Not with a bang but a whimper: how employer-sponsored health insurance will end

Last updated on: February 26, 2015 at 11:19 pm by Jane the Actuary

Not with a bang but a whimper: how employer-sponsored health insurance will end 2015-02-26T23:19:00-06:00 Jane the Actuary

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This comes out of recent personal experience as a employee, or rather, as the spouse of an employee with employer-sponsored healthcare, as well as regular training sessions at work.

Open enrollment is coming around, and initial announcements are beginning — no actual pricetags, yet, but the statement that our company has had higher-than-average claims for the last several years, and that, once again, it’s going to lead to a change in the cost-sharing. That is, rather than continuing to pay, say, 80% of premiums, they’re going to pass the “excess” cost increase onto employees by now paying only 70%. Of course, when we have a good year, with lower-than-average claims, you can bet they’re not going to boost up the cost-share to 80% again.

Those of you with employer-sponsored health insurance, think about what you pay for health insurance now, vs. a decade or two ago. (I paid $10, in total, in copays when my oldest was born.) Yes, part of it is that health insurance in general has gone up in cost; I’m not discounting that — but the employer’s share is also decreasing. And this trend will accelerate. Employers want out. Sure, there are requirements in Obamacare, depending on how upcoming court decisions are decided, but there is still a lot of latitude for decreasing the cost-share, especially for dependents.

And it used to be seen as important that employers offer generous healthcare benefits for employee retention. Sure, my firm still offers studies to employers comparing their benefit programs to our database of participating employers, and I haven’t been involved in this particular project for a good decade now, but my hunch is that employers are more willing to be below-average in healthcare subsidy if they can hit their “average” target in other ways. In any event, we also conduct surveys in which employers state that they are more concerned with controlling cost than with employee satisfaction over their healthcare benefits.

After the financial accounting statement 106 was published in the early 90s requiring employers to account for future healthcare liabilities in the same way as pension liabilities, employers nearly-universally abandoned retiree healthcare benefits, except for grandfathered groups. At least with pensions, pay increases were more or less predictable, and there were well-established funding mechanisms. Not so for healthcare.

One of the approaches many employers took was a “cap” — “we will contribute a subsidy amount which we will allow to grow to no more than 2 times our subsidy as of 1993,” for instance. And I expect that employers will apply this approach to employee healthcare, too.

So what happens when, over time, employer contributions have dropped to new lows? — especially since, if your employer-sponsored insurance is deemed “affordable” for the employee, the spouse and children aren’t able to get subsidies or even go onto the exchange at all? In an ideal world, that’s when we’d start to see some real change, but there’s still no reason to believe that providers, especially near-monopoly hospitals, won’t still hold all the cards. Maybe, maybe some competing insurer will offer new apps allowing you to find the lowest-cost way of getting those stitches in your kid’s forehead (yeah, second time this year — but now we hit the deductible and are home free for the rest of the year), even if you have to drive longer distances. But that’s about it. Other than that, I got nothing.

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