An alarming drop in job health benefits

A controversial McKinsey & Co. survey -- which the consulting firm has now backed away from -- set off a firestorm in June by indicating that up to 30 percent of employers may drop medical coverage when the federal health reform law takes full effect three years from now.

Critics of the 2010 Affordable Care Act (ACA) pounced on this as further evidence for repeal. But their hasty conclusions conveniently ignore reality. The percentage of people with employer-provided health insurance -- the backbone of the U.S. health care system -- has been dropping for at least a decade.

This alarming trend argues for ongoing reform -- strengthening cost containment in particular -- and against returning to the unaffordable health care status quo.

Some of the freshest data detailing this dismal decline comes from the University of Minnesota. In late June, its State Health Access Data Assistance Center released a report showing that the national percentage of nonelderly with job-provided coverage dropped from 69 percent to 61 percent from 1999 to 2009.

That translates to about 7.3 million fewer people without such coverage. (The report studied the nonelderly because Medicare covers those 65 and older.)

Researchers also analyzed data at the state level and found this erosion "occurred broadly across nearly all states."

Twelve states with little in common had declines of 10 percentage points or more during this time period. On the list are states such as Minnesota, which has a high number of state-mandated health benefits, and states like Mississippi and Arizona, which have far fewer mandates.

Employers may be dropping coverage or not providing it. But at the same time, workers also may be voluntarily going without coverage to save money. On average, premiums for yearly, single coverage increased from $2,490 at the beginning of the decade to $4,528, researchers found.

Health reform critics contend that the law's insurance subsidies for lower-income people will induce some employers to drop insurance altogether to save money. The law's low penalties for firms that don't provide benefits may also make this financially advantageous.

But the Minnesota researchers found that didn't happen in Massachusetts, which passed a 2006 health reform law similar to the ACA. The Bay State maintained a stable level of job-provided health coverage.

Whether the ACA accelerates the decline of employer-provided insurance remains an open question. Studies from the Rand Corporation, the Urban Institute and Mercer, a consulting firm, concluded there would be no substantial change. But this is an issue to be monitored as the law takes effect.

In the meantime, much more has to be done to end the health insurance death spiral. People without insurance still get care, but these uncompensated care costs are shifted in part onto private premiums, making fewer people able to afford insurance.

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