Richmond, Va.
Wednesday, Aug. 20, 2014

Insurance expert discusses health care benefits in light of ‘Obamacare’

Monday, Sept. 16, 2013

Businesses across the board — be they public, private or government-run — have been in a state of stagnant growth for years. Employers have faced hiring freezes and pay freezes. Now, in what seems to be a preemptive reaction to the enactment of the Affordable Care Act, institutions such as UPS and the University of Virginia have announced plans to eliminate health insurance for employee spouses who are eligible for health benefits elsewhere.

Does this pose a potential threat to benefits offered to employees? Should employees be worried? Is losing employer-subsidized benefits a worst-case scenario?

According to Etti Baranoff, associate professor of insurance and finance in in the Virginia Commonwealth School of Business, who has taught for almost 20 years, the answer is no.

"Who says that the employers are supposed to actually be responsible for your health insurance?" Baranoff asked, citing countries such as Switzerland and Israel that have excellent health coverage not covered by employers.

About the Affordable Care Act, dubbed “Obamacare,” Baranoff said there were “endless solutions” to health care reform. What passed Congress was what President Barack Obama could secure the votes to support.

"So it may be not the utmost and the most practical, but he is building into not having an uninsured population," Baranoff said. "You know, health insurance is a social product. You drink water, you breathe the air, you need health care. … And you cannot have … 16 or 20 percent of the population without health insurance. How do you sleep at night?"

Baranoff discusses the future — and past — of health care below.

Is this the beginning of a new trend? Will we see a rise in employers no longer covering employed spouses' insurance?

Some employers are never going to do anything to their employees to take away anything, because they want their employees to be very loyal to them.

If (organizations) start changing it, it’s kind of like the ripple effect is going to unravel the system. But nobody said that unraveling the system is so bad. Who says that the employers are supposed to actually be responsible for your health insurance?

Let’s take Switzerland. Everybody’s covered, everybody’s doing it as a private citizen. It's not that the employer is doing it. … In Israel, you can choose to be in one kind of HMO or another kind of HMO. ... Everybody is covered. My sister-in-law just had a bone marrow transplant. There is no second to the quality of care she is getting. And the last thing she has to worry about is the cost of it at this point.

Why would an organization do this? What are the advantages? Could this practice lead to employers providing less insurance to their own employees in the future?

Do you know why we are having employers taking care of all of the benefits? … When we moved from federalism to the Industrial Age, people moved away from their families, where they got the care from the family itself. And then the employers literally had to take care of the people for a burial, for retirement, for the family. Nobody else would take care of the people. So it became kind of part of the employment. People worked for the same employer for years, for all their lives. And then, as we progressed in the United States, it became part of the incentive type of employee benefits, because it was a tax incentive. Employers would pay … for health insurance up til now. It’s changing with Obamacare. Nobody pays any taxes on it. … You get the benefit, (but) it’s not added to your W2. You go to the doctors; things are paid on your behalf. It’s not like you have additional income.

What are other options organizations could implement instead of cutting insurance coverage to save on insurance costs?

In reality, bringing all the people back into the system is one of the main reasons that we have the reform. In the reshuffle … you know happens when you start things, it's out of balance (at first), and eventually it will all equalize. You’ll see a lot of reactions. Some of the reactions will be like Starbucks saying, “We love our employees, we are going to continue to give the benefits we care about. This is part of our culture. We are not going to desert any families.” Other companies are saying, “We don’t feel the same kind of relationship to our employees and their families and we’re going to be making sure that we’re getting out of this business as much as we can. … We are not in the business of benefits.”

So what people are doing — and this is what I’m teaching — you’re looking at cost-benefit analysis. And if you have options of going with your employer versus your spouse's employer, you’re looking at where you pay less in premiums and you compare also benefits. And this is why it’s very possible that the benefits are not as good, by the spouse’s employer; this is why there is the choice. In reality, if people are going to be asked to do what is available to them directly, they’ll do it and there will probably be basics, and more Cadillac (choices) and people will pay extra if they can afford it. It is just the transition period, and the culture to me is the main indication of what’s happening. It’s really not a matter of “now I got the permission, I’m going to do it.” (Employers) could have done it before. It’s a political game right now. When the whole thing happened, the way it was passed, the whole health care reform was the way it was able to be passed. So it is “choose your own adventure.”

Is there anything you'd like to add?

If your employer is not your source of health insurance, you’ll be able to go on an individual basis. You’ll maybe even be able to prove that you’re very, very healthy. Maybe you’ll pay less premiums. Maybe you’ll want to have a very high deductible, because you’re really only worried about a situation where you have really big bills. Let’s say you break your leg and you have another surgery and another surgery, then your maximum out-of-pocket (expense) will be, maybe, $5,000 for a year, but then your premiums on the upfront will always be a lot cheaper. You always have to do cost-benefit analysis. For some reason, the way it is created right now, people think that to be in a group, you’re better off, you’re getting a better Cadillac (option). Not every employer is giving you a Cadillac plan … especially small employers with a big turnover


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Etti Baranoff, Ph.D.