Monday, May 21, 2018
Business

Businesses may quickly abandon health insurance for workers, report suggests

The days of Americans getting health insurance through their employers may be numbered.

As the Affordable Care Act goes from thousands of pages of legalese to real-life public policy, the future of employer-provided health insurance is one of the most fascinating questions. Will employers call for, and their workers accept, the practice of buying health insurance through government exchanges? How much will companies save, and will they pass those savings on to employees? Will it make workers more mobile and ready to shift jobs, or will employer-paid health insurance become a sought-after perk?

The answers go to the heart of how things work in a sector that is one-eighth of the American economy. A new report gives some hints of how large the impact might be.

By 2020, about 90 percent of American workers who now receive health insurance through their employers will be shifted to government exchanges created by the health law, according to a projection by S&P Capital IQ, a research firm serving the financial industry.

It's not an outlandish notion. Ezekiel Emanuel, an architect of the Affordable Care Act, has long predicted a similar shift.

But the scope and speed of the shift are surprising. So is the amount of money that companies could save. The S&P researchers tried to estimate what it would save the biggest American companies. Their answer: $700 billion between 2016 and 2025, or about 4 percent of the total value of those companies. The total could reach $3.25 trillion for all companies with more than 50 employees.

They assume those savings will accrue to companies' bottom lines, though there are also compelling reasons to think that some of those savings would end up in the pockets of American workers in the form of higher wages or other benefits.

The idea is this: Now that federal and state exchanges exist where anyone, even those with pre-existing illnesses, can gain coverage, employers might decide to give their workers a stipend to pay for health insurance on the exchanges rather than sponsor a plan themselves.

In truth, the American system of health care, in which most people get their private health insurance through their employer, has always been rather odd. Why should quitting a job also mean you have to get a new health insurance plan? Why should your boss get to decide what options you have and negotiate the cost of them? Employers don't get to select our auto insurance or mortgage company, so why should health insurance be any different?

If there is uncertainty around how the employer-provided health insurance system will evolve, there is even more around who will ultimately pay the bill. It could be the federal government, via insurance subsidies, or individuals who must pay for more of their health care. In a perfect world, lower costs would come from a more efficient system that provides better care at lower costs. But no one knows what the actual system of, say, 2025 will look like, any more than people could have foreseen the decline of pensions when the 401(k) option was added to the tax code.

Michael G. Thompson, managing director at S&P Capital IQ, argues that the parallel with defined-benefit pension plans is an apt one. For decades, those plans were a major benefit offered by large employers. But as other options became available that allowed employers to more cheaply provide retirement benefits with fewer administrative headaches, which 401(k)s provided, employers shifted to 401(k)s en masse.

"We still expect some companies to hold on to their health care plans, just as some private companies still have pensions," Thompson said. "But we think that the tax incentives for employer-driven insurance are not enough to offset the incentives for companies to transition people over to exchanges and have them be more autonomous around management of their own health care."

The advantages are particularly clear for companies with lower-paid workers, who may be eligible for federal subsidies under the Affordable Care Act aimed at those employees making up to 400 percent of the poverty line.

Not everyone is so sure. Employers may not love the administrative challenges of administering a health plan, but they have been offering these plans voluntarily for decades, because employees value the perk. An employer who backs away from offering a health insurance plan directly, instead sending workers to the exchanges, may lose a competitive advantage in hiring. (Yet companies' experience with substituting 401(k)s for pensions may have taught them that employees had little choice in the transition, and just accepted it.)

There is another strong reason that employers might not rush for the exits. When an employer subsidizes a worker's health insurance plan directly, the subsidy is tax-free to the employee. So the employer is effectively getting more bang for the buck in its total compensation. If an employer gives its workers extra pay to help them buy health insurance on an exchange, that money is taxable income.

Add to that a $2,000 per-worker annual penalty that the Affordable Care Act charges large employers that do not provide insurance, and the pathway toward employers dropping coverage may not be as short and direct as the S&P researchers suggest.

"For most firms, there isn't a net gain to dropping coverage for active workers," said David Cutler, a health economist at Harvard who advised the Obama administration in writing the law. "The subsidies are more than offset by the higher taxes workers will pay."

The story may be different, Cutler added, for retirees. Where now many employers pay for health insurance for retirees not yet eligible for Medicare, that may change.

Comments
Starbucks: You donít have to buy coffee to sit in our cafes or use our restrooms

Starbucks: You donít have to buy coffee to sit in our cafes or use our restrooms

Starbucks is now allowing people to use its restrooms and sit in its cafes and patios even if they do not buy anything.The coffee giant on Saturday announced its new policy, which says that customers, including those who did not make a purchase, can ...
Updated: 2 hours ago
Camping without the hassle: New service rents you all the gear you need, plus the car

Camping without the hassle: New service rents you all the gear you need, plus the car

One day in April, I returned from a camping trip - a quick 24 out of the city - and ran a load of laundry. Whatís more telling is what I didnít do.I didnít hose down a muddy tent, I didnít soak a shoddily cleaned pot, and I categorically did not empt...
Published: 05/19/18
Romano: Save your money, sports betting wonít be in Florida anytime soon

Romano: Save your money, sports betting wonít be in Florida anytime soon

It is the middle of the day and the beginning of the off-season at Tampa Bay Downs. That means the action is limited to simulcast wagering, and that means the televisions outnumber the bettors.The parimutuel industry is long past its heyday in Americ...
Published: 05/19/18
Son of Crabby Billís founder leaves complex legacy of troubled projects and good deeds

Son of Crabby Billís founder leaves complex legacy of troubled projects and good deeds

SOUTH PASADENA ó Like his father, who founded the Crabby Billís seafood restaurant chain, John Loder Sr. had a larger-than-life personality. That was one reason he dived into the real estate business, becoming a well-known, if at times controversial ...
Updated: 9 minutes ago
Global Tampa Bay initiative seeks to grow direct foreign investment through expanded regional teamwork

Global Tampa Bay initiative seeks to grow direct foreign investment through expanded regional teamwork

TAMPA ó A decade ago, the Great Recession put Hillsborough and Pinellas countiesí efforts to grow their foreign exports on hold.But since then those efforts have returned, gained support and momentum, expanded the range of their ambition and are now ...
Updated: 5 hours ago
Florida unemployment holds at 3.9 percent, state adds 9,600 jobs

Florida unemployment holds at 3.9 percent, state adds 9,600 jobs

Floridaís economy appears to have plateaued with its unemployment rate holding at 3.9 percent for the seventh straight month, according to the April report released Friday.But some economists say it may be a good thing if the rate doesnít fall much m...
Published: 05/18/18
Lawsuit over Riverwalk Place tower in downtown Tampa settled

Lawsuit over Riverwalk Place tower in downtown Tampa settled

TAMPA ó A lawsuit over the mix of residences and offices in the planned $350 million Riverwalk Place tower has been dropped.Last August, Riverwalk Tower Investment-Intown LLC, which had been expected to be one of the developers in the project, filed ...
Published: 05/18/18
Orlandoís new attractions power jump in theme park attendance

Orlandoís new attractions power jump in theme park attendance

By MIKE SCHNEIDERORLANDO ó The arms race to build new theme park attractions in Orlando is paying dividends. A new report released this week shows theme park attendance at the largest parks in North America last year was up 2.3 percent, powered by ne...
Published: 05/18/18
How Mosaicís relocation could help Tampa International Airport land a flight to Brazil

How Mosaicís relocation could help Tampa International Airport land a flight to Brazil

Tampa International covets a nonstop flight to S„o Paulo, Brazil. Mosaic Co, which is moving its headquarters to Hillsborough County, has huge holdings in the country, including several mines. Could Mosaicís relocation help TIA realize its dream? It ...
Published: 05/18/18
Remember that upscale Guy Harvey RV resort near Tarpon Springs. Forget the Guy Harvey part

Remember that upscale Guy Harvey RV resort near Tarpon Springs. Forget the Guy Harvey part

HOLIDAY ó A year ago this month, Guy Harvey Outpost Resorts announced plans for its first-ever RV park, near Tarpon Springs where the Anclote River empties into the Gulf of Mexico.The $35 million resort, named after the popular Jamaican marine artist...
Published: 05/18/18