3 Employers, 2 Wonks and 1 Health Insurance Mess (LIVE!)
May 13, 2021
Art by Leslie Walker
Employers are likely to continue playing an outsized role in the U.S. health care system for the foreseeable future. So how can the insurance they offer be made more affordable and accessible for more Americans?
(This episode was recorded live as part of a virtual conference hosted by the University of Pennsylvania on May 7, 2021.)
Listen to the full episode below, read the transcript or scroll down for more information from this live event.
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Tradeoffs Live!
This episode was recorded live as part of “The Promise of Health Reform and a Public Option in a Biden Administration,” a virtual conference put on by the Leonard Davis Institute of Health Economics at the University of Pennsylvania and United States of Care. Our session gathered policy experts and employers to discuss how to make employer-sponsored insurance work better for more Americans. The speakers were:
- Brian Blase, PhD, Senior Fellow, Galen Institute
- Suzanne Delbanco, PhD, MPH, Executive Director, Catalyst for Payment Reform
- Allison Hoffman, JD, Professor of Law, University of Pennsylvania
- Shaundell Newsome, Co-Chair, Small Business for America’s Future
- Sheila Savageau, U.S. Health Care Leader, General Motors
The Problem
More than 150 million Americans get health insurance through their employers. Nearly three-quarters of the roughly 30 million Americans who remain uninsured have at least one person in their household working full time, suggesting employers could do more to expand coverage.
But employer-sponsored insurance has numerous shortcomings that limit its effectiveness:
Availability
Just over half (54%) of employers offer health benefits, and small businesses are far less likely to offer them.
Choice
Just 26% of firms that provide health benefits offer more than one type of health plan.
Cost
The average family's premium for employer-based insurance has increased 50% in the last decade and deductibles grew at more than twice that rate.
Complexity
Employers that provide health benefits often assume hefty legal, fiscal and administrative burdens. Common intermediaries, such as pharmacy benefit managers and third-party administrators, add further layers of complexity and obscurity.
Portability
Employees cannot take their employer-based coverage with them if they leave or lose a job, a shortcoming highlighted by the pandemic.
Two Potential Policy Fixes
As part of the live event, the authors of two different policy proposals for the employer insurance market each pitched their idea to a “disgruntled employer” (played by Tradeoffs sound engineer Andrew Parrella). Watch those pitch videos below for an overview of each idea, and read on for more details.
Employer Public Option
This proposal was presented at the event by University of Pennsylvania law professor Allison Hoffman. It is based on an academic paper coauthored by Hoffman, Howell Jackson and Amy Monahan. Their idea is for the federal government to offer employers a public option plan modeled on traditional Medicare with a few tweaks. The plan would be optional, but if an employer chose to offer it then they could not offer any other plans.
The authors propose piloting the public option first with larger employers, but the plan would eventually be available to all employers.
While employees would only have one plan to choose from (the public option), the federal government would compel providers to participate if they wanted Medicare business, which would in turn give most employees more provider choice than they have now.
Employers and workers would share insurance costs in the same way they do now, but the authors expect the total cost would be lower since the federal government could, in theory, negotiate lower reimbursement rates than employers currently pay providers. Lower-income employees would also be eligible for federal subsidies.
The federal government would take on almost all of the administrative and legal burden that employers currently shoulder, and there would only be one plan to offer, greatly simplifying the open enrollment process.
If a worker switched to another job that also offered the public option plan, they could keep their coverage. If a worker lost a job, the plan could become a Medicaid-like option, with the government subsidizing the coverage until their income returned to a certain level.
The Tradeoffs
Handing over most of their insurance responsibilities to the government could save employers time and money, but they would sacrifice control and the ability to customize very generous plans to compete for talent. This proposal would also likely face fierce political opposition from providers and insurers.
Individual Coverage Health Reimbursement Account (ICHRA)
This proposal was presented at the event by economist Brian Blase, who is a senior fellow at the Galen Institute and the Foundation for Government Accountability. In 2019, the Trump administration issued federal rules turning this idea, known as an individual coverage health reimbursement arrangement (ICHRA), into a real option available to employers. Early uptake has been slow, but 15% of employers in one survey said they plan to offer an ICHRA in 2022 or later.
ICHRAs allow employers to set aside a fixed amount of tax-free money for employees, who then use those funds to shop for coverage on the Affordable Care Act (ACA) exchanges.
Larger employers can choose to offer ICHRAs to limited categories of employees, such as part-time workers, who they might not otherwise cover with traditional group insurance. This flexibility could lead to employers providing at least some health benefit to a greater number of workers.
Employees have as many plan choices as are available on their state or federal ACA exchange. Certain plans may have narrower provider networks than others.
Employers choose a fixed amount to contribute to the ICHRAs, protecting them from unexpected costs like premium hikes. If the recent ACA subsidies passed by Congress are made permanent — a move that Biden supports — then employees shopping on the exchanges could find especially good prices.
ICHRAs are administratively simple for the employer, but employees may face a large number of complex choices to compare on the ACA exchanges.
If a worker leaves a job, the employer's contribution to the ICHRA stops, but the worker can keep the plan they have.
The Tradeoffs
ICHRAs provide more predictability for employers and more choice for employees but they put more of an onus on employees to shop smartly for their insurance, which research shows can be hard to do. The affordability and diversity of plan options available to employees depends on the health of the ACA exchanges, which can vary from state to state and year to year.
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Episode Resources
Related Research and Reporting:
How Corporate Executives View Rising Health Care Cost and the Role of Government (Gary Claxton, Larry Levitt, Shawn Gremminger, Bill Kramer and Matthew Rae; KFF; 4/29/2021)
A Public Option for Employer Health Plans (Allison Hoffman, Howell Jackson and Amy Monahan; U of Penn Law School Public Law Research Paper No. 21-12; 2/17/2021)
The High Price of Lowering Health Costs for 150 Million Americans (Tradeoffs, 2/18/2021)
Integrating Health Savings Accounts with New Health Reimbursement Arrangements (Brian Blase, Galen Institute, 10/15/2020)
Bipartisan Tax-Free Solution To Health Care Financing: Coupling HRAs With A Public Option (Regina Herzlinger, Richard Boxer and James Wallace; Health Affairs; 6/30/2020)
The Trump administration’s final HRA rule: Similar to the proposed but some notable choices (Christen Linke Young, Matthew Fiedler and Jason Levitis; USC-Brookings Schaeffer Initiative for Health Policy; 6/14/2019)
Episode Credits
Guests:
Brian Blase, PhD, CEO, Blase Policy Strategies; Senior Fellow, Galen Institute; Senior Fellow, Foundation for Government Accountability
Suzanne Delbanco, PhD, MPH, Executive Director, Catalyst for Payment Reform
Allison Hoffman, JD, Professor of Law and LDI Senior Fellow, University of Pennsylvania
Shaundell Newsome, Founder, Sumnu Marketing; Co-Chair, Small Business for America’s Future
Sheila Savageau, U.S. Healthcare Leader, General Motors
The Tradeoffs theme song was composed by Ty Citerman.
This event and episode were produced by Leslie Walker and Andrew Parrella.
Additional thanks to Slow Clap Productions, Traci Chupik, Sammi Kerley, the Tradeoffs Advisory Board and our stellar staff!