PRESIDENT'S COLUMN
Bill Goodrich

Declines in Health Coverage Won't Continue Indefinitely

It would be easy to make too much or too little out of a recent U.S. Census Bureau report showing a decline in the percentage of the population with employment-based health insurance coverage.

About 59.5% of people in the United States last year had employment-based coverage, down from 59.8% in 2004.

That decline in employment-based coverage almost entirely explains why the percentage of the population without health insurance rose in 2005 to 15.9% from 15.6% in 2004.

Such a one-year decline, in itself, is not disturbing. Indeed, we'd question whether the small size of the decline is significant.

Still, the long-term trend is clear: Employment-based coverage, the way most of the nonelderly population receives health insurance, is on the decline. The proportion of the population with employment-based coverage has declined each year since 2000, when 63.6% had coverage through employers.

Certainly, some of the decline is the result of changes in the economy over which policy-makers have little control. For example, many corporations have downsized in recent years, with employees losing their jobs and, after COBRA coverage runs out, their health insurance.

But by far the biggest reason for the decline in employment-based coverage is the high cost of providing it. In just five years, group health care costs per employee have leaped 60%, rising to an average of $7,089 per employee in 2005 from $4,430 per employee in 2000. Few other goods and services have increased by that much in that time.

Indeed, the cost of health insurance, especially for early retirees, certainly was a factor in the demise of such one-time steel industry giants as Bethlehem Steel Corp. and LTV Corp.

But it is wrong to suggest that all is gloom and doom and that the decline in employment-based health insurance is irreversible.

Corporations, for example, are rapidly moving away from overly generous health insurance plans, which, over the long run, are unaffordable. Instead, many companies are offering lower-cost consumer-driven plans in which employees have greater financial incentives to use services more carefully.

Health insurers finally are starting to make provider price and quality information more available, allowing employees to make better purchasing decisions before a service is performed.

And government, in some cases, is doing its part. At the state level, Massachusetts and Vermont, as a result of legislation passed this year, will increase eligibility for state-subsidized health insurance coverage, reducing the number of uninsured. With that increase, presumably there will be a reduction in uncompensated care, a cost that providers try to shift to patients covered under employer plans.

While the decline in employment-based coverage is disturbing, there is no reason to believe the declines will continue indefinitely.

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