 Summary Research Insights The Role of Employer-Based Health Insurance under Health Care Reform g Engaging Americans to take an active role in the health As the administration and Congress continue to move toward care through an individual mandate as well as encouragement comprehensive health reform, the role and future of the current to participate in prevention, wellness and chronic care employer-based insurance system is a crucial point of discussion. programs; and Employers, both large and small, as well as their workers are g Offering assistance to the uninsured and low-income workers dissatisfied with the current employer-based health insurance to enable them to meet the obligation to be insured and system and are generally supportive of the concept of reform. As financing this support through savings gleaned from a more with every aspect of reform, however, the devil is in the details. efficient health care system. The ability to address employer concerns and maintain their cooperation will be a major factor in the health reform debate. Although a lack of data about how firms and their workers are Employers identify four critical challenges that can be met likely to respond to specific reforms precludes simple predictions through health care reform: of the degree to which reform will impact employers and their employees, impact is nonetheless likely in a number of areas, g Obtaining greater value through the use of health particularly those related to monitoring and enforcement of information technology; individual or employer mandates, premium subsidies, delivery g Creating more affordable insurance options for individuals system reform and care coordination, and performance-based through a more competitive private market and replacing the measurement and payment systems. current state-by-state market with multi-state markets; AcademyHealth held a breakout session at its 2009 National Health Policy Conference to better understand employers’ desire for comprehensive health care reform and the commitment of support from employers and businesses. Mark Pauly, University of Pennsylvania, moderated a panel comprising John Castellani, Business Roundtable, Sherry Glied, Columbia University*, and Peter Lee, Pacific Business Group on Health. The speakers addressed the impact that health care reform is likely to have on employers and employees, as well as current problems with the employer-based insurance market that might be addressed through health care reform. This policy brief is based largely on the presentations of the panel. * Sherry Glied was unable to attend and present in person due to illness but provided written remarks that were presented by Mark Pauly. The Role of Employer-Based Health Insurance under Health Care Reform Background to secure meaningful health care reform. The president… has made Health care reform was near the top of the agenda of both candidates it a top priority; key congressional committee chairs have made in the 2009 presidential election, and it continues to be a front- it their top priority; and the large and diverse health care interest burner issue among policymakers. In his February 24 address to groups are working cooperatively to find common ground.” 2 Congress, President Obama stated, “We can no longer afford to put health care reform on hold.” Congressional leaders, too, have Providers and insurers have also expressed support for health identified health care reform as an issue near the top of their agendas, care reform. Nancy Nielson, President of the American Medical with Senator Max Baucus, D-Mont., introducing his plan for health Association, stated, “In these tough economic times, the need for care reform in early November and promising to work with Senator health system reform that provides coverage and high quality, Ted Kennedy, D-Mass., chair of the Senate Committee on Health, affordable health care for all Americans is clear.”3 Additionally, Education, Labor and Pensions, to bring a comprehensive health care Karen Ignagni, president and CEO of America’s Health Insurance reform bill to the Senate floor by early summer. Plans, stated she “applaud[s] the president for laying out a bold framework and setting aside significant resources to put our nation The two major political parties, Congress, consumer groups, employers, on a path toward comprehensive health care reform, which is a goal and providers agree that health care costs must be controlled, especially that has eluded our country for more than a century.”4 in the current economic climate, and all Americans must have access to high quality health care. Already, Congress has reauthorized the Employers Support Health Care Reform While State Children’s Health Insurance Program (SCHIP) program and Maintaining Employer-Based Insurance supported provisions for improved health information technology and Problems experienced by small and large employers, as well as the comparative effectiveness research as part of the economic stimulus bill. likely impact of health care reform, differ considerably. Currently, However, there is consensus that while important, these small measures the health insurance scenario among large employers is relatively do not go far enough, and broad-based reform of the health care system positive, with most workers having good coverage. However, small is necessary. employers and their relatively low-age workers face problems of lack of access to health insurance, poor or incomplete insurance Though there is much discussion about the best way to achieve coverage, and health insurance options that are not financially health care reform and some concern that the country has been feasible. Relative to large firms, the tax benefits are low and down this road before without success, there is also optimism that the administrative costs are high in small firms. In the current this time health care reform will be implemented. The last time comprehensive health care reform was seriously considered was in 1993 during the first two years of the Clinton administration. Employer-Based Health Insurance Initially, reform seemed to have widespread support. However, The employer-based insurance system has worked as consideration of President Clinton’s plan was delayed due to reasonably well for a long time. It is characterized by: other policy priorities, the political climate changed, the economy improved, and businesses, insurers, and providers withdrew their gGroups of people who came together for a different initial support of President Clinton’s plan and comprehensive purpose and are then used for obtaining insurance health care reform, in general.1 (e.g., insurance incidental to job); g People/groups who maintain coverage over time and in Congress and the Obama administration seem eager to capitalize on the same place, as long as the employer continues to the current support for overhaul of the health care system. President offer insurance; Obama has sought the input and leadership of key senators and members of Congress, as well as other players in the health care g Employers who act as agents for workers, advocating market. His desire to quickly enact health care reform is supported to get them the best value for their money; by a wide range of stakeholders, including employers and consumer g The ability to achieve efficiency in administrative costs; organizations. “He has rightly sounded the urgent plea to get and comprehensive reform done early…and recognizes that the failure to act has dire and unacceptable consequences for working families, g Tax reductions for workers for the portion of their businesses and our national economy,” AFL-CIO President John compensation that goes toward health insurance. Sweeney said in a statement. Families USA Executive Director Ron Pollack stated, “There has never been a more auspicious opportunity 2 economic recession—with fewer jobs, stagnant wages, and an inclusive) private market, replacing the current state-by-state increased number of part-time workers—the employer-based market with multi-state markets; insurance system could deteriorate. An extended recession would g Engaging all Americans and ensuring they are taking an likely stress the system, even among large employers. active role in their health care by obligating them to purchase health insurance through their employer, the private market, Employers recognize that health care reform offers potential or a public program for which they are eligible, as well as benefits to both the firm and the workers, and is critical to a encouraging them to participate in prevention, wellness, and return to a robust economy. They are striving to create jobs in chronic care programs; and the face of challenging economic circumstances and know that workers who lose their jobs often lose their health insurance as g Offering assistance to the uninsured and those with low well. Employers want to provide health insurance, but escalating incomes so that they can meet the obligation to be insured, health care costs that they cannot control are one of the greatest financing this support through savings resulting from a more cost pressures they face. While many argue that the burden of efficient, value-driven health care system. increasing health care costs ultimately is borne by the workers, Two of the most commonly discussed approaches to increasing placing stress on household incomes, others contend that these health care coverage are an individual mandate to obtain health costs inhibit job creation by employers, and detract from the care coverage and an employer mandate requiring firms to United States’ ability to compete in global markets. provide health insurance. Employers believe reform can lead to decreased costs, increased g individual mandate is not likely to have a direct effect An affordable health insurance options, and financial assistance for on most large employers. It may, however, have an indirect those who cannot afford coverage. They remain committed to positive effect on some small employers. If workers receive a offering health insurance to workers. In addition, they recognize health insurance subsidy or are penalized for not purchasing that a large portion of innovation comes out of the private sector, insurance, they might encourage their employers to offer and they continue to believe that good health insurance benefits insurance, since that is an easier arrangement for them attract and retain high quality workers. Workers want highly then purchasing in the individual market. Employer-based affordable health care for all employees and dependents, and there insurance may become the path of least resistance under an is evidence that health insurance coverage leads to more productive individual mandate. Policymakers need to consider how they workers. The primary reason that employers choose not to offer would enforce an individual mandate, with one option being health insurance is because it is too expensive. So, when debating to have employers report information on workers’ health health care reform, policymakers must consider both coverage insurance coverage to the IRS and monitor coverage through trends and cost trends. In other words, health care reform must existing tax systems. take into account cost and quality, not just the addition of increased g Most economists agree that the costs of an employer mandate coverage within the current health care system. Health care reform would be borne by workers, in the absence of a new source of must address methods for measuring performance, design of the money. The primary impact of an employer mandate is likely delivery system, and appropriate reimbursement policies and to be on workers in small, low-wage firms. However, since incentives. Americans with health insurance are not only better little is known about why firms behave the way they do or how able to take care of themselves, but firms whose workers have access workers with varying characteristics respond, it is very difficult to quality health care may be able to be more competitive and to predict how things would change under an employer effective in a worldwide economy. mandate. Those opposed to an employer mandate frequently argue that the burden would shift to workers. Health Care Reform Employers identify four critical challenges that can be met Increased coinsurance and premium subsidies are frequently through health care reform: discussed options for making the purchase of health insurance more financially feasible. Increasing workers’ share of premiums g Obtaining greater consumer value from the health care system might be better received than reducing wages as employers face through better use of health information technology (HIT) to budget constraints resulting from the economic slowdown. To provide consumers with information about quality health care; the extent that subsidies are implemented, it would be more g Creating more affordable health insurance options for efficient to make them to workers, rather than to the employers. Americans through a broader, more competitive (open and If the subsidies are given to employers, then there will have to 3 The Role of Employer-Based Health Insurance under Health Care Reform be oversight and coordination, since some workers will get their by Medicare’s Relative-value Update Committee, with some insurance in other ways, e.g., in the individual market. Reporting bias toward technologically advanced procedures and providers. and enforcement requirements also would need to be developed. Overall, they argue that there is a need to re-align public and private payment systems, noting that the problem is not just a In addition to expanding coverage, health care reform must also problem for the government and not just related to Medicare address the delivery system. The current system is uncoordinated, spending, but rather applies to total health care expenditures. inconsistent, and unaffordable. Health information technology, including payment incentives for its use, is a critical piece of a Ultimately, all these challenges will have to be addressed as part of revamped delivery system. Efforts to coordinate care, including the reform process. Yet it remains clear from the current political establishing medical homes with care linked to payment, as well and policy debate that key stakeholders, including employers, are as incentives for wellness care and health promotion, are also no longer satisfied with the status quo and are actively engaged in frequently proposed elements of reform. debate about the best way to reform the health care system. Many also agree that a reformed health care system should About the Author be performance-anchored, taking into account the relative Deborah Rogal is a director at AcademyHealth. performance of physicians, as well as comparative effectiveness. Tools must be developed that permit the assessment of functional Endnotes status (health outcomes), measurement of development and 1 Starr, P., “What Happened to Health Care Reform?” The American Prospect no. 20 (Winter 1995): 20-31, http://www.princeton.edu/~starr/20starr.html . implementation, and linkages between physician performance 2 Fox, M., “Healthcare reform gets backing in Congress,” Reuters, November 13, and payment. It must be possible to determine which physicians 2008, http://www.reuters.com/article/politicsNews/idUSTRE4AB67T20081113. 3 Nielson, N., M.D., “AMA Congratulates Obama’s New Health Care Picks: Gov. do a better job, as well as which treatments are better. Relating Sebelius and Nancy-Ann Deparle,” March 2, 2009, http://www.ama-assn.org/ payment to performance is a key element of many health care ama/no-index/news-events/governor-sebelius-hhs.shtml. reform proposals. Proponents support a move away from the 4 Ignani, K., “AHIP Statement on the President’s Budget,” February 26, 2009, http://www.ahip.org/content/pressrelease.aspx?docid=26068. current volume-based payment system that is strongly influenced 4