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Will Large Employers Dump Healthcare Coverage?

Fortune magazine has made some news recently about the impact of healthcare reform on large employers:

Internal documents recently reviewed by Fortune, originally requested by Congress, show what the bill’s critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the healthcare coverage they provide to their workers in exchange for paying penalty fees to the government.

The only trouble? There’s no way these employers are seriously thinking about doing this.

I can understand why the employers would do the math. According to healthcare reform law, penalties for failing to provide health coverage are a small fraction of the cost of that coverage. But as with most everything else in healthcare, there’s much more to it than just a simple math equation. Here’s what I mean.

Health coverage is an integral part of large employers’ total package of compensation. Having a comprehensive benefits plan is one of the key ways employers separate themselves from their rivals, especially in competitive markets. But it goes deeper than that.

Employers know that a healthy workforce is a more productive workforce. So they increasingly design their health plans to help employees take better care of themselves and their families. They do it in ways that match their unique corporate cultures, and the specific health issues of their employees.

For instance, these issues are different for manufacturing companies and pharmaceutical companies, defense contractors and marketing companies, consulting firms and supermarket chains (I know because my company Best Doctors provides its service to companies in all of these industries and others.)

What’s important to understand is this: large employers view health coverage as far more than just some cost center they would be happy to hand over to someone else. Instead, they view coverage as one of the important tools they can use to attract and retain talent, make their workforce more productive, and as a reflection of a culture of innovation they want to foster. If they handle these decisions well, it’s part of what gives them an edge over their competitors.

So why is Fortune magazine reporting on this so breathlessly? I think they — like so many others who have written or talked about healthcare reform — don’t seem to know all that much about their subject matter. The employers in the article say they’re not about to drop coverage, and there are no quotes from benefits consultants or other industry experts. Most of the piece is laden with the familiar sound of the politics of healthcare reform that has characterized the last year.

One thing should be clear from the experience of the last year: there are a lot of misconceptions about healthcare that make it hard to talk about thoughtfully, but which make it very, very susceptible to politics.

Fortune’s reporting gives an interesting inside look into how big companies try to figure out big regulatory changes. But their conclusions are deeply mistaken.

*This blog post was originally published at See First Blog*


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One Response to “Will Large Employers Dump Healthcare Coverage?”

  1. PeterW says:

    I can’t say that I agree. Remember that under the Obama plan, those companies who don’t arrange their own private insurance have to pay a fine, and then their employees can sign up for government health insurance whenever they get sick (because of the no-discrimination-by-health-condition provision that is wreaking havoc in Massachussets). So it’s not a matter of callously dumping their workers’ healthcare plans, but rather deciding that it’s cheaper to get them on the government plan for a fee. Assuming workers’ wages move upwards to compensate – and in a competitive market they should – this will have no negative effects on their health. The only losers are Obamacare proponents and the budget deficit, which nobody appears to care about anyway.

    I’ve discusses this issue here: http://cephalicfurrow.wordpress.com/2010/03/23/healthcare-bill-mandates-adverse-selection/

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