Ezekiel Emanuel on Employer-Based Insurance: Let the Dumping Begin

Ezekiel Emanuel believes that ten years from now employer-based insurance will be a thing of the past. By 2025 he believes less than 20 percent of Americans will get their coverage from an employer.

Emanuel is one of the architects of the Affordable Care Act. Recently he published a book titled “Reinventing American Health Care” in which he argues that fairly soon “a few big, blue-chip companies will announce their intention to stop providing health insurance.” Once it begins other companies will follow, dropping people by the millions onto the new health exchanges.

Emanuel gave an interview to the NY Times this week in which he described the major obstacle right now: negative public perception about the exchanges.

Q. What will cause employers to stop offering insurance?

A. Why does an employer do it now, when there’s
no mandate, no requirement? Because it needs to attract workers, and
workers have no real other options. The individual market is not enough
of an alternative. The first and most important, essential, requirement
is that the exchanges work well, become a positively branded experience,
and give people a lot of choice — choice that they like.

If perception of the exchanges becomes more positive, then employers can present dropping employer-sponsored coverage as a positive rather than a negative, i.e. you get to choose your own plan instead of you’re on your own.

The other big obstacle to dumping employees right now is that money spent on insurance is tax deductible whereas paying a fine for not offering insurance is not. But Emanuel thinks, “there may be ways of their employer not providing them insurance but
providing them a way to get insurance that allows them to keep the tax
exclusion.” In other words, companies might be able to keep the tax cut and lose the responsibility for picking health plans.

There is some agreement that another major disruption, especially an unexpected one like this, would create further political problems for Democrats. Jonathan Gruber, a promoter of the ACA, told the NY Times last week “It would be a big, big problem politically.”

Avik Roy, an analyst who offers a more conservative take on Obamacare, agrees with Gruber that dumping by big employers would create a political opportunity. However, Roy believes it might be one Republicans should pass up. He told the Times, “It’s a better world where people shop on their own.”

From the employee’s perspective, dumping people onto the exchanges would be a huge mess, though some of those folks would get subsidies which could reduce their costs. From the perspective of the government, there’s the potential that adding lots of subsidy eligible employees (think restaurant and retail workers) could make the cost of the law balloon unpredictably.

In short, if Emanuel is right, employee dumping could turn out to be a win for businesses, a lose for taxpayers and a mixed bag for employees, some of whom benefit and some who face higher costs. But politically speaking, the issue will likely be a loser for Democrats over the next few years.