Why Some Employers May Still Stop Providing Health Coverage

The Wall Street Journal’s Emily Chasan is making the case that, despite any methodology problems in what is now a highly suspicious report from McKinsey about employers dropping coverage as a result of the Affordable Care Act, some employers may still stop providing insurance:

But some executives say it’s natural that companies will seek to avoid getting locked into escalating health-care costs. “The employers know that their costs will only continue to increase at the same unsustainable rate,” said Bryce Williams, President and CEO of Extend Health, which runs a national Medicare exchange used by corporations for retiree health care. “This is a function of health-care inflation that employers have been forced to take on over the past few decades. The reform bill for the first time gives employers an interesting outlet.” […]

For some companies, paying the fixed cost of a penalty may be more palatable than facing rapidly rising premiums from insurance companies, that may rise even higher, if insurers and hospitals need to pass along higher costs. Some companies may worry that in a more government-driven insurance market, insurance carriers and medical providers may have nowhere else to turn but to them to make up for shortfalls in funding.

There is a certain degree of volatility in the employer-based insurance market, and the Affordable Care will provide both employers and employees with more choices and new decisions. The important point is that if a company does stop offering coverage, its employees will be able to shop around for affordable insurance in the exchanges.

For all its problems, the employer sponsored health care system provides stable coverage to millions of Americans and will likely remain a key source of insurance in the years ahead. While some progressives have proposed severing the link between employment and health care, others see any sudden shift as impractical. They point to the logistical nightmare of having to transfer millions of people into relatively untested exchanges in a relatively short period of time and the political problems that are associated with people being fairly satisfied with the insurance they currently have. The Affordable Care Act will provide for a far more gradual shift, one that keeps pace with Americans’ comfort level for new insurance options.