Health Care Disintermediation

My simple guess as to the reason for the decline:

The plans got more expensive, both in total and from the point of view of the employee. That is, not only did premiums increase, the share paid by employees rose as well.

My particular compensation package has not changed since 2002, so my insurance coverage is much lower (though still very good) than it used to be. I would love to remove the employer from the insurance equation, and the employer (mine anyway) doesn't want the costs incidental to maintaining the health plan.

Attitudes about who is best at selecting coverage need to change from the "benevolent" employer to the individual. Most of my collegues think that all our raise should always go to the tax-advantaged health plans. This tells me that the taxman is too involved in health plans.

By the way, I wonder why private insurance is burdened with the catastrophic stuff that would otherwise have been covered by the government anyway? For example, a prematurely born baby is a massive drain on group policies and if the mother were not covered at all, the baby would still receive mandated services.

I am only interested in easy answers to this one. :-)

What are the factors that might explain the trend toward fewer workers opting into corporate health plans?

More two-income households and more coverage of non-spousal partners would help explain the trend. When "employer-provided medical benefits" are offered to both members of a two-income household, they will opt-in to the better plan and opt-out of the other.

My insurance (major medical) is independent of my employer, and costs $70/month.

My employer offers only bells-and-whistles coverage at $125/month.

I save $660 per year if I don't visit the doctor. If I do go, I spend $80-$200, leaving me with an extra $400/year. Meanwhile, if I break a leg or catch meningitis, I'm not going to die or go bankrupt.

It would be nice if my employer would subsidize my health care plan, or give me a rebate, but I can't have everything, I suppose.

Is it disintermediation if a worker goes from an employer-contributed plan to no plan or a spouse's employer-contributed plan? Or should that term be reserved for when an employee leaves an employer-contributed plan and enters plan with no employer contribution?

If so, the quoted statistics do not demonstrate disintermediation.

More employees (myself included) are simply opting out of Employer health care. By not participating I save $ 320 on a monthly basis. Do the math, I have been with my current employer since August 1996. By not paying $ 320 a month for my "Employer Provided' health care, I have an additional $30,7 K in my savings account. At 35 years of age, the $ 30,7 K I would have spent would have merely subsidized a not-so-healthy participant in the program.

Two main reasons, often in conjunction: High Cost plus Spousal access to a better, more comphrensive medical plan. lgl

David Cutler wrote this paper a couple years ago.

"This paper examines why health insurance coverage fell despite the lengthy economic boom of the 1990s. I show that insurance coverage declined primarily because fewer workers took up coverage when offered it, not because fewer workers were offered insurance or were eligible for it. The reduction in take-up is associated with the increase in employee costs for health insurance. Estimates suggest that increased costs to employees can explain the entire decline in take-up rates in the 1990s."

NBER WP 9036

In the United States, the ease of purchasing wheaties, massages, motor vehicles and plumbing services does not vary as a function of whether one is employed by a traditional institution (university, corporation, Uncle Sam, state government, etc.) or not. The ease of purchasing health care does.

It is a trivial matter, requiring 0% of one's attentional resources to secure health insurance if you work for the FDA or the U of X or IBM. It is a very non-trivial matter otherwise.

The cost of health care varies enormously as a function of whether one is in one of Sam's clubs (government, education, corporation) or not. The November 24 Wall Street Journal has a front page story about Curtis Selby, a member of the "Old Brethren Church" who opted out of health insurance for religious reasons. He developed a variety of serious ailments and had to negotiate rates for different services at various hospitals. The article provides several examples of how the cost of treatment X varies enormously as a function of whether an HMO, Medicare, Medicaid or Joe Uninsured is footing the bill.

The current system makes a mockery of free market economic theory - the price of a colonoscopy should not vary as a function of the source of the payment.

The current system is a joke. Get it?

...

the price of a colonoscopy should not vary as a function of the source of the payment.

Why not? Health plans can negotiate price with providers because they deliver volume. Same with the government. Triple-A members can get better room rates at hotels, and that does not make a mockery of free market economics.