“Wishful” Thinking?

By Nevin Adams, EBRI

Last week the Wall Street Journal reported that Sears and Darden Restaurants were planning a “radical change in the way they provide health benefits to their workers,” giving employees a fixed sum of money and allowing them to choose their medical coverage and insurer from an online marketplace, or exchange1. “It’s a fundamental change,” EBRI’s director of health research, Paul Fronstin, noted in the WSJ article.

Indeed, this is the time of year when many American workers – and, by extension, most Americans – will find out the particulars of their health insurance coverage for the following year. For most, the changes are likely to be modest. And, based on the 2012 Health Confidence Survey (HCS), not only do most Americans seem to be confident in those future prospects, they would seem to be satisfied with that outcome.

More than half of those with health insurance are extremely or very satisfied with their current plans, and a third are somewhat satisfied. Nearly three-quarters say they are satisfied with the health benefits they receive now, compared with just 56 percent in 2004.

Dissatisfaction, such as there is to be found, appears to be focused primarily on cost; just 22 percent are extremely or very satisfied with the cost of their health insurance plans, and even fewer are satisfied with the costs of health care services not covered by insurance. Perhaps not surprisingly, about one-half (52 percent) of Americans with health insurance coverage report having experienced an increase in health care costs3 in the past year, though that was the lowest rate since this question was added to the survey in 2006.

The HCS found that confidence about various aspects of today’s health care system has remained fairly stable2 – and undiminished either by the passage of, or the recent Supreme Court decision on, the Patient Protection and Affordable Care Act (PPACA); more than one-half (56 percent) of respondents report being extremely or very confident that they are able to get the treatments they need, and another quarter (27 percent) report being somewhat confident. Only 16 percent of 2012 HCS respondents said they were “not too” or “not at all” confident that their employer/union would continue to offer health insurance for workers – though that was more than twice as many as expressed that level of concern in 2000.

While respondents were generally supportive of the measures broadening access and/or choice in the PPACA, nearly two-thirds said they hadn’t yet noticed any changes to their health insurance – and among the 31 percent that had, 70 percent said the changes were negative, including impacts such as higher premiums, higher copays, and reduced coverage of services.

Despite a falloff from previous surveys, more than two-thirds (69 percent) of employed workers said that benefits were “very important” in their employment decision, with health insurance topping the list of those important benefits by an enormous margin. Nearly six out of 10 said that health insurance was the most important employee benefit, as has been the case for some time now.

All of which reinforces that, while many see room for improvement in the current system, those that have employment-based health insurance now like it, and want to keep it.

It will be interesting to see if, in the months and years ahead, they get that wish.

Notes

More information from the 2012 Health Confidence Survey (HCS) is online here.  The HCS is sponsored by EBRI and Mathew Greenwald & Associates, Inc., a Washington, DC-based market research firm, and made possible by the generous support of the HCS underwriters, listed here.

 1 More information about private health insurance exchanges is available in the July 2012 EBRI Issue Brief “Private Health Insurance Exchanges and Defined Contribution Health Plans: Is It Déjà Vu All Over Again?” 

 2Asked to rate the health care system, survey respondents offered a diverse perspective: 17 percent rated it either “very good” or “excellent,” 28 percent consider it to be “good,” 28 percent say “fair,” and 26 percent rate it “poor.” However, the percentage of Americans rating the health care system as poor doubled between 1998 and 2004 (rising from 15 percent to 30 percent).

 3Of more than passing concern is the finding that among those experiencing cost increases in their plans in the past year, nearly a third had decreased their contributions to retirement plans, while more than half have decreased their contributions to other savings as a result.

Starting Small

Are CBO Estimates on the Future of Employment-Based

Coverage Under PPACA Moving Toward the Herd Mentality?

By Paul Fronstin, EBRI

Fronstin

Trends in employment-based coverage start with small numbers.

The Congressional Budget Office (CBO) recently reported that it had revised its estimates on the net number of people with employment-based health coverage downward in 2016. In March 2011, CBO reported that about 1 million fewer people would have employment-based health coverage due to enactment of the Patient Protection and Affordable Care Act (PPACA), but in March 2012 it revised that number to about 4 million. CBO also estimates there will be about 2 million fewer estimated enrollees in insurance exchanges, which are to take effect in 2014.

The net reduction in the number of people with employment-based coverage—about 2 percent of the total health insurance market—is actually a function of total gains and losses in coverage. As the CBO notes in a footnote for its 2019 estimates, as a result of PPACA, about 14 million fewer people are expected to have employment-based coverage (about 11 million individuals will lose access to employment-based coverage, and another 3 million will decline employment-based coverage and enroll in health insurance from a different source), while about 9 million will newly enroll in employment-based coverage under PPACA.

The Herd Mentality

A report from Avalere assessed the validity of differing estimates of the effect of PPACA on employment-based coverage. Its analysis concluded that the employment-based market will be fairly stable after 2014, when key PPACA coverage provisions go into effect. However, the most important statement in the report may be the following:

“While near-term changes in aggregate ESI [employer-sponsored insurance] rates are unlikely, longer-term erosion—over 10 to 20 years—is possible under certain circumstances. … if a few [emphasis added] large employers drop coverage after 2014, others could follow in a “me too” effect. Both of these scenarios are difficult to model, but should be considered.”

Various surveys suggest that a significant number of employers will follow the market:

  • In a June 2010 survey, Fidelity found that 26 percent of small employers and 36 percent of large employers would seriously consider eliminating health care if other employers did.
  • In September 2010, HR Policy Association reported that 80 percent of chief human resource officers surveyed said that other companies moving away from health coverage would influence their decision to offer coverage.
  • A June 2011 survey of very large self-insured employers by the Benfield Group found that 21 percent were highly likely and 49 percent somewhat likely to drop coverage if their industry competitors stopped offering health benefits.

The trend in sentiment in these surveys may be reflected in a recent Towers Watson/National Business Group on Health Employer Survey that found that between 2007 and 2011, the percentage of employers reporting that they were highly confident that they would be offering health benefits a decade later fell from 70 percent to 23 percent.

The CBO seems to capture such a dynamic in its sensitivity analysis. CBO indicates that variation of estimates in employment-based coverage ranges from a net loss of 20 million to a net gain of 3 million by 2019. In fact, a number of surveys have also found that a small number of employers plan to drop coverage in 2014 or thereafter (see “Understanding Employer Surveys That Address the Future of Employment-Based Health Coverage,” online here.

As noted earlier, the most important take-away from this may be a reminder that trends in employment-based coverage start with small numbers. The movement away from defined benefit pension plans to defined contribution (401(k)-type) retirement plans did not happen overnight: It began with a mere 1 percentage point drop, between 1980–1981.  Neither did the movement to managed care, to consumer-driven health benefits, nor the movement away from providing retiree health benefits.

These changes took years, some would say decades, to play out. There is no reason to believe that 2014 will look much different from 2013 or 2011 in terms of whether or not employers offer health coverage.

What may be more important is the percentage of employers offering health coverage in 2020, or 2025.

More Part-time Workers Lack Health Coverage

In the wake of the economic recession, the number of part-time workers who lack health insurance is increasing, according to new research from EBRI.

Full-time workers are far more likely than part-time workers to be offered a health insurance benefit from their employers, which in turn affects how many are actually enrolled. In 2010, 60.1 percent of full-time workers had coverage from their own job, while 16.8 percent of part-time workers had such coverage.

Paul Fronstin, director of EBRI’s Health Research and Education Program and author of the report, said the data provide an important baseline to measure changes once a key provision of the Patient Protection and Affordable Care Act (PPACA) takes effect in 2014. The law will require that employers with 50 or more full-time workers failing to provide health coverage to full-time workers in 2014 will be required to pay a penalty. While many employers already offer health coverage, there are other provisions of PPACA that are expected to increase the cost of coverage.

“Because of PPACA, there is concern that employers may respond by cutting back on health coverage for part-time workers or by increasing the proportion of part-time workers employed,” Fronstin said. “Since the recession, we have seen the share of part-time workers going up and at the same time there has been a slight drop in part-time workers with coverage from their own employer.”

The EBRI report notes that penalties for failing to provide health coverage under PPACA will apply only to employers with 50 or more full-time workers. But most of these employers already offer coverage: In 2011, 93 percent of employers with 50‒199 workers offered coverage and 99 percent of employers with 200 or more workers offered it.

The full EBRI report is published in the March EBRI Notes, “Trends in Health Coverage for Part-Time Workers,” online here.