Large Firms Push for Health Coverage Changes

December 6, 2007 (PLANSPONSOR.COM) - While employer groups are readying for a lobbying campaign to change the U.S. system of employer-based health coverage, there is little evidence of a mass exodus of large companies abandoning their policies, a new study found.

However, a news release from the Employee Benefit Research Institute (EBRI) said the group’s research found that might change depending on market conditions.If one large company took the plunge to no longer offer health benefits, EBRI found, the employer’s counterparts might well follow suit for competitive reasons.

According to the study, big companies could also change course if:

  • the employer health benefit tax deduction is dropped,
  • there is a movement to universal health coverage,
  • there is erosion in the federal pre-emption of state regulation of health benefits.

“Many individual employers believe there is a business case for offering health benefits to their workers and they continue to invest substantial amounts of money in their health programs,” wrote study author Paul Fronstin, Director of the EBRI Health Research and Education program. “They also tend to agree that if one major employer were to drop health benefits, others would follow.”

According to the announcement, the study also found that:

  • The percentage of workers reporting they have access to health benefits through their job is largely unchanged from the mid-1990s and down only slightly from the late 1980s. In 2005, 74% of workers who were not self-employed reported they were eligible for workplace health benefits, up slightly from 73.6% in 1995.
  • Take-up rates for employment-based health benefits have fallen from nearly 88% in 1988 to 83.5% in 2005 among workers with employer benefits, but fewer than 5% of workers eligible for health benefits are uninsured.Between 1994 and 2000, the percentage of workers with employer health benefits held steady at between 73% and 75%.
  • Since 2000, the percentage of workers with health benefits has fallen to about 71%. The percentage of small employers offering health benefits in 2007 was about the same as it was in 1996, though it expanded between the mid-1990s and 2000, before declining through 2005.
  • Premiums for employee-only coverage increased by 86%, and the average deductible among workers with employee-only coverage in a preferred provider organization (PPO) jumped 75% from 2000 to 2006 (while the consumer price index was up 17%). However, workers’ out-of-pocket costs as a share of total spending have fallen: By 2005, out-of-pocket spending as a percentage of total consumer spending had declined to 26%, down from more than 30% in the mid-1990s.

The EBRI report said a number of employer organizations are positioning themselves for a health care debate tied to a new presidency in 2009. The groups include the HR Policy Association, representing the chief human resource officers in the largest U.S. corporations; the Committee for Economic Development, an organization of business leaders and educators; and the ERISA Industry Committee.

The study also noted that the Business Roundtable and the National Federation of Independent Business have joined with AARP and the Service Employees International Union to urge change.

"An evaluation of recent data does not suggest that the end of employment-based health benefits is upon us," Fronstin asserted in the EBRI announcement. "However, the message from some associations representing employers is that the existing employment-based system must be reformed because the status quo is unsustainable. Some individual employers, including leaders in the field, appear to share this new vision."

A Tipping Point

According to the researcher, the organizations' proposals are noteworthy because all "have a common message that employers have reached a tipping point with health benefits and are either proposing alternatives to the status quo or are on the verge of releasing such a proposal."

While the impetus for change appears to be growing - particularly in the larger end of the market - there continues to be support among sizable companies for the notion that they have a vested interest in continuing their health policies.

Ten large employers interviewed for the EBRI study (with 18,000 to more than 200,000 employees) "think that health benefits have a positive impact on the bottom line through wellness, disease management, and worker productivity" and believe that "making health care more affordable for both employees and employers is a top business priority," Fronstin reported.

Meanwhile, according to EBRI, there appears to be little question that employers have already reached the tipping point for retiree health coverage. Only 13% of private-sector establishments offered health benefits to early retirees in 2005, down from 22% in 1997. The major reason for the change was an accounting rule that required employers to report retiree health liabilities on their balance sheets, EBRI said.

More information about the study is here .