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Shift from employer-sponsored health insurance to state-sponsored coverage

While the number of people with employer-sponsored health insurance has declined in California, the overall rate of uninsurance has not dropped, due to a rise in enrollment in the government’s Medi-Cal program. Moreover, in 2003 almost 800,000 Californians had access to insurance at their employer but could not afford the premiums. Average contributions increased from $114 to over $200 from 2001 to 2003.
These contributions went to health insurance costs that ranged from $3700 for an individual to over $10,000 per family in 2004.
In total, 54.5% of employed individuals had employer sponsored health insurance, a drop of two points from 2001 to 2003.
Lots of statistics, but what do they mean. Here’s my take.
1. Employees are paying roughly 25% of the cost of their insurance, when it is available.
2. The burden of providing health insurance is shifting towards state-sponsored programs from employer-sponsored programs.
3. This shift is likely to continue, and in fact to accelerate due to rising premiums.
I find it fascinating that we continue to debate the merits of a state-based system of health insurance v. employer based v. individual portable programs. Meanwhile, market forces are driving the nation in the direction of a state-sponsored system. So, while we engage in intellectual debates, outside factors drive reality.
Alain Enthoven of Stanford contends that we need to eliminate the employers’ role in health insurance. I disagree. Dr, Enthoven may well win the debate, assisted by these underlying external forces.
What does this mean for you?
If you are a health plan, you know quite well the challenges of adding lives and revenues in what is a mature market. That’s why health plans are moving so aggressively into government-sponsored programs. Continue that work, but don’t forget the employers – they still pay most of your premiums.

One thought on “Shift from employer-sponsored health insurance to state-sponsored coverage”

  1. When an employer hires an employee, the employer considers the cost of health and other insurances offered to employees as a part of the wages and benefits they are willing to pay for that employee, so the question of “who pays” for health insurance premiums is debateable.
    “Insurance” is a poor term for health care coverage, and it is part of the problem we face.
    There is virtually no chance that individuals will not utilize health care benefits, so the risk that a carrier will have to pay out is about 100%. The fact that a private business has to make a profit means that a certain percentage of the money spent on health care premiums DOES NOT pay for health care.
    Are single payer/government systems best for negotiating the best rates and for lowering administrative costs? Intuition would tell us that they should be, but then again, are government run activities well run absent the profit motive?
    We need to make an educated and thoughtful attempt to fix this system rather than allow ourselves to be pulled along by inertia into something that might not work.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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