Why Employers Should Get Out of the Health Care Business
No, this is not a reason for Medicare for All
Every election cycle, health care is always a topic of conversation. Republicans say that Obamacare was a failure but generally are scant on the details of a new plan. Democrats say that Obamacare was a success but want to replace it with Medicare for All. Yes, I know Joe Biden said he was not in favor of Medicare For All, but by expanding the public option (Medicare), we will get there. It will just take longer.
I am not here to shake my fist at the sky and say Washington needs to get their act together; instead, I am putting this piece out to share an idea I have spent a fair amount of time thinking through and that I have shared with people in the medical field to get feedback for refinement.
Let’s see if my plan will end me on talk shows or just another idea lost in the ether.
What is wrong with the current/proposed systems?
Lack of Options
I think one of the most significant issues with our current healthcare system is the lack of options. If your employer offers you insurance, your options are the plans they offer.
If you don’t get care through an employer, you can go through the health insurance exchanges and either select a private insurance company or sign-up with Medicaid (government-sponsored healthcare for people with limited resources).
Depending on your financial circumstances, getting a private insurance plan through one of these exchanges can be quite expensive. But it makes sense. If company XYZ has 10,000 employees, they can spread the risk, aka cost, among more people and offer a lower rate per person. But if you are self-employed or a small-business, it is much harder to spread that cost, so you will have to pay a higher premium per person.
Benefits Large Corporations
The current system benefits large companies in two main ways. One, Stifling smaller competition by increasing operating expenses. Two, pocketing the extra money when employees don’t exercise the benefit.
Offering health insurance to all employees is easier for larger, more established companies. It is more expensive in total for them, but on a per employee basis does not have the same impact. They are able to get bulk pricing that smaller start-ups are not able to enjoy. You will also see that large companies will be quick to support legislation that requires employers to offer health-insurance to all employees. This allows them to score a PR win for being progressive on employee benefits, while also crushing small business.
Many companies list providing healthcare as an employee perk, but they don’t dive into the details of how much that is costing them. I think I found out the reason why.
It is, so they don’t have to increase your pay if you decide not to exercise the coverage. For example, my wife and I are offered insurance through our jobs. Her plan is better than the one I get through my work, so we were thinking of switching. When I switch, I would have to pay an additional premium to be covered on her plan, where does that money come from?
You would think if my employer was offering me health insurance, I would get a little bump in pay since I am no longer taking advantage of their plan, and I could move it over to my wife’s? Wrong. The company is essentially able to pocket this expense and most employees don’t bat an eye, because the cost is pretty hidden from us.
Limits Employee Mobility
This is something you don’t often hear about, but having employers be the center of our healthcare system also hurts the job market.
Imagine you were offered a position at a startup. You were offered a lot of equity and a decent salary but no health insurance. If you had a family reliant on your health insurance, you might pass up that opportunity. Why? Because not only do you rely on your employer for income but health coverage as well.
Or another scenario, you have saved up a lot of money and you and your spouse want to start a small business. Instead of having continuity of plan by just paying out of pocket, you will have to go through one of these exchanges and potentially lose the coverage you had.
The larger a company gets, the more they can spread out these costs and slowly tighten the golden-handcuffs on their employees and stifle any new competition, not through innovation but through accounting.
I didn’t come up with this solution out of thin air, I just copied another example that is eerily similar, car insurance.
To drive a car in the US you are required to have car insurance, except in New Hampshire and Virginia. I also think individuals should be required to have health insurance. This will make sure everyone is paying into the system and will avoid situations where someone is receiving care without ever paying in and then either getting stuck with a huge bill or having that bill passed onto other people who have paid.
However, there will be no public option. Meaning the federal or state government will not be able to offer a plan. Instead, the federal government can offer a stipend, similar to how they do now for individuals below a certain income status.
Step 1: everyone has coverage, now the question is how will it be paid for?
So, I still think employers will make providing healthcare a perk, but instead of locking employees into their plans, they can offer them a stipend for coverage. They can offer plans that they have been able to secure at lower rates, because of bulk-pricing, but the employees are not required to exercise this option.
This now gives the employee choice and transparency. So if they want to switch to their spouse’s plan they have money to pull from, if they want to get insurance from a provider that neither of their companies offers they can do that as well.
This will also help avoid interruption in care if either of them loses employment. They would simply continue paying for their plan like any other month. If they were on an employer discounted plan they will still have the option to pay for that plan, minus the employer pricing.
New Companies, New Ideas
I think my approach would lead to a massive boom in innovation in the healthcare space. Now with a massive supply of potential customers, insurance companies will be forced to come up with innovative ideas to improve customer care as well as drive down costs.
An example I could see playing out is an insurance company that is highly focused on preventive care. They will require their members to participate in frequent testing and health data tracking to help their customers avoid any preventive medical conditions. This company would outspend current companies in preventive care but radically underspend in costly medical procedures.
The advent of new companies in this space will also challenge quasi-monopolies that some health insurance providers have in some regions of the country. Instead of just reacting to laws Washington passes, large legacy companies will have to continually be improving to help drive down costs to stay competitive.
The biggest critiques I could see with my plan is that it would add unwanted transparency and increase individual responsibility.
With the transparency in the value of stipend people will see how much they are actually spending on health care instead of just the monthly premium their employer charges.
It also adds another thing for you to worry about at the end of the month. Instead of choosing between 2 plans for health insurance, you will now have a myriad of options to analyze and compare.
I know there are other blindspots I am missing. By no means do I think this is a bulletproof solution.
I know that was a lot to digest, but I appreciate you giving it a thorough read. Here are the main points just as a refresher and will hopefully be the talking points of your next Zoom call that eventually gets political, because what isn’t now?
Employer-Sponsored Health Insurance
Benefits Large Companies over small
Limits Employee Mobility
If you have any comments or feedback, please send them my way at email@example.com. Thank you for reading and until next time.
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