we are going to have a mandate, however, we have to provide adequate subsidies on a sliding scale for those who cannot afford the coverage.

How do we do that? This brings me back to the "basics" of healthcare spending, a series that I've been doing over the past few months, showing where our healthcare dollars are going -- and where we might pare waste, while pushing back against healthcare manufacturers who are gouging America.

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