The health insurance meltdown

By John E. McDonough | December 27, 2005



BUSINESS GROUPS ACROSS the Commonwealth are mobilizing against a proposed 5 to 7 percent payroll assessment on employers who don't provide health insurance to their workers. This assessment, approved by the Massachusetts House of Representatives in November, is part of their health reform plan now before a House-Senate conference committee. This debate is of enormous consequence for business -- and for everyone. Here's why.



Nationally, employer-sponsored health insurance coverage is undergoing a meltdown. The Kaiser Family Foundation reports that the percentage of employers who cover their workers declined from 69 percent in 2000 to 60 percent in 2005. That's an alarming drop in five years. The journal Health Affairs documents that the number of uninsured Americans grew by 6 million between 2000 and 2004, primarily because of a drop in employer-sponsored coverage among adults. This jump occurred as the number of Americans with government-sponsored coverage increased.



Massachusetts did not avoid this trend -- it was a trendsetter. The Economic Policy Institute reports that between 2000 and 2004, Massachusetts suffered the third largest decline in workers receiving employer-provided health insurance of any state, 5.6 percent, after Virginia and Arkansas.



Some suggest inadequate coverage occurs only among economically vulnerable employers. It's not true, as last fall's confidential Wal-Mart memo on their employee health benefits program reveals: ''In 2004, 38 percent of enrolled Associates [Wal-Mart employees] spent more than 16 percent of the average Wal-Mart income on healthcare. . . . In total, 46 percent of Associates' children are either on Medicaid or are uninsured."



It's not just Wal-Mart, as a 2005 Massachusetts government report on employers with workers who obtain health benefits through MassHealth or the state's Uncompensated Care Pool shows: Dunkin' Donuts, Stop & Shop, Wal-Mart, McDonald's, and Unicco (janitorial services), head the list -- costing taxpayers more than $12 million in medical services for these workers.



The race to the bottom in health insurance coverage is on. Employers who provide decent health coverage, and their workers, pay higher premiums and taxes to cover employers who don't. Employers who provide coverage pay $160 million annually to finance the Commonwealth's Uncompensated Care Pool; a larger cost-shift is embedded inside everyone's health insurance premium. As the loss of employer-sponsored coverage accelerates, the size of this cost shift grows.



In short, the employer health insurance meltdown threatens everyone -- not only the 532,000 uninsured in Massachusetts.



National data shows employers pay, on average, 12 to 15 percent of gross payroll to provide health insurance. The Massachusetts House payroll assessment does not mandate employers to provide health insurance and does not require employers to pay an assessment even close to that level: 5 percent for employers with 11 to 100 workers, and 7 percent for firms with more than 100 workers.



Some question whether the House plan creates an incentive for employers now offering coverage to drop it and pay the assessment instead. That will not occur because many middle- and upper-income workers in those firms would have to obtain individual coverage on their own, and the payroll assessment revenue would not directly benefit the firm's own workers. Firms dropping coverage would be disadvantaged in competition for good workers.



Others suggest the assessment would lead employers to leave Massachusetts. As the 2005 state survey makes clear, firms that provide no coverage or inadequate coverage, such as Dunkin' Donuts, may leave the state, but can't take their business with them. Overwhelmingly, businesses in Massachusetts that could move to Tennessee or Taiwan cover their workers -- and pay higher premiums to subsidize care for employers that don't.



Businesses opposing the House plan suggest government, consumers, and taxpayers should shoulder the burden to fix our health coverage crisis. Their opposition raises the larger, important question -- what should the responsibility of employers be in providing health insurance to workers? If we don't confront this question now, the answer will not get easier.



Overwhelmingly, opinion polls show the public supports a shared solution involving government, individuals, and employers. A November poll by Gerry Chervinsky found 66 percent of Massachusetts residents support the House payroll assessment.



As the conference committee attempts to craft a health reform compromise, business groups will advertise their opposition to the assessment, confusing the public about the real stakes in health reform. One group calls their effort ''Massachusetts Businesses for Real Health Reform."



Real reform requires everyone -- government, individuals, and businesses -- to be part of the solution.