The Access Crisis: Are Employer Mandates Part of the Solution? Daniel Lasser, MD, MPH April 25, 2007

Outline Employment-based health insurance -- a brief status report Employer mandates -- a possible solution to the health insurance crisis? A brief look at the role of employer mandates in the Massachusetts plan Challenges

Employment-Based Health Insurance Unlike most other industrialized nations, US policy has encouraged and subsidized the workplace as a primary means for managing access to health insurance Rapid growth after World War II Fueled by favorable tax policy Began as social insurance, with community rating Coverage has peaked As a %: 2000: 66.8% 2004: 62.5% Absolute #s: 2000: 164.4M 2004: 159.5M

Health Insurance Coverage of the U.S. Population, 2005 Employer-based Direct Purchase Medicare Medicaid Military/Other Not Covered Total = 294 million Source: U.S. Census Bureau, Current Population Survey, 2005 Annual Social and Economic Supplement Note: Estimates by type of coverage are not mutually exclusive; people can be covered by more than one type of insurance during the year.

Which one of the following is correct regarding medical insurance coverage in the U.S.?* The majority of persons 18 years of age or under are uninsured The majority of uninsured persons come from working families Medicaid coverage is available for all families with annual incomes below the poverty level Health care workers are more likely than workers in other industries to have coverage Hispanic families are more likely than African-American families to have coverage *2006 ABFM In-Training Exam

Who is insured? Individuals <18: 88% are insured Individuals 65 or older: 99% are insured Young adults 18-20: 70% are insured In 2002, 10.5 million people below the federal poverty level were not insured by Medicaid

Who is uninsured? Considering ethnicity: 1/3 of Hispanic families are without coverage 20% of African-American families are without coverage 19% of Asian families are without coverage 11% of white families are without coverage Health care workers and their families are more likely to be uninsured than workers in other industries ~80% of uninsured families have at least one working family member

Current Problems with Employment-Based Health Insurance Fewer employees take coverage when it is offered Some may even be eligible for Medicaid Coverage has largely shifted from community rating to experience rating With increased costs, more employers are dropping coverage Smaller employers and those with predominantly low wage workers are unlikely to offer health insurance There are problems with portability and provider continuity

Current Problems with Employment-Based Health Insurance

Employer Mandate Models Require all firms to offer health insurance (All? Above a certain size?) Play or play : Require firms that don’t provide health insurance to an employee to pay into a pool to support coverage from another source Per employee Based on a percentage of payroll costs Require a penalty to be assessed to firms that do not pay or play Hawaii requires nearly all employers to provide health insurance Uninsured rate fell to 5% shortly after implementation; now ~10% As of mid-2006, 28 states were considering pay or play legislation 24 target employers with >1,000 employees

The Massachusetts Experience 1988: Universal Health Care Law $1680 Pay or Play Employer Mandate Delayed 3 times, repealed in 1996 Led to expansion of Medicaid, Student Insurance Mandate 1996: Medicaid Waiver Led to enrollee growth, coverage of all children, senior pharmacy program

The Massachusetts Experience 2006: Chapter 58 Individual mandate: by 7/1/07, all 18+ must obtain health insurance Penalties assessed if “affordable” coverage is declined Expansion of Medicaid Market reforms, “Connector” Employer mandate Non-offering employers (>10) pay 295/worker Must offer section 125 “cafeteria plans” Free rider surcharge Employers with uninsured employees who are frequent users may be charged up to 100% of costs >$50K No charge if offering 125 plan

Employer Mandate: Challenges Economic concerns Local: Economic disadvantage for employers in states who adopt mandates Global: Economic disadvantage in competing with firms in countries without employer-based health coverage Note: If combined with an individual mandate -- employer premium costs may rise as non-participating employees opt in Political lobby Legal – ERISA pre-emption

Conclusions Employment-based health insurance is the predominant source of coverage in the US In the current political environment, employer mandates may play an important role in expanding access to insurance There will be a greater likelihood for success if combined with other approaches as well