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An ACA Backer Sees End To Workplace Coverage

When the Affordable Care Act was enacted four years ago, I found the new law’s approach so misguided and destructive that I promptly discontinued my company’s employer-paid health insurance benefit. Now it seems one of the Act’s chief architects and defenders thinks I was only a bit ahead of everyone else.

In his new book, “Reinventing American Health Care: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System,” Ezekiel Emanuel predicts that the proportion of private-sector workers who receive health care through their employers will fall to below 20 percent by 2025, compared to the current figure of just under 60 percent. Though I suspect we share few other opinions about Obamacare, I think he is right about this.

I have written in this space many times about what I see as the deep flaws inherent to the Affordable Care Act. We have already begun to see some of these play out as the law begins to take effect, or at least the few parts of it that the administration has not postponed.

I want my employees to have health insurance. As far as I know, all of them do. But rather than have our firm choose a plan and pay for it, I now let them make their own arrangements. Some pay to participate in our company’s plan via payroll deductions; others are covered on plans through their spouses or, in the case of some younger employees, through their parents. Some of the money I used to spend on employee health insurance now goes to pay higher taxes that help fund the government’s health insurance subsidies and some went to my workers to spend as they choose.

While the law fines large companies that do not offer coverage, the rising cost of premiums may eventually turn the decision into an exercise in cost-benefit analysis. For businesses like mine that are too small to trigger penalties, the incentive to fight the tide of rising costs is even smaller.

In an interview, Emanuel said the shift from employer-paid coverage to coverage paid by patients, the government or some combination of the two will be a net positive. “You might put it under positive, unintended consequences,” he said. Many health experts agree with him that such a change would be good for the system, according to The New York Times, though Democrats will face even messier political fallout than Obamacare has already brought them if Emanuel is ultimately right.

The truth, however, is that whether or not Emanuel is right about it being a good thing, the trend of private businesses getting out of the health insurance arena is probably irreversible. Businesses want to do business, not shop for health care.

The fact that so many Americans currently get their health insurance through their employers is something of a historical fluke, created by wage controls during World War II that limited raises. Subsidized health care became a common form of alternate compensation. More recently, apart from the continuing tax benefit available to employer-paid health insurance, the biggest advantage of a company plan is that, in most cases, all full-time workers are eligible for coverage regardless of their individual health. Now that the Affordable Care Act has outlawed health-based rejections by private insurers, employees can get their coverage without employers’ help. There is simply much less need for most businesses to shop for insurance on their employees’ behalf.

Not all analysts agree with Emanuel’s view that company health insurance is on its way out, or that it would be a good thing if it disappeared. The Congressional Budget Office’s projected drop in workplace coverage is relatively modest. Journalist Amanda Bennett, who reviewed Emanuel’s book for The Washington Post, found his history well-researched and useful but his predictions harder to swallow.

Bennett called Emanuel’s belief that most employers will give up their roles as health care access providers “wishful thinking.” She also points out that his rosy view, as he freely admits, rests on the government exchanges achieving and maintaining a seamless user experience. Bennett observed, “The nightmarish launch of the health-care exchanges alone should be enough to convince anyone that just because something is in a law doesn’t mean it will happen.”

My guess is that the Affordable Care Act is likely to see some major changes down the road, but that doesn’t mean we can go back to our old system. That ship has sailed. Once enough businesses, or large enough businesses, reset employee expectations, subsidized health insurance will go from a benefit necessary to secure quality talent to an optional perk that individual employers can choose to offer or not.

The Affordable Care Act’s approach of guaranteeing that consumers can purchase insurance that covers pre-existing conditions virtually whenever they want (or at least during annual enrollment periods) is financially unworkable. It will let too many people wait until they are sick before they buy coverage. But the law could require insurers to renew policies, or issue replacement policies in the case of people switching carriers, to customers who have had coverage and subsequently saw their health decline at better rates than they’d offer to individuals signing up with the same condition. Such provisions would encourage people to buy coverage before they actually needed it, and it still would not require employers to get back into the insurance game.

In any case, it never made sense to give employer-paid health insurance better tax treatment than the coverage that individuals might buy for themselves. Whatever its other failings, if the ACA gets us out of that trap and moves us toward a more rational way of buying and paying for health care, it will have accomplished at least one useful thing.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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