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Job insecurity = health insurance insecurity

Chris Farrell Jan 5, 2012

It goes without saying that healthcare reform is controversial. The race for the White House is in full swing. Obama’s healthcare legislation — Patient Protection and Affordable Care Act — was signed into law on March 23, 2010. It’s Obama’s signature legislation. The Republicans vying for their party’s nomination are in agreement: Repeal it. The Supreme Court will issue a ruling on the constitutionality of the Affordable Care Act — or at least parts of it — sometime this year. 

Supreme Court

The pressure for healthcare reform won’t go away whatever the outcome of the election and the ruling by the Supremes. High health care costs are eating away at household budgets. Health expenses are the federal government’s long-term budget problem. Too many people remain vulnerable to losing their health insurance when they lose their job.

For instance, some 9.3 million adults lost their health insurance due to higher unemployment alone during the 2007-2009 recession. That’s a sobering result from The Impact of the Macroeconomy on Health Insurance Coverage: Evidence from the Great Recession by John Cawley (Cornell), Asako S. Moriya (Carnegie Mellon) and Kosali Simon (Indiana University).  

What’s more, the scholars estimate that the ranks of those who lost their jobs (and therefore their health insurance) were roughly nine times greater than the experience of the previous recession in 2001.

Job eekers

The relationship between unemployment and lost health insurance was strongest among college-educated, white and older (50 to 64) men.

These are dismaying numbers. Talk about a double whammy. The vulnerability of workers to losing their health insurance along with their job should go down once the Affordable Care Act is in place, say the scholars.  

In the future, the reforms passed by the U.S. Congress in the 2010 Patient Protection and Affordable Care Act (PPACA) will likely moderate the impact of the unemployment rate on the probability of insurance coverage. The PPACA offers incentives for employers to offer, and individuals to take up, coverage; provides subsidies for coverage of low-income families through public and private policies; and changes the regulation of health insurance prices in the individual market. Many features of the law are expected to cushion the impact of future recessions on health insurance coverage, particularly for adults. For example, the availability of well-functioning markets (“exchanges”) for individual insurance together with limits on raising premia with age could reduce the impact of recession on the health insurance status of older workers.

Clearly, the Affordable Care Act is an improvement over the current frayed patchwork quilt of coverage. However, the act doesn’t go far enough because it preserves the link between healthcare insurance and employment. 

When it comes to understanding the current U.S. health care system, the key turning point was World War II. Wages were frozen but not employer contributions to health insurance (and other benefits). Companies bid for scarce labor by improving medical benefits for their employees. Close to 60 percent of working families now have some kind of company provided coverage.

In essence, the Affordable Care Act preserves this employer-based system. Little wonder considering it’s modeled on a blueprint promoted by the Heritage Foundation in 1999 and brought into reality in Massachusetts in late 2004 by Mitt Romney, then the state’s Republican governor. (Forget all the incendiary language about the bill. The Affordable Care Act was a centrist bill that took ideas from the moderate wing of the Republican Party and merged them with mainstream technocratic healthcare insights.)

Problem is, an employer-based system is fundamentally inefficient and inequitable. Even though workers don’t own the plan, they pay the full cost of the benefit through reduced wages. Healthcare costs weigh on management’s hiring, firing and promotion decisions. The cost pressures will continue to rise.

The solution that will be pushed by conservative and liberal experts to their Republican and Democratic audiences will be to attach healthcare insurance to the individual. Most health care experts have long advocated severing the tie between employment and health insurance. It won’t happen quickly, especially not in an election year. But it will with time. The U.S. political system may be messy and noisy, but it has also proven itself to be highly flexible and adaptable. As Winston Churchill famously remarked, “You can always count on Americans to do the right thing — after they’ve tried everything else.”

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