Recent Rise In Health Coverage Due To Return of Jobs With Benefits
(A version of this Health Alert was published by Forbes.)
The best measurement of people who lack health insurance, the National Health Interview Survey published by the Centers for Disease Control and Prevention (CDC), has released early estimates of health insurance for all fifty states and the District of Columbia in the first quarter of 2016. There are three things to note.
First: 70.2 percent of residents, age 18 to through 64, had “private health insurance” (at the time of the interview) in the first quarter of this year, which is which is the same rate as persisted until 2006. Obamacare has not achieved a breakthrough in coverage. It has just restored us to where we were a decade ago. Further, the contribution of Obamacare’s exchanges to this is almost trivial, covering only four million people.
What has really happened is a restoration of employer-based benefits as we have slowly clawed our way out of recession: 61.2 million people had non-exchange private insurance in Q1 2010. This included both employer-based benefits and the pre-Obamacare market for individual health insurance. By Q1 2016, this had increased to 66 million. Because most in the pre-Obamacare individual market have shifted into Obamacare exchange coverage, the increase in employer-based coverage will have been close to eight or nine million.
Second: There has been a significant change from private coverage to government welfare (primarily Medicaid). The shift has been about five percentage points since 2006, and ten percentage points since 1997. Critics of Obamacare who focus on its increasing the proportion of people dependent on Medicaid (a welfare program) ignore the great expansion of Medicaid dependency years before anyone had heard of Barack Obama.
Third: There is a significant discrepancy between the four million Obamacare beneficiaries estimated by the NHIS and estimates produced by the U.S. Department of Health & Human Services and the Congressional Budget Office, which estimate about 11 million Obamacare beneficiaries.
The most plausible explanation for the discrepancy is the NHIS’ four million are those who have Obamacare exchange coverage at the time of the interview, whereas the other estimates likely estimate those who have Obamacare exchange coverage at any point in the year.
Obamacare policies are unpopular: Enrollment peaks in the third quarter and there is a significant drop off in the fourth quarter. People want jobs with benefits, not Obamacare, which has mostly served to fragment health coverage even more, rather than actually expand coverage.
John writes, “People want jobs with benefits.”
This is just propaganda that John writes to promote employer-based health insurance. John thinks that parents want some uninformed employer choosing the health insurance on their children, pathetic.
What is more accurate is that employees going to Open Enrollment this month at their jobs cannot switch to Individual Medical because this month is not in Open Enrollment for this coverage. So employees are trapped into purchasing over-priced employer-based health insurance like slaves.
John refuses to write about this like all of the media.
We don’t want freedom of choice in America, the land of government created monopolies.
You know perfectly well I and NCPA have always supported individuals buying their own health insurance, which is the reason for the tax reform we have supported for decades: So people get the same tax preference whether they buy their own policy or take their employers.
The reality is people value employer-based benefits. If they did not the status quo would not persist.
People value Employer based benefits because they are subsided by the tax payers. Why doesn’t the NCPA realizes that subsidizing insurance will not help control the costs?
The tax reform that you are talking about I will admit is a better program than our current system but it is also more burdensome to the tax payer and will do nothing to help control costs. The NCPA wants a free market that is subsidized by tax payers.
guess I have never heard of a subsidized free market before.
we would be better off with the Hildabeast Government program and just get rid of the insurance companies.
I agree we need far less health insurance. If you have a proposal to remove all government preference for health consumption versus other consumption, I wish you good luck getting it legislated. In the same way, if you have a proposal to remove all government preference for home ownership, I wish you similar good luck.
So are you saying that its not political correct to do the right thing? Maybe Gruber was right when he said the American Public is just to stupid.
I’m sorry but I still cant see how subsidizing a market will make it a free market.
I would think a better phrase would be it is not politically expedient. No politician can expect to gain points from telling people they should pay tax on the health coverage they receive through work. If you really want to discourage over-insurance, tax it directly while allowing a tax deduction for HSAs.
It’s not politically expedient to do the right thing.
That is just nonsense. It’s been my experience that intelligent people will make intelligent decisions if they are provided all necessary information. The NCPA has our countries best and brightest scholars on health care policy. Now theses scholars in one blog post are saying it’s not politically expedient to tell the truth.
Reading the blog posts shows how disconnected the public is from understanding the real problem with our healthcare system.
Look what Bart stated: “Most people who have jobs with decent employer coverage wouldn’t qualify for a subsidy on the exchanges or at least very little subsidy”
The disconnection is “decent” there is no such thing as a decent employer sponsored plan. That plan is subsidized by the tax payers, the greater the benefits the greater the subsidy.
Please name one other county in the world who funds there countries healthcare system through employers?
Then John states: “You know perfectly well I and NCPA have always supported individuals buying their own health insurance, which is the reason for the tax reform we have supported for decades: So people get the same tax preference whether they buy their own policy or take their employers. The reality is people value employer-based benefits. If they did not the status quo would not persist”.
The disconnection is people value employer-based benefits.
People have no idea what benefits they are actually receiving and the true costs of the benefits. Would people still value the benefits if they were shown the true costs?
Yet another disconnection is: You know perfectly well I and NCPA have always supported individuals buying their own health insurance, which is the reason for the tax reform we have supported for decades
The disconnect is tax reform. The NCPA feels we can control the inflation of healthcare by giving more subsidies. The main reason for the outrageous inflation in healthcare is because healthcare is funded primarily through a third party insurance payers that is subsidized by tax payers and giving more tax payers subsides to individuals to mirror employer based benefits will somehow slow healthcare inflation.
John also states: “I agree we need far less health insurance. If you have a proposal to remove all government preference for health consumption versus other consumption, I wish you good luck getting it legislated”
I have not seen one politician ever talk intelligently about Health Insurance and how it interacts with health care. I am left to assume that the individuals advising the politicians are doing a horrible job of educating the politicians on the true problems.
Reading statements like this certainly shows an understanding of the problem but a lack of willingness to tell the truth because it would not be politically beneficial.
John you asked for a proposal. Here is a start. If we are going to subsides Healthcare then we need to cut out the middle man out and come as close to a free market as we can.
The tax payers subsidizes the individual by simply putting $100,000 in a Healthcare Account at Birth.
How an average individual would see there account grow over an average life time. Take into account a Guarantee rate of return of say 2% and instead of a Medicare payroll tax keep the same tax for the Healthcare account. Medicare, Medicaid and Insurance are phased out over the next 75 Years. Tom Price has Age based tax Credits so let’s compare his plan. Over 75 years Tom Prices plan would cost tax payers $143,100
$900 per child to age 18 $900 x 18 =$16,200
$1,200 age 18 to 35 $1,200 x 17 = $20,400
$2,100 age 35 to 50 $2,100 x 15 = $31,500
$3,000 for age 50+ $3,000 x 25 = $75,000
Now my proposal
0 to 75 Average Expenses Medical Estimate $196,000
Age 0 to 1 average $3,400 $3400 x 1= $3400
Age 1 to 5 average annual costs $2,500 $2,500 x4 = $10,000
Age 6 to 40 average annual costs $1,400 $1,400 x 40 = $47,600
Age 40 to 50 average annual costs $2,500 $2500 x 10 = $25,000
Age 50 to 60 average annual costs $3500 $35,00 x 10 = $35,000
Age 60 to 75 average annual costs $5000 $5,000 x 15 = $75,000
$100,000 placed into a Healthcare Account at birth with a 2% yearly growth. With the above per year deductions and the Current Medicare tax starting at age 25 to age 70 and assuming the average person will pay about $65,000 in Medicare payroll tax over the 50 year period.
Year 1 Account value $100,000 – $3400 + 2% = $98,532
Year 5 Account value $96,000
Year 10 Account value $100,000
Year 25 Account value $112,000
Year 40 Account value $180,000
Year 50 Account value $200,000
Year 60 Account value $205,000
Year 75 Account value $205,000
Funds may only be used for healthcare during one’s life time. Upon Death funds if any are split between Healthcare Industry, federal government and dependents on a 25%/25%/50% bases. This will give incentives for the medical community to not over charge and put some cash back into the federal government and also give incentives to individuals to be more cost sensitive to expenses.
This eliminates all Health Insurance, Medicare, Medicaid and helps solve the problem with funding long term care for the next generation.
Radical changes like this are the only way we can fix the problem.
What Lee and others are missing is that effectively only higher-cost employees are subsidized relative to individually purchased and -underwritten insurance. A healthy 30-year old is not going to be economically better off with a tax-subsidized, employer-sponsored plan than with an equivalent pre-ACA underwritten plan. The benefit of the employer tax exclusion flows mostly to higher-cost employees.
It may not be the system any one of us would have designed from scratch, but I’d like to see an alternative in place before destroying it.
Economic research suggests they are not as subsidized as initially appears. The adjustment happens through wages. For example, part of the wage differential between men and women is to compensate for mandatory maternity benefits in health insurance.
Wage adjustment no doubt dilutes the effect, but when combined state and federal marginal tax rates are over 50 percent, there’s a lot of room for slop.
I would expect hiring managers in large companies to be more concerned with the ledger cost to their departments of the benefits being offered– which are leveled-out by law– than by actual self-funded cost to the company. And for small businesses that actually purchase insurance, the cost differentials are even more strongly hidden (except for age-banding).
But even if the wage-compensation dilutes the effective subsidy to high-cost employees by half, this only suggests that an equivalent tax credit can be much smaller than 50% of premium, if coverage is not part of employee compensation.
John, do you think that people who purchase Individual Medical prefer not getting the same tax dodge?
I’m glad you say you support equal treatment under the law and maybe you should always say that when you write your posts instead of saying, “People want jobs with benefits.”
In truth John, people Value a bigger tax dodge – admit it.
Are you aware there was a presidential election in 2008 in which a candidate named John McCain proposed giving every American a refundable tax credit to pay for medical care?
Barack Obama creamed him for proposing to tax employer-based benefits. More people would have benefited from McCain’s proposal. They prefer the status quo.
Well its official!!!
The Only Individual health insurance company still selling insurance in 2017 in the state of nebraska just got its rate increase approval .
Remember this November 8th
Rates are going up 42.31%
Blue Cross and Blue Shield of Nebraska 29678 IND BCBSNE NetworkBlue – Individual – 29678NE110 05/04/2016 34.90% 01/01/2017 42.31% Review Complete
I was talking to a reporter a while back and he remarked that the implosion of the exchange plans has made job-based benefits even more valuable to employees. Everyone (including me) thought the exchanges would lead to the erosion of employer coverage since workers would have somewhere else to get health insurance. With the high costs in the exchange, that’s no longer true.
Yes, and I fear that will make it even harder to get the tax reform we need to subsidize the playing field between employer-based and individually owned health insurance. Obamacare has poisoned the well.
John, are you talking about pre-ACA individually underwritten insurance or the off-exchange individual plans that exist today?
If today, I agree there should be at least a move in the direction of tax parity with employer plans, since the two types of plans are more similar than in the past. Short-term medical or similar mini-plans excluded, of course.
Most people who have jobs with decent employer coverage wouldn’t qualify for a subsidy on the exchanges, or at least very little subsidy. If they preferred their employer plans over comparatively cheap pre-ACA individual plans, it’s a cinch they aren’t going to be interested in community-rated Obamacare exchange plans.
“Most people who have jobs with decent employer coverage wouldn’t qualify for a subsidy on the exchanges”
Bart, I think this is the main reason for the interest in so-called private exchanges. As I understood it, the idea is to form exchanges for employer-sponsored groups and their membership.
The media aren’t paying much attention to private exchanges, but they’re there:
https://www.conference-board.org/conferences/conferencedetail.cfm?conferenceid=2805
http://liazon.com/what-does-the-future-hold-for-private-exchanges-liazons-ceo-weighs-in-at-ebns-private-healthcare-exchanges-conference/
There are roughly 170 million Americans who have employer-sponsored medical coverage, and I doubt their interests can be ignored with any success.
John F. — My understanding is that the adoption rate for private exchanges is slower than expected. The concept supposedly was to provide employees with more choice of plans from either one carrier or multiple carriers and stabilize the employer’s health insurance / healthcare cost by providing a defined contribution toward the premium which would be sufficient or almost sufficient to cover the premium for the least expensive plan. That, of course, exposes employees to potentially more rapid growth in their own contribution toward the premium in future years assuming the employer contribution rises only about in line with general inflation at best.
The other potential negative factor for employers is that if they were self-funded previously and the exchange plans are full risk policies, their costs could increase by 6%-10% in the short run. If all or virtually all employees have to participate for insurers to offer community rated premiums, the healthiest employees would presumably choose the least expensive plan, probably an HMO, in disproportionate numbers while the less healthy folks choose the more comprehensive plans.
If that happens, the premiums for the more generous plans are likely to rise significantly faster than general inflation in the future. In the end, the private exchange concept could easily prove to be highly unpopular with those employees who need the insurance the most because either they or a family member(s) or both have above average healthcare costs.
Barry I agree the private exchanges haven’t caught fire like for example, high-deductible plans did. But they are still out there.
As to potential drawbacks of private exchanges, I would say private and public exchanges share similar fundamental problems and how such exchanges will fare in the future is an open question. Two specifics:
(1). The risk of uncertain future subsidies applies for the government exchanges, too. There’s no guarantee that government subsidies will keep up with the rising cost of coverage, driven as that is by the rising cost of medical care. Open question, in my opinion.
(2). It’s my understanding that the private exchanges accommodate self-funded plans. Is that largely because big employers continue to express some interest in them and big employers are mostly self-funded? To the extent that may be so, is it logical to suppose an insured HMO would be the least-expensive option in the exchange? Open questions, in my opinion.
(In fact, I’ve seen several annual employer open enrollments in which an HMO was just about the most expensive option – in part because the HMO offered richer benefits, and in part because its richer benefits drew a less-healthy population.)
John, I don’t see the connection. Wouldn’t private exchanges for employer groups be just a refinement of the employer-sponsored model, with the same tax treatment (and HIPAA regulations)?
I think employer-oriented private exchanges would appeal mostly to small businesses, who generally aren’t self-funded and are less able to offer cafeteria plans on their own. In fact wasn’t that really the intent?
Lee B. writes: “I’m sorry but I still cant see how subsidizing a market will make it a free market.”
Taking into account reality is a most important consideration. If one reads Milton Friedman or Hayek one notices that both recognize that sometimes a completely free market approach is impossible. When criticized for agreeing with something that wasn’t completely free Friedman responded that he did so because the benefits were so great and the harm so little. Hayek said that if it is absolutely necessary government might act, but should use methods that least interferes with the free market.
As others have said, one ought not to let the perfect interfere with the good.
[…] In 2016, the average tax credit (for the 85 percent of enrollees who receive tax credits) was $3,480, but it was still not enough to prevent almost half the eligible people from signing up. The Administration expects fewer than 14 million people to enroll in Obamacare plans next year. Recall that is the total number of people who sign up during the year. The number who actually stay in an Obamacare for the full year is much less – about four million. […]