Employer-Based Insurance: “Hasta La Vista, Baby!”

Hasta La Vista (äs′tä lä vēs′tä) n.

1. Spanish for “See you later” or “So Long”
2. Healthcare for the provision of “Employer Based Insurance”

I can distinctly recall the moment I first heard these now famous words in the 1991 Summer Blockbuster, Terminator II. John Conner was trying to teach the outdated Terminator how to get hip to the new reality. Arnold’s sin qua non pronunciation has now become the standard for the phrase and I can still hear it now in my mind as clearly as I did back then in the theatre.

I think we have reached the breaking point where this phrase is once again appropriate for Employee-Based Insurance. Nearly a month ago USA Today featured the following cover story:

November 13, 2007 USA Today Cover Story. Used without permission.

Furthermore, fellow blogger and co-conspirator Jane Sarahson-Kahn recently mused along the same lines, but with a slightly different take based a recent Future of Employment-based Benefits report.

As I have mentioned before, I have been questing why we have our insurance tied to our employment situation. We are familiar with the traditional history of this, tracing back to WWII when wage freezes created the employee benefits industry. Later, tax legislation reinforced and entreched the employer as the source of patient aggregation. There are clearly advantages to this, of course, particularly in the selling of insurance to a few (large employers) to obtain thousands of consumers.

However, the house of cards is beginning to unravel. GM’s monumental outsourcing of their retiree health benefits will be remembered as the harbinger that the started the domino’s falling. Who’s next – perhaps its your employer?

The USA today article highlights some familiar statistics restated to make the point:

• 69% of individuals obtained their insurance from their employer in 2000, today only 60% obtain their insurance through employers (45% for people who work at small companies).
• Average monthly premium for employees has increased from $160 to $273 over the last 7 years (a 70% increase adjusted for inflation).
• Annual increases of 15-25% for small employers are routine and common place which is completely unsustainable.
• A typical family policy offered by employers costs $12,106, the percentage paid for by the employee continues to rise (increased deductibles, increased co-pays, and decreased benefits)
• Health Care spending as a part of the average American Household budget continues to increase.

And a few notable quotes:

• Growing momentum. “The idea of separating insurance from employment has been raised before. Now, its taking on a life of its own” – Paul Fronstin of the Employee Benefit Research Institute (EBRI).
• Fragility of current system. “The employers interviewed for this study tend to agree that if one major employer were to drop health benefits, others would follow” and “they tend to agree that public policy changes, such as the erosion or elimination of ERISA (federal) pre-emption of state insurance regulation, could result in the complete elimination of employer support for a voluntary employment-based health benefits system” – EBRI December 2007 report.
• Desire for clean slate. Mixed views from employers include thoughts that the current system is “inefficient” and “not intelligent” and “if we could start over with a clean slate, we would not have the current system.” – EBRI December 2007 report

Bottom line, I believe there will be a better way to purchase health care in the future and that the products will need to become more individualized to truly serve the needs of those purchasing the health plan / insurance services. I believe the handwriting is on the wall . . . and while mass employer migration away from providing these entitlements might not happen mañana, I believe they will happen con el tiempo!