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In April 2006, the headlines on Boston's Beacon Hill read like this:
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"Massachusetts Plan Gives All Residents Access to Health Insurance."
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"Lower-Income Residents Will Receive Premium Subsidies."
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"Employers, Individuals Face Levies If They Lack Coverage."
And in coming years, there may be even bigger news for workers nationwide if their states adopt reforms similar to those passed by the Massachusetts legislature and signed by former Governor Mitt Romney, prompting headlines that might read: "With Health Insurance a Given, Workers Feel Freer to Change Employers."
The push to reform employer-provided health insurance goes beyond the Bay State. California, Arizona, New Mexico and Oregon are considering universal healthcare coverage systems, and about half of US states are debating laws that would require some large employers to insure workers.
Indeed, if Massachusetts reform and similar efforts elsewhere succeed, American workers may see the beginning of the end of their reliance on employers as health insurance providers. Such a trend could give workers considerably more leverage with their employers as well as mobility in the labor economy.
How Massachusetts Health Reform Could Affect Employers
After the Massachusetts reform law takes effect in July 2007, it is likely to give more workers access to health insurance through their employers, because companies will be able to provide access to the state plan at almost no administrative cost, experts say.
And with companies facing a fee of up to $295 for each uninsured employee, "employers will be pressured to create cafeteria-style plans, at least," says Arnold Kling, an economist and author of Crisis of Abundance: Rethinking How We Pay for Healthcare, published by the Cato Institute, nonprofit public policy research foundation.
"A lot of employers have workers who haven't signed on because of the premium costs," says John Thorbahn, president of Thorbahn Associates, a benefits consulting firm. "The Massachusetts plan will force more workers onto the plan, so employers have to be imaginative in the range of benefits they offer." For example, workers in their teens and 20s may prefer a plan with relatively low premiums and high deductibles.
"Will employer costs rise?" asks Thorbahn. "I don't think so." Many healthcare experts believe bringing uninsured people into the system will lower costs in the long run by providing access to primary and preventative care.
On the other hand, if employers believe costs are rising too rapidly under the plan because they're contributing for more employees, they could reduce their contributions and leave middle-income workers -- many of whom won't be eligible for a state subsidy -- stuck with the full premium bill. "Employers could drop coverage in droves and stick it to their workers," says Brian Rosman, director of policy at Health Care for All in Boston. "It's an experiment."
Health Insurance Could Become Separate from Employment
Experts say middle- and high-income residents who don't qualify for a state subsidy could still benefit. "For people who have to buy on the individual market, the law lets them get group rates, which should save about 25 percent, and pay with pretax dollars," says Rosman.
Is the Massachusetts plan a step toward removing employers from their role as health insurance providers? "It definitely could be," says Devon Herrick, a senior fellow for the National Center for Policy Analysis in Dallas. "The decoupling process can be painful for employees if they don't understand that health insurance isn't free -- it's part of their wages."
Under the new law, when workers have a chronic illness or consider a job with a new company that provides no insurance for the first six months, they have a disincentive to leave their current company. But "if we do ultimately go away from employer-based health insurance, presumably you do increase labor mobility, and benefits become less of an issue for workers," says Kling.
The big question: Will the Massachusetts plan -- with all its complexities -- really cover almost all uninsured workers? "We're not as optimistic as [former Governor Romney], who says that 95 percent of the uninsured will get coverage," says Rosman. "But we think two-thirds to 85 percent will. It does depend on continuing state funding."
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