I think it's a question of trends. A fundamental problem in the current set up is that employers pay the bulk (average 70%) of costs for health care and this cost has been increasing at 3-4 times the rate of inflation. From an employer's perspective, labor costs have been skyrocketing. From an employee's perspective, wages have been relatively flat while they have seen health care benefits become more expensive and/or less generous. They have associated this more with employer greed than with increases in health care costs.
Originally Posted by Gerry Clinchy
My own personal experience with this was with my own company. When I acquired the company in 1996, they were (illegally) offering health benefits at no charge to all full time, salaried staff, but not offering benefits at all to full time hourly staff. The average wage for our hourls staff was much higher than the wage for the salaried staff. I offered health benefits to hourly staff in exchange for a salary reduction to cover about half the cost. Not on person out of 100 staff accepted. Instead, to achieve legal compliance, I offered health benefits to everyone where I paid 70% of the cost of coverage for the employee and the employee paid the remaining cost for themselves and paid the full cost for dependents. I gave salaried staff an immediate salary increase that was actually slightly more than the cost of the premiums I was no longer paying. 80% of the salaried staff immediately dropped their insurance coverage rather than pay the premium themselves even though they had been given the money to make the payment. There were many complaints about the loss of benefits, but almost everyone preferred the cash.
From this experience, I believe that people who are required to pay for their own benefits will almost always opt for cheaper plans rather than more comprehensive coverage. As they consume medical services, they will bear a higher personal cost as a result and will be less willing to pay high prices. That economic force will help reduce costs more than any government mandates or insurance company procedures ever could. This can backfire if the services that are avoided are those needed to prevent more serious illness. It is also important that a place does not create the illusion of savings by ending coverage for services that are absolutely essential. Thus there is nothing to suggest that consumers are consuming "too much" when it comes to life saving care or care for major illnesses and injuries. Having policies that avoid paying for these unusual but very expensive procedures creates no real savings since the care will need to be provided anyway.
The structure of basic benefits under the new law reflects these principles for harnessing economic decision making in a creative way. It excludes maximum lifetime limits and imposes a relatively high, but manageable out of pocket spending limit, thereby avoiding illusory savings. It provides full coverage for designated preventative services to avoid cost barriers to care that will help reduce future costs of illness. It then allows significant, but not prohibitive deductibles and co-pays for other services to discourage unnecessary use. While benefits are subsidized by a mix if employer and government subsidies, the covered individuals retain a large enough financial responsibility that they will be encouraged to pressure for lower costs.
There will undoubtedly be a number of changes to the program over time. Hopefully, however, it will ease the transition to non-employer based health care and improved personal responsibility for health care costs while preserving access to essential services.