An article published last month on Remapping Debate points out what may become a trend among American employers:
Beginning next month, Sears and Darden — the latter of which owns several restaurant chains, including Olive Garden and Red Lobster — will cease to offer defined benefits in which the employer, as part of its compensation package, provides employees with a set of health insurance benefits and continues to offer those benefits even when the employer’s costs for insurance rises. Instead, they will implement a defined contribution model, in which the companies will offer employees a fixed annual sum — like a voucher — that they can use to buy insurance for themselves and their families.
A voucher? Sound familiar?
Along with this monumental change comes what the writers of the article term a “large-scale marketing campaign,” designed, of course, to sell a very undesirable modification of “the multi-generational compact between management and labor.”
That marketing campaign, just like right-wingers selling their distasteful wares, purposely uses terms like “choice” and “empowerment,” as in, the good-hearted employers are merely offering their employees more choice among insurance plans and empowering them to take charge of their health care. Who could be against that?
Remapping Debate, though, is not sold:
According to numerous health care experts, economists, and even some in the consulting industry itself, however, that rhetoric belies the true motivation behind the shift: reducing the company’s exposure to ever-rising health insurance costs by shifting those costs directly onto employees, who will be forced to either pay more out of pocket for the same level of insurance or pay the same amount for less robust coverage.
An important point to make here is that this fixed contribution scheme is just the latest attempt to shift costs from employer to employee:
Several experts pointed out that benefits have already been significantly eroded in the group insurance market, as many employers have switched to “consumer-directed” health care models in which low premiums are coupled with very high deductibles and occasionally a health savings account. But [Kathleen] Stoll of Families USA said that the implementation of the fixed contribution model could greatly exacerbate that problem. When their contribution to health insurance is already limited to a fixed amount, Stoll said, employers will be more liable to make changes to that contribution. If the company has a bad year, for example, it may simply choose to freeze the contribution or even lower it in order to cut costs.
In my experience, the company doesn’t even have to have a bad year to cut costs. Profitable companies have been squeezing employees, when it comes to wages and benefits, including health care benefits. This is just another cost-shifting model and look out if it becomes popular:
According to Jacob Hacker, a professor of political science at Yale University and an expert on the American health care system, if the defined contribution health insurance model were to catch on, it would fit into a larger, historical context.
“The fundamental thing to recognize is that this is part and parcel of the more general risk shift,” Hacker said. “The reality is that health care, retirement, all of the fundamental sources of security are shifting from larger organizations like employers and the government onto individuals.”
This cost-shifting, though extremely problematic for workers in the short-term, may mean that in the long-term Americans will finally say goodbye to employment-based health insurance coverage altogether and demand a single-payer, Medicare-like system for all.
And the sooner the better.