Last week, the Economic Policy Institute released a disturbing report revealing just how many white-collar workers have lost their employer-based health insurance in recent years—even though they didn’t change jobs.
Many workers believe that if they hold onto their job, their insurance is safe. Professionals with jobs near the top of the occupational ladder are especially likely to assume that their employer is not going to cut their coverage. That may well have been true in the 1990s, when the job market was tight—but not today.
The EPI report shows that in just the first six years of this century, the share of U.S. workers with employer-provided health insurance (EPHI) fell from 51.1 percent to 48.8 percent. Moreover, workers in white-collar occupations—including executives, managers, and workers in professional specialties—were just as likely as blue-collar workers to lose their safety net.
Perhaps this shouldn’t come as a surprise, since employers typically pay a much larger share of premiums for higher-income employees, as I discussed on HealthBeat last month. So as insurance premiums soar (up 78 percent since 2001), employers are beginning to chafe under the very costly burden of providing first-class benefits to white-collar employees. (Insurance premiums rose “only” 6.1 percent in 2007, but going forward, experts expect sharper increases because the cost of medical technology continues to skyrocket).
Most employers will just shift more costs to employees in the form of higher co-pays and deductibles. But some will decide that they cannot continue to offer insurance.
“No one is immune to the slow unraveling of the employer-based health
insurance system,” warns Heidi Shierholz, EPI economist and co-author,
with Jared Bernstein, of the report “A Decade of Decline: The Erosion
of Employer-Provided Health Care in the United States and California,
1995-2006.”
“This dramatic loss of employer-provided health insurance since 2000 is
not simply driven by the loss of high-quality jobs, such as those in
the manufacturing sector,” the report observes. “Rather, it is caused
by the significant decline in employers providing coverage within
existing jobs across the board. The burden of these employer cuts is
not carried by part-time or marginal workers. Rather, the most dramatic
loss is among workers with the strongest connection to the labor force.”
Note, for example, the startling declines, from 2000 to 2006, in the
share of workers covered by EPHI as shown in the bottom half of the
table below (click for larger version). At the top of the job ladder,
in the first three occupations listed, the percentage of executives,
professionals and technicians with employer-based coverage fell by over
3 percent to 5.6 percent.
The top half of the table below shows what percentage of workers are
employed in various occupations; the bottom half reveals what
percentage in each occupation have employer provided health insurance.
Drilling a little deeper, the bottom half of the table below tells you
more about the people who lost their insurance. For example, from 1995
to 2006, workers with a college degree were just as likely to lose
their EPHI as those who didn’t have a degree. Meanwhile, from
2000-2006 the share of 45-54 year old workers with EPHI—which includes
many people who are most likely to need health care –fell by a fat 4
percent. (The small dip in the share of those over 55 with
employer-based insurance is due to the fact that many people in this
age group retire or partially retire, the report explains).
“EPHI is disappearing across the across the entire age and
education spectrum, including prime-age workers and those with college
degrees,” the report’s authors note. “These findings show that health
insecurity is now a broadly shared American experience.
“As a consequence,” they say, “the solution requires a broadly shared
approach. The erosion of the employer-based system, with losses
accumulating in even high-end sectors, along with the critical need to
control health care costs, indicates that the provision of coverage
needs to be at least partly ‘taken out of the market.’”
As employers back out of the benefits business, individuals who try to
get insurance on their own will discover just how expensive it is.
Rates vary by state, but family coverage in a state like Virginia can cost as much as $24,000 a year.
This is why, in the very near future, “we will need ‘universal programs
’that pool risk across large populations,” Bernstein and Shierholz
advise. Anyone who doesn’t have EPHI (or doesn’t like/cannot afford the
EPHI that they have) could join these groups. In addition, if universal
insurance is going to cover everyone at an affordable price—even if
they are sick—the authors conclude that we will have to “mandate
coverage, with subsidies for those unable to meet the mandate.”
Although an individual mandate requiring that everyone join an
insurance pool is not a popular concept, the report’s authors are
correct. Note that they are economists—not politicians. And while
economists can be dreary, the nice thing is that they are not worried
about whether you will vote for them. And therefore, rather than
telling people what they want to hear, they tend to address the reality
of the numbers. Even better, these are excellent economists (I know
Bernstein). So, not only are they confronting the numbers, they truly
understand the numbers.
Unless a mandate requires that everyone have insurance, some young,
healthy people would wait until they became sick to join a pool,
expecting people who had been paying premiums into that program for
years to now cover them. If that happened, ultimately only the sick and
the elderly would buy insurance– and prices would levitate to a point
that virtually no one could afford it. If we are going to have a
mandate, however, we have to provide adequate subsidies, on a sliding
scale, for those who cannot afford the coverage.
How do we do that? This brings me back to the “basics” of health care
spending, a series that I’ve been doing over the past few months,
showing where our healthcare dollars are going—and where we might pare
waste, while pushing back against health care manufacturers who are
gouging America. In my next post, I plan to return to “Spending on
Hospitals—Part 3.”
This may finally be the issue that pushes health care over the tipping point.
When the white collar and professional classes start being affected directly, they will make this a big issue. That means that not only will they be vocal about this, but that they will use their money and influence to promote change, they will also vote for their own self interest.
And unlike the lower classes, they vote in much higher proportions and donate to candidates. It’s not clear that any of the leading politicians are on top of this issue. They are all still talking about incremental changes and not ruffling the feathers of any of the existing power groups.
In a letter to the editor today, a person complained why is it the government’s responsibility to provide everyone with health care insurance. The able working class has the responsibility to take care of its own health care insurance. Why is it society’s responsibility to take care of my health care problem? Why should our taxes be raised to provide health care insurance to someone who should provide it for himself?
The last time this person checked the American dream was if you worked hard enough you can achieve your dreams. Perhaps when white collar and professional classes start being affected directly, this will become a big issue? Perhaps “they” will use their money and influence to promote change and vote their own self interest? We shall see!
Robert and Gregory–
I agree with both of you.
And I think that as we head further into a deep recession, the upper-middle-class may begin to feel the same insecurity that many middle-class and working-class people now feel. That could, ultimately, lead to the social solidarity that we need to achieve true reform.
This of course is what happened in the 1930s when so many white collar workers and professionals lost their jobs. This led to Social Security and the New Deal. I just hope we
don’t have to go through something that approximates a 30s-style
Depression.. . .
But I do see $200 a barrel oil (slightly less than twice today’s price) in part because world demand will continue to grow, and world suppply can’t grow that quickly, and in part because I’m quite sure that at some point, oil producers will begin pricing oil in some currency other than the dollar.
The world’s losing faith in the dollar for a number of reasons, and from an oil producer’s point of view, it doesn’t make sense to continue to sell their product in a currency that is losing value.
If oil was priced in Euros today, we’d be paying about 50 percent more, in dollars. . .
This is just one reason why I see us heading into a long 1970s-style recession–if not a 1930s style depression.
Of course every recession/depression is different. But I hope that increased solidarity and some serious health care reform could be the silver lining this time around.
I think there are two separate issues here. The first relates to employers who do not offer health insurance because they can’t afford it and the second is low income employees who do not sign up for it because they believe that they can’t afford their share of the premium cost.
Taking the second issue first, employees know (or should know) that if they don’t sign up for health insurance when they are initially hired, they will have to demonstrate evidence of insurability if they want it later. Employers could address the employee affordability issue by moving to a sliding scale contribution instead of a flat monthly dollar amount or a straight percentage of the premium cost. Way back in 1990, my prior employer used a version of the sliding scale. Secretaries and others who, at the time, made less than $30K paid either nothing or $10 per month (I can’t remember precisely) while analysts (including me), portfolio managers, and executives who made $100K or more paid $250 per month. Most of us in the higher paid group thought the approach was perfectly fair and reasonable. A progressive percentage of income contribution from employees starting at 1% of income up to maybe 5% of income or 50% of the full employer’s premium cost (whichever is less) seems fair to me.
As for whether employers offer insurance or not, I would like to see an employer mandate requiring that insurance either be provided or pay, perhaps, 7%-8% of payroll into a central fund to help cover the cost of taxpayer provided subsidized coverage. For those who lose their job, are self-employed, work for very tiny businesses or retire before becoming Medicare eligible, they should be automatically eligible to purchase a taxpayer subsidized insurance plan for a premium scaled to income ranging from zero for income below 100% of the Federal Poverty Level (FPL) up to 10% of income (or the full premium cost if less) for those above 400% of the FPL. The availability of such an alternative would eliminate the problem of needing to continue to stay in a job or delay retirement solely because you need the employer provided health insurance and don’t have any practical alternative for securing insurance at an affordable cost.
WHO IS ECONOMIC POLICY INSTITUTE?
http://www.epi.org/content.cfm/about
” .. EPI was founded by a group of economic policy experts that includes Jeff Faux, EPI’s first president; economist Barry Bluestone of Northeastern University; Robert Kuttner, columnist for Business Week and Newsweek and editor of The American Prospect; Ray Marshall, former U.S. Secretary of Labor and professor at the LBJ School of Public Affairs, University of Texas-Austin; Robert Reich, former U.S. secretary of labor and professor at Brandeis University; and economist Lester Thurow of the MIT Sloan School of Management.”
All Democrats. Wow. What a revelation.
Facts is hard.
My business is already spending 11% of payroll to provide our employee’s with group health insurance, which still leaves a small deficit for employees to subsidize. With a 35% federal corporate tax rate, 7% payroll tax for social security & Medicare, PLUS state unemployment taxes, PLUS state and local corporate income taxes, it is difficult to imagine being taxed out of viability, especially in current economic conditions. Just to remind you, only a profitable organization sustains the level of growth necessary to create jobs and increase shareholder equity, which directly impacts the retirement funds upon which the majority of American rely for retirement at ANY age. Perhaps a more prudent approach might look at a more efficient reallocation of bloated government spending rather furthering the corporate tax burden. The word “corporation”, my friends, is just another word for a large network of people like you and me who need their jobs to survive.
Nice post
Barry, Diogenes, Jennifer and Anna–
Barry, I agree that employees should pay for insurance on a sliding scale, based on income–and that there should be a public sector alternative available for those who don’t have employer sponosred insurance.
Jennifer– On the whole question of whether employers should be paying into an insurance pool, or insuring their own employees I think it varies by company.
Some smaller labor-intensive companies really can’t afford to insure their employees–at least not at today’s rates.
Some provision needs to be made for assessing different employers at different rates based on proitability, how long they’ve been in business (start-ups don’t have the deep pockets); how labor intensive they are, etc. . .
Diogenes– Google Bernstein and EPI and you’ll find that when he writes something for the New York Times, he’ll describe EPI as a non-profit research institute that often supports Democratic candidates.
Others describe EPI as “liberal-leaning.”
It’s considered on the liberal side of the mainstream. And I don’t know of anyone who questions EPIs numbers.
(Different people might look at the same numbers and come to a different conclusion as to what should be done. But the numbers are clean.)
Anna– Thank you.
Barry, Diogenes, Jennifer and Anna–
Barry, I agree that employees should pay for insurance on a sliding scale, based on income–and that there should be a public sector alternative available for those who don’t have employer sponosred insurance.
Jennifer– On the whole question of whether employers should be paying into an insurance pool, or insuring their own employees I think it varies by company.
Some smaller labor-intensive companies really can’t afford to insure their employees–at least not at today’s rates.
Some provision needs to be made for assessing different employers at different rates based on proitability, how long they’ve been in business (start-ups don’t have the deep pockets); how labor intensive they are, etc. . .
Diogenes– Google Bernstein and EPI and you’ll find that when he writes something for the New York Times, he’ll describe EPI as a non-profit research institute that often supports Democratic candidates.
Others describe EPI as “liberal-leaning.”
It’s considered on the liberal side of the mainstream. And I don’t know of anyone who questions EPIs numbers.
(Different people might look at the same numbers and come to a different conclusion as to what should be done. But the numbers are clean.)
Anna– Thank you.
It is alarming that the percentage of U.S. employees with provided health insurance is decreasing. Costs are skyrocketing but we need insurance.
Something needs to be done about the rising cost of … everything.
Billy–
You are right. We are facing inflation in all of the essential of life– food, healthcare, oil, gasoline–and water is becoming scarce.
That’s why we need to get on top of making sure that the necessities are distributed equitably, and that no one is gouging.
insurance policies done by the employers varies from company to company. by the way this is also true that the working class need to take care of their own health insurance policies.
I was double covered through my plan and work and my spouse’s plan at his job. But, I just lost my employer funded health insurance. This was employer effort to save money. Luckily, I got small raise in pay…but only about one third of what my health insurance cost. My boss got 10k raise, which will help reimburse him for his new insurance through his spouse’s company plan.
I’m ready for Canadian-style single payer health care for ALL.
i still think it is good to hold on the job. and for the health care insurance , i am not sure it is still safe.
http://www.enjoygolds.com/dfo-gold.html
aion money
Companies just keep dropping people from their insurance plans? Using what theoretical reason? This stuff is getting so ridiculous, I swear…
-Samuel