Does employer health coverage have a long term effect on the US Economy?© BrainMass Inc. brainmass.com December 24, 2021, 11:40 pm ad1c9bdddf
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Long-term implications for the U.S. Economy of Employer Health Coverage
Everyone agrees that though access to employer coverage has increased (Long & Stockley, 2009, n.p.), but everyone also agrees that the coverage in terms of dollar amount has been dropping and that the benefits under employer sponsored health coverage is being scaled back. This decline has alarmed labor unions, which in turned is pressuring legislators to do something to arrest this decline.
One of the few states that has answered the call is Massachusetts, which is one of the few states with "near-universal insurance coverage" (Massachusetts Division of Health Care Finance and Policy, 2009, n.p.), and requires employers within the state to: "set up a Section 125 plan (or "cafeteria" plan) for their workers, so that employees can pay for health insurance premiums with pretax dollars" (Commonwealth of Massachusetts, 2006, n.p.) and for "[Employers] with more than ten employees also must make a "fair and reasonable" contribution toward their workers' health insurance or face an assessment not to exceed $295 per full-time-equivalent (FTE) worker per year" (Commonwealth of Massachusetts, 2006, n.p.). These requirements have helped Massachusetts to defy the national decline in the scope of benefits or quality of care under employer provided health insurance.
Other states and the federal government has responded differently from Massachusetts' response. Public provided health coverage such as Medicare is now being considered as a complement for the decline in employer provided health coverage. In fact, public health care coverage, the corner stone of President Barack Obama's second term, is a very controversial topic in the United States currently.
Just think how the Obamacare became a favorite fodder of jokes by comedians for their late night shows.
This decline has been attributed mostly to economic conditions and increasing premium costs (Reschovsky, Strunk, & Ginsburg, (2006, n.p.). As Reschovsky, Strunk, and Ginsburg (2006) mentioned, the employment levels are dictated by the business cycle, which in turn is directly affected by the economy. The employment levels then affect employees' access to employer provided health insurance. This cause and effect, in any situation, is never reversed: meaning the level of employer provided health care coverage does not affect the economy nor does it dictate when the economy recovers.
The economic impact on the level of employer provider health coverage is shown by the study made by Reschovsky, Strunk, & Ginsburg in 2006. They found out that in 1997-2001, a period of robust economic growth, about 4.5 million people gained employer health coverage. On the other hand, in 2001-2003, a period marked by economic recession in the United States and economic slowdown globally, about 9 million employees lost employer provided health coverage.
This situation is supported by the general observation that between 2001 and 2007, employer provided health care coverage deteriorated. Fortunately, as mentioned above, this situation is slowly being corrected and the decline arrested with the slow recovery of the economy.
On the other hand, the observed decline in benefits under employer-sponsored health coverage may be due to the lingering economic recession in the United States. What this means is that the relationship between the long-term economic growth in the US and employer health coverage is: the economic situation directly impacts the capacity of employers to provide for their employees health care benefits and therefore their capacity to pay for health care premiums for these said employees.
Furthermore, the level of employer health coverage does not have a contributory factor in the long-term prospects of the economy. The moment that the economic situation moves from recessionary to expansionary, it is expected that health care premiums related to employer-sponsored coverage will increase.
In fact, this is what happened in 2012. According to the 2012 annual Kaiser Family Foundation/Health Research and Educational Trust (HRET) Survey of Employer Health Benefits (Claxton, Rae, Panchal, Damico, & Whitmore, et al. 2012, p. 2324), the health care premiums for employer sponsored coverage increased slightly from 2011: "[the] average annual premiums in 2012 were $5,615 for single coverage and $15,745 for family coverage, an increase of 3 and 4 percent, respectively, from 2011" ((Claxton, Rae, Panchal, Damico, & Whitmore, et al. 2012, p. 2324).
In conclusion, employer health coverage is not a contributory factor in the long-term prospect of the U.S. economy. Rather this prospect directly impacts the employers willingness to provide a higher level health care premium and benefits for their employees. This capacity can actually signal an impending economic recession, recovery or expansion.
Claxton, G., Rae, M., Panchal, N., Damico, A., & Whitmore, H., et al. (2012). Health Benefits In 2012: Moderate Premium Increases For Employer-Sponsored Plans; Young Adults Gained Coverage Under ACA. Health Affairs, 31(10), 2324-33.
Commonwealth of Massachusetts (2006). Chapter 58 of the Acts of 2006 [Internet]. Boston (MA): Commonwealth of Massachusetts; Accessed on September 24, 2014, Available from http://www.mass.gov/legis/laws/seslaw06/sl060058.htm.
Long, S.K. & Stockley, K. (2009). Massachusetts Health Reform: Employer Coverage From Employees' Perspective. Health Affairs, 28(628.6), W1079-W1087.
Massachusetts Division of Health Care Finance and Policy (2009). Health care in Massachusetts: key indicators. Boston (MA): Division of Health Care Finance and Policy. Accessed on September 24, 2014, Available from: http://www.mass.gov/dhcfp
Reschovsky, J.D., Strunk, B.C. & Ginsburg, P. (2006). Why Employer-Sponsored Insurance Coverage Changed, 1997-2003. Health Affairs, 25(3), 774-82.