Reform legislation seeks to buttress individual market as employer-based coverage erodes
When President Obama took office last year and declared health insurance reform as a top domestic priority of his administration, he affirmed it would preserve employer-based coverage. He rejected calls for a Canadian-style single payer system, branding it too radical and disruptive.
Nevertheless, the reform legislation that could come up for a final vote this month in Congress implicitly acknowledges an erosion of employer paid health care coverage in the United States. It does with a focus on buttressing the individual market as an alternative for those who don’t get coverage through their jobs. While this market segment currently covers only about five percent of the working age population, that number is likely to grow as more small employers stop providing health coverage to their employees. The legislation lacks an “employer mandate” requiring small employers — defined as those with 50 and fewer employees — to slow that trend.
Instead, the reform bill appears designed to prop up the individual market, buttressing it as an alternative for those without employer-based coverage. It does so by expanding the risk pool with a mandate that everyone but the very poor have coverage and requiring individual insurers to take all applicants including those with pre-existing medical conditions.
Individual insurers will have a larger number of insureds to share the risk and generate premiums. But they will also have sicker people in the pool with costly chronic conditions like diabetes they can no longer turn away. The question going forward if the reform bill is signed into law is whether that approach is actuarially sustainable given continued projected increases in medical care expenditures and whether premiums can remain affordable even with subsidies. It’s a critical question given the Obama administration’s reliance on the individual market to fill the coverage gap created by a shrinking small employer group insurance market.