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Employer Burden

Pay More, Get Less

  • By
  • Joshua Freedman,
  • New America Foundation
April 30, 2014
The American middle class faces an uncertain future. Staring headlong into a difficult – and changing – world economy that has yet to fully recover from the Great Recession, many middle class families are trapped between low, stagnant wages and an increasingly expensive set of social and economic supports.

Competing Visions of the Past: Learning from History for the Future of American Social Policy

  • By Steven Attewell, University of California-Santa Barbara
December 6, 2012

In his 2012 nomination acceptance speech in Charlotte, President Obama argued that this election represented “a choice between two fundamentally different visions for the future.” It is also true to say that we faced a choice between two fundamentally different visions of the past. And despite Obama’s reelection, the debate rages on in a closely-divided electorate and in Washington. Underneath disagreements over Obamacare, Medicare advantage cuts and Medicare vouchers, and individual retirement accounts, there is an argument about which model of social policy is best for the country.

Follow-up to McKinsey Kerfuffle

June 17, 2011
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Two days ago, we wrote about the kerfuffle” surrounding a recent McKinsey & Co. study. The study claims 30% of employers will drop employee health care coverage, contrary to many other non-partisan reports. Despite the study being picked up by most major news outlets and seized on by health care reform opponents, we found a troubling problem with the study’s methodology: it hasn’t been released.

Even though McKinsey’s own Bowen Garrett, the chief economist at their Center for U.S. Health System Reform, published an Urban Institute report in January that directly refutes the McKinsey study, the aberrant study has continued to be widely cited and circulated.  GOP Senator Ron Johnson and former McCain adviser Douglas Holtz-Eakin are now citing the study as proof of the ballooning costs of Obamacare while Karl Rove opines “The ObamaCare Bad News Continues” in the Wall Street Journal, also pointing to the “devastating” study.

As we said on Wednesday, a study countering common wisdom shouldn’t be discounted out-of-hand, but it certainly warrants a closer look.  Health care policy decisions, much like informed medical decisions, must be based on real and transparent data.

In the days following our blog post, the controversy has been picked up by numerous blogs:

Questioning the McKinsey Study - Someone Should Ask Bowen Garrett

June 15, 2011
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McKinsey & Company released a study last week that has caused a kerfuffle here in DC. The study claimed that 30% of employers “will definitely or probably stop offering coverage after 2014” as a result of the implementation of the Affordable Care Act. 

Opponents of the health reform law quickly seized on that number as further proof of President Obama’s anti-business, job killing agenda and bungling of health reform. House Speaker John Boehner’s office posted a blog entitled: “New Report: ObamaCare Will Eliminate Health Coverage, Cost America Jobs,” which breaks down the “troubling” analysis from McKinsey indicating employers ready abandon employee coverage en masse.

On closer inspection, McKinsey’s analysis turns out to be more troubled than troubling. The McKinsey study runs counter to virtually every other non-partisan review of the law’s impact on employer-sponsored insurance, as was pointed out by Time,Business Finance, Politico, the Washington Monthly and others. Even theWall Street Journal acknowledged “previous research has suggested the number of employers who opt to drop coverage altogether in 2014 would be minimal.” That’s not to say that a study countering common wisdom should be discounted out-of-hand, but it does raise enough eyebrows to warrant a closer look – especially when the common wisdom you are countering is your own.

Ironically, the author of an Urban Institute study used by the White House to refute the McKinsey report is none other than McKinsey’s own Bowen Garrett, the chief economist at their Center for U.S. Health System Reform. In his Urban Institute paper, Garrett dismantles “claims that the ACA would cause major declines in [employer-sponsored health insurance],” calling them, “greatly exaggerated.”

Wait, you mean McKinsey published a study claiming 30% of employers will drop employee coverage, in direct contradiction to the expressed position of one of their head health honchos? Mr. Garrett was unavailable to comment.

A closer look at the McKinsey study turns up other inconsistencies. The company has declined to release the methodology or wording of the survey questions – both of which can bias results. McKinsey did acknowledge that the survey “educated respondents about [employer sponsored insurance] implications for their companies and employees before they were asked about post-2014 strategies.” That alone could have influenced respondents’ answers. Without knowing the survey questions, the “educational” script, or the methodology, it’s impossible to know whether or not the design of the survey would itself generate an anti-health reform result. Such a survey is certainly not a sufficient base to support the authors’ prediction of “a radical restructuring of employer-sponsored health benefits.”

What’s most interesting, however, is that McKinsey – institutionally – agrees. Though officials within the company’s press office were unwilling to speak on-the-record, a well-placed source at McKinsey said, “The objective of the survey was to better understand employers' decision making related to employee benefits today and post reform. We were not making a point prediction or forecast about employer behavior after the implementation of health reform.”

The study’s authors appear to have overreached. Their article begins, “the shift away from employer-provided health insurance will be vastly greater than expected and will make sense for many companies and lower-income workers alike.” That certainly sounds like the type of economic prediction that the McKinsey insider says the study was never intended to be.

The Great Recession Strains the American Social Contract

  • By
  • Lauren Damme,
  • New America Foundation
November 23, 2010

The Great Recession has exposed numerous flaws in our social contract – weaknesses that existed prior to the economic downturn – highlighting the need for changes in our system. This series of policy briefs explores the stresses on our social contract, and the policy changes that must be made to mend it. The six-part series includes:


Overview: The Great Recession exposes flaws in the American Social Contract.

COST: The Real Deal with Rising Costs for Employers and Employees

September 8, 2010
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Healthcare reform was sold, in great part, as a response to the rising cost of medical care.  People generally understand and experience rising costs as increases in the premiums, co-pays, and out-of-pocket expenses associated with their insurance, which is often provided through their employers.

It is a major challenge for health reform, therefore, that these costs went up again this year and are likely to increase significantly for the foreseeable future.  Until major cost-reducing features of the legislation yield fruit and the subsidies for low-income individuals kick in, these increases in the short-term may well be greater than without reform as insurers have to comply with new rules and meet new expectations.  Inflation-adjusted costs for employers have actually gone down due in part to the recession but also because costs are being shifted to their employees.

COST: Workers Absorbing More of the Rising Cost of Health Care, Survey Shows

September 2, 2010
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Health insurance costs went up -- by a relatively modest 3 percent in 2010 -- to nearly $14,000 for a family policy, according to a new survey released by the Kaiser Family Foundation. But virtually all the increase was passed on to the workers.

“It’s a big jump in what employees pay,” said Drew Altman, the president of the foundation. “It’s the first time I can remember seeing employers cope with rising health care costs by shifting virtually all the costs to workers.” And while costs are going up, the coverage itself is shrinking.

COST: Survey Shows Steep Increases for Group Coverage

May 12, 2010
Family Health Care Costs Chart

A typical family's health care costs increased 7.8 percent last year, or by $1,303 for a family of four, according to the Milliman Medical Index, which focuses on families covered by an employer-sponsored plan using a PPO (preferred provider organization). It's the biggest total dollar increase the actuarial firm has ever found.in its annual study (although not as a percentage).

Employers and employees alike shared the increase in cost this year, with employers total costs increasing 8.00 percent and employees total costs increasing 7.4 percent. The employee portion includes both out-of-pocket cost sharing at time of service and payroll contributions for medical coverage. Increasing health care costs remain a challenge for both employer and employee and are largely driven by increases in the underlying cost of care.

Total medical spending for the average American family reached $18,074 in 2010, compared with $16,771 in 2009, according to the study. The average employer paid $10,744, topping $10,000 for the first time.

HEALTH REFORM: What Women Stand to Gain

March 31, 2010
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Being a woman just got a little bit less expensive.

No, the President didn’t mandate permanent clothing and accessory sales (we wish), but he did sign a bill that would forbid long-standing sex-discrimination practices in the health insurance industry. House Speaker Nancy Pelosi and other women’s health advocates have trumpeted provisions in the legislation that make certain being a woman is no-longer a pre-existing condition.

COVERAGE: Decrease In Employer-Sponsored Insurance Hurts Middle Class

March 17, 2010

How is the American middle class faring under the employer-sponsored private health insurance system? For a lot of people, the answer is "not so hot."

The Robert Wood Johnson Foundation has just released a report analyzing the decline in employer-sponsored private health insurance coverage in the last decade. Barely Hanging On: Middle-Class and Uninsured features a state-by-state analysis of where Americans are getting their insurance -- and how that coverage has changed since 1999. Across the board (all income levels and ages under 65) employer-sponsored insurance coverage decreased by 6.3 percent, while enrollment in public or government sponsored insurance programs increased by 4.5 percent.

Change in percent of people with ESI

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