Could a domino effect end employer-funded health insurance?

2008

Employer-funded healthcare is the bedrock on which the American healthcare system is founded. And for most Americans health insurance is assumed to be, if not a God-given right, then certainly a benefit that is both expected and valued in a job.

But latest research from the non-partisan Employee Benefit Research Institute has warned that, with health insurance costs continuing to spiral upwards, it could take just one employer blinking to bring the whole edifice crashing to the ground.

There is as yet no sign of large employers bailing out of their role of acting as the backbone of health insurance coverage in the U.S, it has stressed.

But large employers were pushing for changes in the hope of alleviating the rising cost of health benefits.

What's more, the current picture could shift quickly if one large employer were to drop its benefits, it argued.

"Although employers that offer health benefits say they remain committed to the current system… they are watching competitors closely. If one big sponsor takes the first step and decides to drop benefits, others say they would likely follow," it said.

The EBRI's stark finding comes as research from the Kaiser Family Foundation has pointed out that many more Americans are now feeling the burden of healthcare costs directly when they use medical goods and services.

The share of employee compensation going to health benefits had risen substantially over time, while the share going to wages has fallen, it added.

This has also had the effect of slowing the rate of growth of people's pay increases year-on-year, it suggested.

The EBRI in its research said that, even though employers remained very concerned about rising health benefit costs, they emphasised they would continue to support an employment-based system, partly because they believed they would end up paying "one way or the other", the institute pointed out.

And, as yet, the system, while under pressure, had not reached a "tipping point", it stressed.

"Historically there has been general stability in terms of workers being eligible for benefits, the percentage of workers who have coverage, the share of premiums paid by workers, and the share of out-of-pocket costs paid by workers," it added.

The one major exception was employment-based retiree health benefits, which had been in sharp decline, it said.

In addition, workers in private-sector firms with fewer than 10 employees were much more likely to be uninsured than workers in private-sector firms with 1,000 or more employees, it added.