Cecily O'Connor
RedwoodAge.com  

Baby boomers have been at their wits end with US health care for some time, and now it looks like big employers are frustrated enough that they could push for change.

Some associations representing employers’ interests are suggesting fundamental reforms to the current system of employment-based health insurance, according to new research by the Employee Benefit Research Institute, a  nonprofit research group.   

While large employers have no current plans to drop health benefits that doesn't mean they won't rethink offerings later. The study found that if one large employer axed its health benefits, others might follow suit for competitive reasons.   

“An evaluation of recent data does not suggest that the end of employment-based health benefits is upon us,” said the study’s author, Paul Fronstin , director of the EBRI health research and education program. “However, the message from some associations representing employers is that the existing employment-based system must be reformed because the status quo is unsustainable."

Various employer groups have suggested major reforms to the current system, initiatives that indicate they "are positioning themselves for the health care debate tied to a new presidency in 2009, and the prominence of the issue leading up to the 2008 election," according to the EBRI report.

The HR Policy Association, representing the chief human resource officers in large corporations, and the ERISA Industry Committee, representing employee benefit plans at large U.S. corporations, are among those currently developing a position on health care reform, EBRI noted. Meanwhile, the Business Roundtable and the National Federation of Independent Business have joined with AARP and the Service Employees International Union to encourage change.

Chronic Cost Problem
The vast majority of American workers and their families who have health insurance currently get it through their jobs. The employment-based health system in the U.S. is voluntary; employers are not required to provide it, and rapidly rising health costs are forcing many to reconsider benefits extended to workers. 

The baby boom population - now 43 to 61 - is expected to add more financial strain to the health care system as adults confront diseases associated with aging.

Health care costs continue to rise faster than inflation, while workers are paying more for health benefits today than they were in 2000. Premiums for employee-only coverage increased from $28 to $52 per month between 2000 and 2006, an 86 percent increase, and family coverage premiums increased from $138 to $248 per month, an 80 percent increase, EBRI found. In contrast, the consumer price index  increased by 17 percent between 2000 and 2006.

Even as costs rise, long-term access to health benefits is stable. The percentage of workers reporting they have health benefits through their job is largely unchanged from the mid-1990s and down only slightly from the late 1980s. In 2005, 74 percent of workers who were not self-employed reported they were eligible for health benefits through their own job, up slightly from 73.6 percent in 1995.  

Given cost concerns, Fronstin questioned whether employers have reached a “tipping point” that could cause them to end employment-based health benefits. He cited various reports that claim that employment-based health coverage is disappearing, but concluded this is not supported by the evidence. For example, many individual employers believe there is a business case for offering health benefits to their workers and they continue to invest substantial amounts of money in their programs.

At the same time, the latest data show that employment-based health coverage has fallen, but not substantially. Between 1994 and 2000, the percentage of workers with health benefits through an employer held steady at between 73 percent and 75 percent. Since 2000, the percentage of workers with health benefits has fallen to about 71 percent.  The percentage of small employers offering health benefits in 2007 was about the same as it was in 1996, though it expanded between the mid-1990s and 2000, before declining through 2005, EBRI found.

Employers interviewed for the study had mixed opinions concerning whether employment-based health benefits are the most viable model for providing health insurance. Some said they think it is the best system available, though they also think that the current system is both "inefficient" and "not intelligent" and that "if we could start over with a clean slate, we would not have the current system." Some think that an improved version of the current system would be the best system. Others go so far as to say that the current system is not the best system because it is inefficient and because transparencies are lacking.

The large employers agreed they could change their mind about health offerings if one major employer switched its position. Other factors that could cause large employers to change course include the elimination of the employer tax deduction for health benefits, a movement to universal coverage, or the erosion of the federal pre-emption of state regulation of health benefits.