The Health Care Status Quo is Not Stable

The recession is accelerating the movement away from employer based health insurance:

How the Recession is Killing Private Social Insurance, by Noam Scheiber: The Wall Street Journal has a terrific piece today about how the recession is accelerating the fraying the post-World War II compact between workers and employers (which has, of course, been fraying for several decades now). Key nugget:

Two-thirds of big companies that cut health-care benefits don’t plan to restore them to pre-recession levels, they recently told consulting firm Watson Wyatt. When the firm asked companies that have trimmed retirement benefits when they expect to restore them, fewer than half said they would do so within a year, and 8% said they didn’t expect to ever.

Overall, the story really just affirms the president’s central mantra on health care reform–that is, a rejection of the idea that the health care status quo is stable (if less than ideal). In fact, as Obama has stressed, the status quo gets significantly worse every year. From the Journal story:

Employers that offer health insurance spend an average of $6,700 per employee on it this year, nearly twice as much as in 2001, according to consulting firm Hewitt Associates. …

The percentage of employers offering health-care benefits is 60% this year, down from 63% in 2008 and 69% in 2000, according to the Kaiser Family Foundation.

In a survey by Hewitt last winter, 19% of large employers said they planned to move away from directly sponsoring health-care benefits over the next five years.

In the meantime, workers’ share of health costs is headed up. For next year, 63% of employers that offer health coverage plan to increase employees’ share of the expense, according to a survey … by another consulting firm, Mercer.

For what it’s worth, the pension portions of the piece are pretty interesting, too.

If the government doesn’t step in with an effective reform package, a lot of people who thought their health insurance would be there when they need it are in for a surprise.

About Mark Thoma 243 Articles

Affiliation: University of Oregon

Mark Thoma is a member of the Economics Department at the University of Oregon. He joined the UO faculty in 1987 and served as head of the Economics Department for five years. His research examines the effects that changes in monetary policy have on inflation, output, unemployment, interest rates and other macroeconomic variables with a focus on asymmetries in the response of these variables to policy changes, and on changes in the relationship between policy and the economy over time. He has also conducted research in other areas such as the relationship between the political party in power, and macroeconomic outcomes and using macroeconomic tools to predict transportation flows. He received his doctorate from Washington State University.

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