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February 25, 2013

Employer Provided Insurance System Continues to Erode

Posted in: healthcare

The number of Americans that get their health insurance through their employer continues to shrink. According to Gallup in 2011 44.6 percent of Americans got insurance from their employer and in 2012 it dropped to 44.5 percent. While overall the drop is small it more significant if you look only at non-government employees. From Gallup:

Health Insurance Coverage Among Workers Who Work for a Non-Government Employer

Even though the official unemployment rate drop by a point over the last year there has not been a turn around in the number of Americans with employer provide insurance. The employer provide insurance “system” eroded quickly during the economy crash but has continuing to erode even during the weak recovery.

We will need to wait to see what impact the Affordable Care Act has on this trend but most likely it slightly accelerated it. The CBO expect the ACA to cause at least a small reduction in employer provided insurance, but their estimates are subject to significant uncertainty. The simple fact is that many of the elements of the ACA including the excise tax on high end plans, the weak employer mandate, and individual market reforms modestly incentive companies to move away for providing insurance.

One important part of this trend if it keeps up is that it will move more of our overall health care spending from technically off the federal budget to on it. Employer provide insurance is subsidize by being tax exemption. In Washington that is viewed as simply low taxes not “spending.” Having people instead get subsidies on exchanges or Medicaid though will be viewed as government spending. As a result people in certain incomes could move from employer provide insurance to the exchanges without it have much of a net effect on the deficit but it would still look like an increase in overall government spending.

This accounting shift shouldn’t be that important except Washington treats de facto subsidies hidden in the tax code very differently than “government spending” on direct subsidies. The Republican party is dedicated to defending one at all cost while fighting the other.


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