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Employer-based health insurance: Should it stay or should it go?


It occurred to me that while I write all the time about the Affordable Care Act exchanges and individual health insurance plans, I've personally never been covered through anything other than an employer-based plan.

That's a stroke of luck that I know is not the case for many Americans. But at the same time, predictions that the ACA would usher in the demise of employer-sponsored coverage haven't exactly come true.

Indeed, an analysis out this week from the Kaiser Family Foundation pointed out that a less-than-expected decline in employer health plans is one reason ACA marketplace enrollment is likely to grow less than the Congressional Budget Office projected. In fact, KFF's 2015 Employer Health Benefits Survey found that employer-sponsored insurance covers more than half of the non-elderly U.S. population, a figure that's remained statistically unchanged from 2014.

Still, "employers would love to get out of the insurance business," writes Rita Numerof, Ph.D., in her new book, "Bringing Value to Healthcare: Practical Steps for Getting to a Market-Based Model." That's because employers increasingly have to pass rising premium costs onto employees and focus on price rather than value--making for an annual headache when negotiating rates with insurers.

But if the system is so broken, why haven't employers yet gotten out of managing health benefits?

One simple answer, Numerof (pictured left) told me in an exclusive interview, is that change does not come easily.

"The notion of employer-based insurance has been a critical part of employee expectations about what's included in the total compensation package," she says. "Whenever you make changes to compensation, you run the risk of upsetting the employee base, and so any changes to that have to be made very thoughtfully and carefully."

On this point, I'm apt to agree. We employees love our benefits, and having seen loved ones try to navigate the public exchanges, I'm happy to choose between just a few hand-picked coverage selections. In fact, nearly every job I've ever applied to made a point in the listing to note a "generous" or "attractive" health benefits package, even if I later determined those descriptions to be subjective.

But Numerof points out that while employer-based coverage is sticking around for now, it's also changing. Over the last several years, employers have moved from a defined benefit to a defined contribution, she says, so given the current mix of options and the move to high-deductible health plans, "they have scaled back dramatically in terms of managing the whole burden."

And even if employers took the plunge and stopped offering health benefits, Numerof doesn't see the current private or public exchange models as "particularly attractive" to many employers and employees because of their limitations.

Instead, she believes employer-based coverage will continue to exist, but as consumers become more educated and are forced to shoulder more of the cost burden, "we will see more interest in looking at other options, including being able to navigate independently in a national marketplace."

Numerof wants to see this private, nationwide marketplace allow people to buy health insurance much the same way they buy car insurance.

"We really don't have that today, and one of the problems with the ACA is that the insurance offerings are basically mandated, so we don't have the choice that we need," she says. "I as a consumer should have the opportunity to buy what I need for myself and my family without having that dictated by the government about what's good for me."

A truly competitive private marketplace, though, won't happen without transparent, simple-to-understand cost and quality information in healthcare.

That became more of an uphill battle just this past week, as the Supreme Court's decision in the Gobeille v. Liberty Mutual case dealt a blow to states' transparency initiatives in the form of all-payer claims databases. And while a recent survey found the majority of health insurers offer their customers price transparency tools, some have pointed out that these tools may be limited in their ability to accurately gauge costs.

On this point, though, Numerof argues that the endurance of employer-based health plans could be a positive force in the healthcare industry, as big companies have far more clout than individual consumers.

"I think employers have an enormous role to play in creating change and demanding better outcomes and real transparency in costs from providers," she says. "They're increasingly frustrated with what they see as high costs and lack of transparency and accountability, so I think employers playing a role in this will continue to be extraordinarily important for us as a society." - Leslie @HealthPayer