Many Small Employers Say They Just Can’t Afford to Provide Health Insurance.

In yesterday’s post, I referred to an article published in the LA Times which reported on how the lack of employer sponsored health insurance is affecting those who are forced into the individual insurance market to obtain coverage. Today, the cause of this situation is revealed in a major new employer survey on health care reform released by Mercer, LLC. It comes as no big surprise that the majority of small employers believe that, at its current price, employee medical coverage is far beyond their means.

The survey of 545 employers who do not offer health coverage found that when asked their primary reason for not offering health coverage, 43 percent of all employers without employee plans answered “I can’t afford it”. Other reasons included employees being covered under other plans (20 percent), high workforce turnover (9 percent) and the perception that employees would rather have more pay than health coverage (9 percent).

When these employers were asked, if they were to offer a health plan, how much they would be willing to contribute per employee per month. For 59 percent, that amount ranges from zero to no more than $50. Only 10 percent said they would pay at least $200.

“This finding highlights how tough it’s going to be to ask very small employers to voluntarily take on the expense of providing health coverage,” said Linda Havlin, a Mercer worldwide partner. “It also helps explain why even relatively low-cost catastrophic plans like HSAs have not made great inroads with small employers that find it financially challenging to offer coverage.”

Unfortunately, there is not much indication that this trend will change in the future. About half of the employers not currently offering coverage say it is very unlikely that they will offer a plan in the next three years (49 percent) and only about a fourth say it is even somewhat likely.

So what will these employers support in the way of healthcare reform? Employer health plan sponsors were asked to give their opinions on eight health care reforms that have been proposed by the presidential candidates, members of Congress or state governments.

One of the most hotly debated reform proposals to emerge during the presidential campaign is Senator John McCain’s plan to end or cap the tax exclusion for employer-sponsored health benefits. Forty-one percent of employers oppose such a plan, while just 30 percent are supportive. The larger the employer, the more likely it is to disapprove (57 percent of those with 20,000 or more employees disapprove).

Half of all employers oppose “play or pay” laws, which would require employers to either offer health coverage or pay into a government fund to cover the uninsured (just 31 percent are supportive and 19 percent neither approve nor disapprove).

Only two of the reform ideas have the support of the majority or near-majority of employers. Just over half (53 percent) support requiring individuals to have health coverage if they can afford it, either through their employer or purchased on their own.

While neither presidential candidate’s platform includes such an individual-mandate proposal, Senator Barack Obama’s comes closest, requiring that all children have coverage. Another, more radical approach to achieving universal coverage – a health care system like Canada’s, where the federal government is the sole payer for health care services – was rejected (51 percent of all employers, and 63 percent of very large employers, disapprove). Employers want to see everyone covered, but (emphatically!) not through a single-payer system.

Nearly half employers (46 percent) support having the federal government provide stop-loss protection to cover an employer’s catastrophic expenses.

Health Plan Innovation Take: With employers more inclined to disapprove than approve of any of the reforms, the results demonstrate the difficulties of trying to achieve consensus around health care system changes. It is also clear, that short of mandating coverage, these employers are not going to begin offering coverage. This brings us back to the dilemmas affecting the individual health insurance market described in the LA Times article.

AHIP Offers Individal Health Proposals

This was an interesting news day. First, I saw an article on insurancenewsnet.com about a report from America‘s Health Insurance Plans (AHIP) that said the insurance industry trade group had found that health care coverage is more accessible and affordable than is widely known. The survey they conducted was said to have found that premiums are affordable, most who applied were offered coverage, and that consumers have access to a wide variety of benefit options to meet their individual needs.

OK, I thought, this is some good news for all those people who are looking for individual health coverage and for the industry. Now maybe there is no need for states to pass legislation to require carriers to issue policies to anyone who applies potentially creating another layer of bureaucracy like Massachusetts has created, and the potential for reduced competition because many carriers may simply choose not to do business in those states.

Then the second article hit my in box. Again it involved AHIP. This one appeared in the New York Times with the lead: “Acknowledging that too many people simply cannot obtain health insurance on their own, the insurance industry plans on Wednesday to propose a series of steps the companies say would let more individuals, even those who have health problems, obtain coverage.”

What? I thought I had just read that everything was OK and that most everyone who wanted insurance was able to buy it. What is going on here?

It seems that the AHIP is trying to get out in front of this issue by developing proposals that would make it harder for insurers to cancel policies or deny coverage to people with pre-existing medical conditions. They also say that they want to limit the premiums that could be charged for such people. In turn, the trade group called on states to provide individual coverage for people who were likely to incur very high medical bills.

This is all apparently geared toward taking the wind out of the sails of politicians who are happy to vilify the insurance industry making them the culprits for the fact that some 47 million American do not have health insurance coverage.

Not a bad approach AHIP. While I am still confused by the mixed messages you sent today, I do think that it was the right move to acknowledge that there are problems inherent in the current individual health insurance market and to ask for the state’s to help jointly develop a solution with the industry rather than provoke an adversarial situation.

Could an a Medicare Advantage type program for non-Medicare individuals be in the future?

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