A defense of employer-linked health insurance

by on September 20, 2007 at 4:49 am in Medicine | Permalink

The employer-based system provides a tremendous service to workers by providing a buffer between the plan administrator or insurer and the workers and their families.  The employer helps the employee navigate the system, is an advocate for the worker and frequently assists with claim appeals and disputes, not to mention assuring that premiums are efficiently collected.  Employers are also leading the charge on the health and wellness front.  Employers who seek to abandon this system out of hand should consider the consequences of having thousands of workers taking the time (on the job) to resolve the many issues and problems that will continue to occur under any insured scheme, but now with individuals left to navigate the system on their own.

I have been an employee-benefits professional for nearly 46 years and have worked with thousands of employees on every kind of health-care issue imaginable under every type of health-care plan.  Most of the problems are created by the patients and the health-care providers, not the dreaded insurance company.  That is unlikely to change.

That is Richard Quinn, of Verona, New Jersey, in a letter to The Wall Street Journal, Sept. 15, p.A7.  On net, I do not agree with this opinion, but this perspective is too often neglected in health care debates.

1 Archit September 20, 2007 at 6:55 am

Why would employers offer this service? If it is to keep employees from leaving, then Quinn’s theory doesn’t make a lot of sense. If employers are competing on this dimensions, independent health care plans would be forced to compete along this dimension since the switching costs are lower. Switching jobs is a big deal, switching health insurance providers less so. So, this doesn’t strike me as a vote in favor of employer-linked health insurance. Unless it has something to do with an independent interest the employer has in the employee’s health, but that doesn’t sound like Quinn’s point.

2 sa September 20, 2007 at 7:24 am

Barry, do note that he’s pretty much done with his work life.

It’s an interesting point. But the present system a direct consequence of the incentives insurance companies faced. Faced with optimizing comlexity, cost ,coverage,etc. they chose to ignore complexity knowing precisely that employers would sort through the complexity for their employees. In the future, insurance comapnies might focus on minimizing complexity if they have to deal with more individual customers.

3 odograph September 20, 2007 at 7:57 am

He’s telling a truth though, that insurance companies are more responsive to “group policies” than individual, because a group represents much more income than an individual. Yes, he no doubt has skills, but he also has greater bargaining power, financial leverage.

“treat this person right, or 200 people are leaving.”

4 bingo September 20, 2007 at 9:04 am

In the present heatlh care finance system it is difficult to argue against the utility of large employers providing this “ombudsman” service for their employees as there is no incentive for the insurance companies to be responsive to any but the largest employers, the largest purchasers of insurance. However, in a truly open insurance market where the sellers of health insurance must compete for business on a national scale they will be able to sell a product that has a much higher profit marging if they provide customer service that replaces this employer “ombusdman” service. Not unlike the service contracts one can purchase at Best Buy on your IPod, the insurance companies will rapidly discover that the profitablility in these “premium policies” is high. The market will fill in for what the employers now provide; this is not a reason to prolong the employer-provided health insurance system.

For what is’s worth, in the second paragraph the writer lays the majority of blame for the “problems” on the patients and the doctors. This is balderdash. The original disease is the onerous and purposefully confusing and inconsitent set of insurance company regulations and rules, as well as their equally irrational and inconsistent application by the insurance company. The difficulty that patients and doctors have in navigating these issues is simply the symptom CAUSED BY the disease, the equivalent of “blaming the victim” in an assault trial. That second paragraph is quite offensive.

5 John Dewey September 20, 2007 at 9:35 am

bingo,

How are you ever going to get the 246 million people who have insurance coverage – private and public combined – to change the system they now enjoy? They are not going to believe any individual policy system – the experiment you suggest we try – will be better than what they now have. I’ve got much more economic sense than the typical American and I don’t believe it.

Would any serious national politician even propose eliminating either employer linked health insurance or medicare?

6 john Dewey September 20, 2007 at 9:42 am

sean: “This service does not need to be linked to an employee. Groups of private individuals could pool resources and hire a full-time administrator if they choose.”

They could, but they haven’t been very successful so far. If that’s what consumers wanted, they would demand it.

sean: “From my perspective these plan administrators are acting to limit my choices due to the budget concerns of my employer.”

Perhaps, but by and large employees know they get a better deal through their employer. I’ve talked with human resources recruiters about this. Just about every prospective employee wants to know about the company’s health insurance benefit. That’s a major factor for them.

7 john dewey September 20, 2007 at 9:52 am

“I’ve heard a lot of anectodal evidence that employers are cutting way back on providing this go-between service.”

What go between service do you mean?

Helping employees navigate the system? The internet sites of health insurance providers now provide effective navigation tools. My experience has always been that coworkers informally provide the best advice about working the system.

Negotiating rates? Employers haven’t stopped doing that.

Collection of premiums? Nope, still being done through payroll deductions.

Assisting with claim disputes? I wouldn’t know. I wasn’t aware that employers ever did this on an individual level. At two of my employers – in pre-internet days – the insurance company provided on-site, face-to-face assistance with claims disputes.

8 John Dewey September 20, 2007 at 10:18 am

mobile: “What if the link between employment and insurance was severed”

Not going to happen any time soon. With a few exceptions, employees are satisfied with their insurance coverage today. A recent national survey found that over 90% of those insured by employer-linked insurance are either “highly satisfied” or “satisfied” with their health insurance.

WilsonRX Insurance Survey

It is true that VA and medicare enrollees have slightly higher ratings than employees of large firms. But the difference is slight, and may have much to do with the populations being covered. VA and Medicare do not cover children. My experience has been that parents are much more concerned about their children’s health benefirts than about their own.

9 bingo September 20, 2007 at 11:09 am

John Dewey: “How are you ever going to get the 246 million people who have health insurance…?”

Employers and their employees will always have the option of maintaining the present system, but haven’t we heard from quite a few large employers that they simply cannot afford to continue to fund the cost of health care for their employees? Isn’t this a discussion about how the system of health care finance in the U.S. can change or evolve so that we can enable each citizen and legal alien to purchase necessary health care without bankrupting either the national economy or large groups of businesses or individuals? Retaining the option of continuing uder a plan similar to what exists now will allow some part of that 246 million to ease into whatever system arises. That system will involve either more open contribution by patients or more difficulty gaining access to care or both (but not neither). It has to happen.

And John, have you really discussed happiness with large groups of individuals who are covered by public programs? Some of the most unhappy people in the U.S. are people covered by Medicare, even though this program is available to all and imposes no limit on participation or access to care. People covered by Medicaid simply live in a totally separate medical world, isolated and apart from those who are covered by private insurance or Medicare. THEY are not answering surveys with 90+% satisfaction rates I’m afraid.

Jump in, float an idea, a solution. Propose a way out of the financial spiral in health care. Or if you prefer to simply sit on the sidelines and armchair quarterback other people’s ideas state clearly WHY you disagree and then support your position.

10 John Dewey September 20, 2007 at 11:36 am

bingo: “but haven’t we heard from quite a few large employers that they simply cannot afford to continue to fund the cost of health care for their employees? “

Been hearing that for a couple of decades. Yet the number of insured persons in the U.S. has increased, according to the U.S. Census Bureau:

Persons with health insurance coverage

1990 – 216,177
1995 – 223,733
2000 – 237,824
2005 – 246,369

Health insurance coverage

bingo: “Some of the most unhappy people in the U.S. are people covered by Medicare … THEY are not answering surveys with 90+% satisfaction rates I’m afraid.”

Do you have a source for your assertion that Medicare enrollees are unhappy?

If you had followed the link I provided, you would see that 94% of those covered by Medicare are either “Highly Satisfied” or “Satisfied”.

11 Person September 20, 2007 at 12:20 pm

Sean and John_Dewey: The problem with making an arbitrary group to get health ins., or using an arbitrary
existing group, is that the insurer then has the leverage to put stringent “pre-existing condition” constraints
on new additions to the policy. In contrast, an employer has a genuine outside constraint on who he hires
(namely, who is qualfied to do the job), and that makes his insured pool “random enough” that he can negotiate
policies for people who might otherwise be rejected for a pre-existing condition.

In other words, to get this employer advantage, not just any large association will do.

12 John Dewey September 20, 2007 at 1:02 pm

Brian: “I’m confident that switching to individual coverage would be a significant improvement”

It may be an improvement for those who enjoy execllent health. It will be a disaster for those with costly health problems. I’m not sure a 60 year old with Type II diabetes could get individual coverage at any cost.

13 John Dewey September 20, 2007 at 3:08 pm

“The basic premise becomes purely academic unless one can explain why the free markets won’t reach an efficient solution.”

I agree, Ken. And I would offer this suggestion: perhaps free markets have already arrived at the desired solution. 246 million Americans have health insurance coverage. According to a national survey, about 93% of them are satisfied with their insurance program. It’s entirely possible the other 50 million do not value health insurance enough to obtain it. Of course, that’s not true for the children whose decision is made for them.

14 Russell L. Carter September 20, 2007 at 3:40 pm

“Mr. Carter, I am the owner of a small company. I do provide my full time employees with health care insurance. It has a much higher deductible than the plan of my very large employer. My employees are free to seek employment at large companies if they wish.”

John Dewey, you’ve just described the issue’s economics accurately, and in your further comments you’re largely incoherent. What you’re in favor of is continued acceptance of an enormous advantage for large enough companies that was originally installed by the market in response to simpleminded government price controls. There is no way that small enough associations can get health care comparable to that of those companies, and “small enough” extends right on down to possibly unemployed individuals with preexisting conditions. As long as you believe in the value of small business (and evidently you do, as you claim you’re a small business owner), there is no rational economic basis for imposing large penalties on smaller sized businesses.

I’m a long time small business owner and employee, and it is almost impossible (as you well know) to effectively compete for quality talent in the high tech market with today’s stupid healthcare funding “system”.

15 John Dewey September 20, 2007 at 4:12 pm

I get confused by mpowell’s reference to the Clinton healthcare proposal. I wasn’t aware we were even talking about that. At least I cannot find the word “Clinton” on this post or in any of its comments.

I completely disagree with mpowell’s suggestion that we will likely get Clinton’s healthcare proposal enacted as law.

16 John Dewey September 20, 2007 at 4:26 pm

“What you’re in favor of is continued acceptance of an enormous advantage for large enough companies that was originally installed by the market in response to simpleminded government price controls. “

I don’t really care what the rationale was for this system we now have. What really should matter to you is whether or not there is any chance in hell of it going away. Americans are satisfied with their employer-provided health care, as the link I provided shows. There are enough voters covered by such plans that those plans just simply not going to be legislated away.

“it is almost impossible (as you well know) to effectively compete for quality talent”

I am sorry you feel you are unable to compete for quality talent. I am positive that other small businesses can compete. Many of today’s large companies were small companies that operated within that system you call “stupid”. Somehow they managed to attract the necessary talent.

Russell, the big guys have enormous advantages across many fronts. Yet the giant-killers continue to surface. Wal-Mart, Southwest Airlines, Dell, and FedEx were nowhere near the size of Sears, American Airlines, IBM, and USPS. Yet each one found a way to succeed.

17 thehova September 20, 2007 at 5:11 pm

The comment made above about most companies poor choices in funding their employees 401k’s is pertinent.

Companies should not be in the business of managing their employees retirement accounts and health care options.

large companies have leverage. But do they do a good job?

does GM do a good in managing their employees’ health care? Does Walmart do a good job? I don’t think so. walmart underfunds while GM overfunds.

18 John Dewey September 20, 2007 at 5:42 pm

“Those with costly health problems don’t need insurance (which by definition they can’t get, since insurance protects against *unexpected* costs), but they may need welfare.”

I don’t think you understand what I mean. An example: diabetes is a potential costly health problem. Diabetics do need health insurance. In most states diabetes is considered an “uninsurable” condition, and insurance companies can deny coverage to individuals. But diabetics are guaranteed the same coverage granted to other employees where insurance is provided.

If a diabetic loses his job, he can get another one. I think it is illegal for an employer to even ask about such a medical condition in an employment interview.

19 bingo September 20, 2007 at 6:16 pm

John Dewey:

I am enjoying the discussion, enjoying the depth of thinking necessary to engage your ideas and thoughts.

My comment that you are unlikely to get 90+% positive responses was in relation to MEDICAID, which on a second reading of my post still seems to be the way that it reads. MEDICAID patients have severe access problems, and when they do obtain access to care it is often under unpleasant conditions. MEDICAID patients are not reporting 96% positive on surveys about their health coverage.

In an on-going, unpublished survey of approximately 200 MEDICARE patients/month in a boutique medical specialty clinic, approximately 15% or them are extremely unhappy with their insurance coverage. Hence “some of the most unhappy people in America are those covered by medicare.” Perhaps we should formalize this and publish it.

Listen, if you have what we now call health insurance (which is really part insurance and part a pre-paid service plan) which is presently paid for by your employer, and you are unaware of the amount of money your employer is paying for your “insurance” that is otherwise potentially income for you, of course you will vote for the status quo. But isn’t this a conversation, at its core, about how to reform our system of health care finance so that we can prevent those individuals who do not have “insurance” and also cannot get adequate care the care that they need, while also improving the health of our citizens? The employer-coupled financing of health care, along with the open-ended committment inherent in MEDICARE is spiralling out of control. How does employer-coupled health coverage overcome its faults and solve the problem?

20 John Dewey September 20, 2007 at 7:06 pm

oes employer-coupled health coverage overcome its faults and solve the problem?”

What faults? I don’t understand. Employers offer health insurance to attract and retain workers. It’s working exactly as they wish it to work. 92% of those in employer-coupled insurance plans are satisfied. Why would anyone want to screw that up?

Medicare is not a problem of the employer-coupled insurance plans. It’s a problem of government interference in free markets. Employer-coupled insurance plans predate Medicare.

If … you are unaware of the amount of money your employer is paying for your “insurance” that is otherwise potentially income for you, of course you will vote for the status quo.”

Why do you guys always assume that everyone else is ignorant? I think unions who negotiate on behalf of their members are well aware of the trade-off between insurance and wages. I think anyone who has considered leaving or has left a company is aware of Cobra cost of health insurance. Anyone who has purchased or considered purchasing an individual policy knows what that would cost. And people do talk to each other.

It’s more than just money, brian. Employees know that their employer is looking out for them. If the employee plays by the rules, the insurance company is not going to screw him. That’s because the employer has an interest in keeping employees healthy and content.

dobedo says he “can do without corporate paternalism”. Fine. That’s his preference. But it’s not the choice of millions of Americans who hare happy with what they’ve got.

21 John Dewey September 20, 2007 at 8:06 pm

the hove: “you celebrate the leveraging power of larger companies while arguing that smaller companies are not adversely effected because Fed X, Microsoft, and Walmart were able to surmount the disadvantage of once being small. “

Sorry, but I never said “smaller companies are not adversely affected”. In fact, I said those companies found a way to succeed despite the advantages possessed by the larger companies. And they are not exceptions. Thousands and thousands of small companies thrive in the current environment.

the hova: “but what could have been if government health care policies were more friendly to smaller businesses.

I don’t understand. How were government health policies unfriendly to smaller businesses? Are you arguing that government should allow small companies to deduct the cost of health insurance but not allow large companies to do so? Do you want government to force insurance companies to give small firms the same rates as large firms? That’s not libertarian, is it?

“Larger companies create policies which reduce the amount of people they have to insure (from hiring temps., to hiring as many part time employees as possible).

And how is that wrong? or inconsistent with your libertarian values?

Just because health insurance is deductible, that doesn’t mean large companies have to permanently hire as many people as you think they should. Furthermore, those temporary and parttime employees were free to find permanent jobs that offerred health insurance, weren’t they?

“I strongly disagree with your contention that the country is happy with the current situation.

Feel free to disagree as strongly and as many times as you wish. The survey to which I linked is the only one I’ve seen that reports the level of satisfaction with health insurance. Do you know of another one?

22 Russell L. Carter September 20, 2007 at 9:37 pm

“Many of today’s large companies were small companies that operated within that system you call “stupid”. Somehow they managed to attract the necessary talent.”

Ah, and now we know that “John Dewey” is dishonest and were he an owner of a successful small business would likely not have the time to sit down on a weekday and slog it out in the comments on a blog[1]. Systems evolve, circumstances change, which is precisely why I pointed out the origin story for employer based health insurance. There has been a real sea-change in the economics of small business health economics over the last decade and everyone who has had to deal with the changes thinks it sux. “John Dewey” I am betting is a paid troll.

[1] I’m in between contracts but one plopped in the inbox at 4pm yesterday that has already got me in prep.

23 Cyrus September 20, 2007 at 11:28 pm

This comment is purely functional.

24 John Dewey September 21, 2007 at 8:21 am

Russell Carter: “now we know that “John Dewey” is dishonest ”

How dare you call me a liar! You know nothing about me at all.

Russell Carter: “were he an owner of a successful small business would likely not have the time to sit down on a weekday”

I’m an owner of a small retail business in another state. I’m also wealthy enough that I’m able to turn most operations over to a competent employee. Again, how dare you call mne a liar!

Russell Carter: “”John Dewey” I am betting is a paid troll.”

You lose, Russell. Why would anyone pay someone to write arguments to the people on this blog anyway? There are far more efficient ways to influence people. Who would pay in the first place? The 246 million people who are satisfied with their health insurance? The thousands of employers who want to continue providing these benefits to their employees?

25 Marc September 21, 2007 at 11:17 am

At one point that may have been true, but with HIPAA, HR help is limited and most times not possible.

26 John Dewey September 21, 2007 at 3:17 pm

“maybe we could have a mandate that the employer cost of health insurance be listed on the pay stub as untaxed income, like Life insurance is now.”

That would make a lot of sense. I wonder who might object. Insurance companies might not want their negotiated premiums to be public knowledge.

“what was really being discussed was the lack of increase in take-home pay.”

You are so correct!

27 John Dewey September 22, 2007 at 6:42 am

Russell Carter,

You are weird. I have no idea what point you are making with such silly accusation.

I received no Email from you. I really don’t care to communicate with someone who accuses me of dishonesty, so please do not try again to send an email to me.

28 Amicus September 24, 2007 at 2:35 pm

The percentage of businesses offering health benefits to their workers dropped to 60 percent in 2005 from 69 percent in 2000, according to the latest annual report on employer-sponsored health insurance by the Kaiser Family Foundation and Health Research and Educational Trust.

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/04/26/MNGFEIFEGT1.DTL

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