Republicans Deserve Some Credit For Health Exchanges

They bemoan the companies “dumping” employees onto the exchanges. But until the health law passed, that’s what they said they wanted.

Magnet pulls people
National Journal
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Jill Lawrence
Sept. 26, 2013, 4:10 p.m.

When polit­ic­al talk turns to mov­ing people in­to the health in­sur­ance mar­ket­places set up un­der the Af­ford­able Care Act, the verb of choice among con­ser­vat­ives is “dump.” The Tea Party Pat­ri­ots even has a name for it: “The Obama­care Dump­ing Ef­fect.”

It’s an iron­ic way to de­scribe an idea that ori­gin­ated with con­ser­vat­ives and free-mar­ket dis­ciples, and at one time was pro­moted heav­ily by groups like the Her­it­age Found­a­tion as a way to broaden risk pools and help con­sumers, all with­in the private in­sur­ance sys­tem. Now, some circles are brand­ing the ex­changes as the place em­ploy­ers send you when they don’t care about you any­more. “Al­most every day, work­ers across the coun­try are wak­ing up to the news that their em­ploy­ers (like Trader Joe’s, Wal­greens, and Home De­pot) are either drop­ping their health care cov­er­age or dump­ing them onto the gov­ern­ment’s ex­change. To­geth­er, this mass ex­odus spells dis­aster for the health care in­dustry,” Fam­ily Re­search Coun­cil Pres­id­ent Tony Per­kins warned in a memo last week ur­ging law­makers to stop Obama­care “be­fore it can in­flict more dam­age than it already has.”

Wal­greens is ac­tu­ally send­ing its em­ploy­ees to a private ex­change, a rising busi­ness prac­tice un­re­lated to the ACA. As for a mass ex­odus, health care ex­perts say that’s less likely than the con­tinu­ation of the pre-ACA trend of few­er small com­pan­ies of­fer­ing be­ne­fits and few­er people get­ting their in­sur­ance in the work­place. About 60 per­cent of people un­der 65 now have em­ploy­er cov­er­age, down from 70 per­cent in 1999, ac­cord­ing to the State Health Ac­cess Data As­sist­ance Cen­ter. The data show a steep fall in 2008-09 as a res­ult of job losses dur­ing the re­ces­sion — an­oth­er in­dic­a­tion of the need for guar­an­teed, af­ford­able cov­er­age for the un­em­ployed, the self-em­ployed, en­tre­pren­eurs, part-timers, and oth­ers.

The con­nec­tion between em­ploy­ment and health in­sur­ance is a his­tor­ic­al ac­ci­dent that star­ted slowly in the late 19th cen­tury and spread dur­ing World War II, when gov­ern­ment wage con­trols forced em­ploy­ers to find an­oth­er way to at­tract work­ers. Uni­on sup­port and tax breaks ce­men­ted the prac­tice. The sys­tem worked fine when people worked for the same com­pany their whole lives. The more com­mon pat­tern now is people switch­ing jobs every few years — and who knows if their former em­ploy­ers even ex­ist any­more?

Health ex­perts and politi­cians across the spec­trum say there’s no reas­on to re­tain the link­age between em­ploy­ment and health in­sur­ance, that in the real world of today, it would be bet­ter for in­di­vidu­als and the eco­nomy to sever that con­nec­tion. “It makes busi­ness more com­pet­it­ive and gives in­di­vidu­als more choices,” says Howard Dean, the former phys­i­cian, Ver­mont gov­ernor, pres­id­en­tial can­did­ate, and Demo­crat­ic Party chair­man.

That was the think­ing be­hind the Healthy Amer­ic­ans Act co­sponsored in 2008 by Demo­crat­ic Sen. Ron Wyden and then-Sen. Robert Ben­nett, a Re­pub­lic­an. Ben­nett says it both­ers him that Obama­care was built on the present sys­tem. “Try­ing to hang on to the present health care sys­tem that was based back in the 1950s is a really dumb idea,” he says. “Wyden was will­ing to con­spire with me to cre­ate an en­tirely new sys­tem based on the way people live today.”

Their pro­pos­al, which had sub­stan­tial bi­par­tis­an sup­port, would have cre­ated state ex­changes, re­quired people to buy in­sur­ance, and in­sti­tuted fed­er­al premi­um col­lec­tions and sub­sidies to fin­ance the sys­tem. The Con­gres­sion­al Budget Of­fice es­tim­ated Wyden-Ben­nett would be “es­sen­tially self-fin­an­cing” in its first year. Em­ploy­ers could con­tin­ue to of­fer cov­er­age, but the au­thors’ in­tent was that nearly every Amer­ic­an un­der 65 would par­ti­cip­ate in the new sys­tem. Dean favored a dif­fer­ent kind of break with the status quo: a pub­lic op­tion on the ex­change that would piggy­back on the Medi­care in­fra­struc­ture and of­fer cheap­er rates than private in­surers. “My side mostly didn’t win,” he says, but he sees con­struct­ive pos­sib­il­it­ies un­der the new law. Ex­changes are provid­ing uni­ver­sal cov­er­age in Switzer­land, the Neth­er­lands, and else­where, he says, so we know “it’s build­able. Now we just need to fig­ure out how to make it work.”

Mov­ing to an in­sur­ance ex­change may be dis­rupt­ive and up­set­ting. Yet most of those dumpees from Trader Joe’s may find they get a bet­ter deal on the ex­changes, es­pe­cially since the com­pany is giv­ing them $500 to­ward premi­ums, on top of gov­ern­ment sub­sidies they may re­ceive if their house­hold in­comes are low. The “com­pared to what” factor, as White House ad­viser Dav­id Si­mas calls it, should be even more dra­mat­ic for people in the in­di­vidu­al mar­ket who cur­rently can’t af­ford cov­er­age, can’t get cov­er­age be­cause of their health, or can only get tem­por­ary and costly CO­BRA cov­er­age.

Con­ser­vat­ives and Re­pub­lic­ans should be try­ing to claim cred­it for this. Al­though they blast Obama­care as a night­mare of gov­ern­ment reg­u­la­tion and in­ter­ven­tion, ex­changes are at their core a private-sec­tor solu­tion to a prob­lem oth­er coun­tries have solved by get­ting the gov­ern­ment far more dir­ectly in­volved. And when these mar­ket­places fi­nally open for busi­ness, we’ll find they are the dev­il we know. As health re­form ex­pert Linda Blum­berg at the Urb­an In­sti­tute notes, “These are the in­sur­ance car­ri­ers that every­body, for bet­ter or worse, has put their trust in all these years.” In oth­er words, con­sider your­self dumped.

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