Bridging Benefit Gaps
Patchwork care makes health solution elusive
04/02/2000
By Charles Ornstein Reprinted with permission of The Dallas Morning News
Although the vast majority of Americans receive health insurance through their employers, by no means is the quality of coverage the same.
Just ask Harry and Louise.
The fictional middle-aged couple – created by the nation’s insurance lobby – helped undermine public confidence in President Clinton’s health-care reform proposal through a series of television commercials in 1993-94.
Sitting around a kitchen table and driving in a car, Harry and Louise voiced the fears of middle-class workers that their coverage would suffer if the government extended health insurance to all Americans.
It is this patchwork system of health insurance – Cadillac benefits for some, nothing for others – that helped doom any hope of a comprehensive national solution, industry experts say.
When given a choice, they say, people generally won’t sacrifice an insurance benefit or two – or pay more – so that others can improve their lot.
“The problem with health care is that it’s very easy to divide and conquer, just because people have such different interests and different fears and different experiences,” said Darrell West, a political science professor at Brown University in Providence, R.I. His book, The Sound of Money, examines the effect of Harry and Louise on the Clinton health-care reform debate.
“The fear was that we would end up with a lowest-common- denominator health-care system,” Mr. West said. “In elevating the poorest elements within society, we might in the process lower the quality of the care received by others.”
Complicating matters, he and other researchers say, are the many classes within the insured population.
At one end of the spectrum, some workers don’t contribute a dime toward health insurance. At the opposite end, others have insurance but rarely seek care because they can’t afford the deductibles.
And on the margins lie one in six Americans, or 44.3 million citizens, many of whom hold jobs that do not offer health insurance.
Each group has its own fears and experiences, and rarely do their priorities coincide.
The lucky ones
Individuals with the richest health insurance benefits typically belong to labor unions.
These workers have coverage starting with the first dollar, so they don’t pay any money toward either their premium or doctor visits.
Because of this, union members have opposed employers’ efforts to shift costs to them. Earlier this year, 17,000 engineers at Boeing Co. in Seattle went on strike for 40 days because the company asked employees to pay a share of their medical premiums. The company relented last month and agreed to continue paying those costs.
“Ultimately, it’s part of us looking at our benefits package and saying, ‘What do we need to do to attract and retain workers?'” said Nancy Cannon, director of employee benefits.
Union negotiator Stan Sorscher said the proposal would have cost the average Boeing family $1,500 per year. Union members, he maintained, have accepted below-market wages for years to maintain their rich level of benefits.
“We thought this was just the start,” said Mr. Sorscher, a physicist at Boeing. “If 10 percent premiums were a good idea, then 15 percent premiums would be an even better idea. … There was an open-ended threat to us.”
The vast middle class
Many of the 155 million Americans with employer-provided health insurance are like Diane M. Johnson, a 41-year-old manufacturing specialist at Texas Instruments Inc.
Ms. Johnson, who is enrolled in the NYLCare HMO, pays a share of her premium every two weeks, in addition to copayments for doctor visits and prescription drugs. She says her top consideration when choosing a health plan is cost.
“If you’re like me and you have several prescriptions, it starts adding up fast,” says Ms. Johnson, who has severe asthma.
Data from the U.S. Bureau of Labor Statistics show that Ms. Johnson’s experience is hardly unique. In 1997, 69 percent of employees with individual coverage were required to contribute to their premiums, up from 26 percent in 1980.
The percentage of employees who contribute to family coverage grew to 80 percent from 46 percent in 1980.
“The numbers of companies that used to provide free family coverage was pretty high 10 years ago,” said Edith Rasell, an economist at the Economic Policy Institute in Washington, D.C. “Now almost no companies provide free family coverage.”
Young and restless
By and large, employees who are young and healthy are less concerned about health coverage than stock options, career advancement and personal satisfaction.
The Internet generation enjoys such perks as free massages, discounts at workout facilities and catered lunches. As for health insurance, “that’s not something they’re as concerned about as long as they know that they’re covered,” says Julie Muenzler, human resources manager for imc2, a 100-person Internet services company in Dallas.
When imc2 asked employees for benefit suggestions at an annual retreat last year, they responded by requesting dry cleaning pick-up at the office, more vacation time, additional floating holidays and stress management programs.
Mike Keller, a 27-year-old graphic designer at imc2, said when choosing his current job, he was impressed by the casual dress code, the free Coke machine and the rock-climbing wall.
Mr. Keller, who graduated from the University of North Texas, said he asked about health insurance benefits before he accepted his job, but that’s the extent of his research.
“I’m glad I have it; I just don’t use it,” he said. “As a matter of fact, I picked the wrong doctor to treat me. I picked a pediatrician on accident. I’ve been healthy my whole life – thank God – and I haven’t really needed all that.”
The small-business crowd
Because small businesses don’t have the purchasing clout of their larger brethren, they often don’t provide comparable health benefits.
Only 55 percent of firms with fewer than 10 workers offered benefits last year, according to a report by the Kaiser Family Foundation and the Health Research and Educational Trust. That compares with 99 percent of firms with more than 200 workers.
What’s more, small businesses that offer insurance are feeling the brunt of increased medical costs, and they are shifting the burden to their employees.
Jim Kollaja, for example, pays 50 percent of the cost of insurance for workers at his family-owned woodworking business in Corpus Christi. When this year’s higher rates took effect, the company charged workers 12 percent more for single coverage and 26 percent more for family coverage.
The company’s trade association reports that about half of similar firms offered health insurance for full-time shop employees in 1998.
“A lot of companies opt not to carry it, not to hassle with it,” said Mr. Kollaja, vice president of Imperial Mill and Fixtures Inc. “We look at it as what we need to have in order to compete for the best employees.”
Imperial is routinely turned down by insurance companies because several of its 30 employees have chronic medical conditions that are expensive to treat.
“It’s kind of a love-hate relationship. I hate my insurance company, but I can’t do without them.”
The gray and threatened
The people most affected by changes in health insurance are early retirees who are not yet eligible for Medicare.
A recent study by the consulting firm William M. Mercer Inc. found that the percentage of large companies offering benefits to this group has fallen each of the last six years, to 35 percent in 1999 from 46 percent in 1993.
Thousands of retirees have sued their former employers, saying officials reneged on earlier promises to provide them health benefits for life.
But courts have generally ruled that companies are entitled to reduce or even eliminate benefits as long as they reserve the right to do so in writing.
Pabst Brewing Co. in Milwaukee terminated health benefits to 774 retirees in September 1996. For those not eligible for Medicare, comparable coverage cost as much as $8,200, according to a 1997 government report.
Andy DeRuiter retired from Pabst in early 1995 after 23 years. Sixteen months before he was eligible for Medicare, Pabst terminated the retiree benefits. As a result, Mr. DeRuiter went uninsured, relying on free drug samples from his doctor to treat his high blood pressure and chest pains.
“When we retired, they told everybody, ‘You retire now, and you’re set for life,'” Mr. DeRuiter, now 67, says. “That was a big lie.”
The uninsured
Despite public perceptions to the contrary, 84 percent of the 44.3 million uninsured Americans are workers or members of a working family. And a full 20 percent have access to employer-paid health benefits on the job.
Standing in the way of coverage, researchers say, is low-income workers’ inability to afford their share of monthly premiums set by employers.
In many cases, uninsured people are willing to rely on public hospitals if it means having the money to buy extra groceries for their family.
Despite the growing number of uninsured, surveys indicate that the public believes these people are better off than in the past. According to a 1999 report, 57 percent of people believe the uninsured are able to get the care they need when they need it, up from 43 percent in 1993.
“People know there’s a problem, but the economy has hidden a sense of the crisis,” says Harvard University professor Robert Blendon, the study’s author. “For people who have a job and insurance, life has never been better. They say, ‘I’ve never had it so good in my life – money in my pocket, the employer is worried about me leaving – everybody must be doing better.'”
Timing is everything
Some policy experts and politicians believe the time is right for a national solution for the problems of the uninsured, even though others don’t believe there’s a crisis yet.
In the Democratic presidential primary, both Vice President Al Gore and challenger Bill Bradley presented proposals to expand health coverage to millions of uninsured Americans. The difference between the two plans involved cost and scope.
Republicans George W. Bush and John McCain did not discuss the issue during the primary stage.
The real push for change could come from within the Washington Beltway, not middle America, where the problems are most acute, researchers say. That’s because the voices of the uninsured can’t be heard above the din of lobbyists.
“When Gore and Bradley both put forward proposals, that was unprecedented in terms of the attention that health-care coverage got in a presidential campaign,” said Paul B. Ginsburg, president of the Center for Studying Health System Change. “This, to me, was a sign that there may be a lot more interest on the part of the public.”
Still, Mr. West of Brown University said the real push for government reform will come when the middle class sees massive increases in health-insurance costs.
“That would be a crisis,” he said.
Charles Ornstein, who covers health business issues for The Dallas Morning News, is pursuing a yearlong fellowship through the Kaiser Family Foundation.