Employer-based health coverage drops to new low

A new Gallup poll shows a drop in employer-based health care coverage over the last three years, although leaves open the question of why.  Since January 2008, Gallup has surveyed the population on the source of health-care coverage, and at that time half of Americans had employer-based coverage.  In December 2010, that number has dropped in slow but steady decline to 44.8%, while those receiving government coverage has increased from 22.5% to 26%:

A new low of 44.8% of American adults report getting their health insurance through an employer in November, down from 50% in January 2008, when Gallup began tracking it. The percentage of Americans with government-based healthcare remains elevated, with the 26% who report having it last month similar to the high of 26.3% found in September.

Half of Americans reported having employer-based health coverage in January and February 2008. The figure remained near the 49% mark throughout much of the rest of that year, before dropping to 48% in November 2008, as the financial crisis and unemployment worsened. Over the same time period, Gallup has tracked an increase in the percentage of Americans with government healthcare — Medicare, Medicaid, or military/veterans’ benefits.

Gallup asks Americans about their healthcare coverage daily as part of the Gallup-Healthways Well-Being Index. The monthly data for November are based on interviews with 27,218 Americans.

Nearly one in six (16.1%) American adults report that they did not have health insurance in November, a figure that is down slightly from a high of 16.8% in May of this year.

There are many reasons why this trend may be occurring now, especially since the polling data only goes back to the start of the recession.  Millions of jobs have been lost since that time, which eliminated health-care coverage for many of them.  A substantial number of those would have eligibility for Medicaid.  At the same time, the population has grown slightly older, and some of the shift may be seniors transferring to Medicare.

This data could be used to argue that an ObamaCare program or something similar is needed to handle the problem, but that would ignore the fact that we still have almost twice as many people in employer plans than government programs.  Furthermore, if the economy starts creating jobs again, the employer-based plans will once again start covering those who lost insurance in the last couple of years — assuming that an ObamaCare program doesn’t provide disincentives for coverage.  Right now, the perverse incentives of ObamaCare hits small businesses the hardest, and that is where the new jobs will come.

However, let’s not lose sight that real reform would have to disconnect people from their employers for health coverage in any case.  The tax incentives for treating benefits as different from other compensation have generated the comprehensive third-party payer model that government mainly adopted for its own programs.  Insurance needs to return to its proper role in indemnifying against significant loss, not acting as the agent for every single medical-maintenance transaction in the market.  That removes the pricing signals that allow markets to operate rationally and incentivize greater supply to meet demand.  That would put consumers and doctors in control of treatments, allow for security blankets for people that stay with them as they change jobs, and to keep the cash they’ll need to pay for routine care on their own.

The problem isn’t that people are exiting from the third-party payer system of employer-based coverage — it’s that they’re transferring to the third-party payer system of government-based coverage.