What Your Job Means to Health-Care Reform

As the legislation to reform the nation’s health-care coverage continues to take shape, it has drawn more attention to the relationship between the working and the insured.

A heavy payroll loss and a spike in the unemployment rate helped expose Americans’ dependence on their jobs for health care. Nearly 60% of the population receives health coverage through their employer, according to the latest Census Bureau data from 2007. And as the recession has roiled the job market (roughly 7.2 million people have lost their jobs since December 2007, according to the Labor Department), so has it underscored the link between employment status and health insurance. Millions have lost their employer-sponsored coverage since the downturn began, and fewer companies are providing coverage – or the same level of coverage – to the workers they retain.

A study by Hewitt Associates conducted in April found that 13% of employers surveyed had increased the premiums employees pay for insurance since late 2008, while 32% reported considering an increase and 19% said were weighing cutbacks to medical benefits. 

Many individuals are staying with their jobs primarily for the health benefits – a phenomenon known as job-lock. These workers – who might be their family’s sole source of coverage or who might have a pre-existing medical condition – are reluctant to switch jobs or strike out on their own because they don’t want to risk giving up the security of a health plan.

So what might a new health-care system mean for these different types of workers?

For starters, the White House’s proposed health care reform legislation would seek to weaken the bond between medical coverage and employment status.

Supporters of President Obama’s plan say the overhaul could make coverage generally more affordable and easier to get. However, the legislation is still a moving target, and many details have yet to be worked out by Congress. (They’re set to resume legislative wrangling when they return from recess on Sept. 8.)

Here’s a look at how the current proposals may change health insurance for different groups of workers.

Laid-off workers who cannot participate in a spouse’s health plan now have three options when they lose their subsidized employer-sponsored insurance. They can continue with the coverage they received from their employer for 18 months through Cobra (for which they pay the full premium), buy an individual plan in the open market, or go without coverage.

A new health-care system would change those options. First, any person – regardless of their employment status – would be able to shop for coverage on the health insurance exchange, a feature of two proposals now on the table. The exchange would offer a menu of private and public (government-sponsored) plans.

There are two advantages of such an exchange, says Karen Davenport, the director of health policy at the Center for American Progress, a left-leaning think tank based in Washington. Insurers would not be permitted to deny coverage based on a pre-existing condition or on someone’s health status. And consumers would get a better deal on the exchange than they would shopping for an individual plan on today’s open market because they would be buying into a larger pool and benefiting from economies of scale, Davenport says.

Under the two versions of the legislation, individuals and families with annual income up to 400% of the poverty level (or four times $22,000, for a family of four) would receive scalable subsidies to help them buy coverage through the exchange.