Economic Outlook - March 2006

Companies keep kicking the coverage off workers

The number of Tar Heels with employer-provided health insurance dropped by more than half a million between 1999-2000 and 2003-04, according to the Economic Policy Institute, a Washington, D.C.-based think tank. The percentage of the stateís population covered by such plans dropped 6.7 points, the second-largest decline in the nation. Adam Searing is director of the North Carolina Health Access Coalition, a nonprofit that tries to educate the public about health-care reform options.p>

BNC: Why the big drop in coverage here?

Searing: First, health coverage costs a lot more than it used to even a few years ago. Last year, we saw premium increases of over 10% for job-based health insurance. Since the year 2000, we have seen premium costs increase by 59%. Itís simple economics. When something costs more, there are more people who canít afford to buy it. The second reason is that North Carolina has lost a lot of higher-paying manufacturing jobs over the last five years. We have more service jobs, which usually donít have good health coverage.

Is this a Tar Heel phenomenon or part of a national trend?

According to a recent national study by the Kaiser Family Foundation and Health Research and Educational Trust, there has been a 9-percentage-point decrease between 2000 and 2005 in the percentage of companies that offer health insurance to their employees.

Is it any different here?

No. North Carolina, in many health-related factors, mirrors the country as a whole. We have a higher percentage of people who are uninsured, so we may have more companies that are dropping coverage here.

What can be done?

The North Carolina Institute of Medicine, a state-funded nonprofit policy group, has been considering a plan similar to the Healthy New York Plan, where the state sets up a $40 million-to-$50 million pool and takes over certain risks for some small-employer insurance plans. An insurance company would sell the plan, but the plan would be backed by the state pool. Any costs that are above a preset threshold, say $50,000, are taken over by this large health-insurance pool. This means that a small-business health-insurance product can be offered for a lot less money than other products that donít have that subsidy. That also means you have a lot of businesses that can suddenly afford health coverage. The institute is also looking at a more limited health-insurance package that would save money by covering almost everything except really expensive hospital stays.

What are other insurance options?

For those who do not have coverage through their employer, some carry individual coverage, which is very expensive for people who may be older or have health problems like asthma or high blood pressure.

What about Medicaid?

Of those half-million people who lost job-based health insurance, about 200,000 were children and women in lower-income families who were able to get insurance through Medicaid. But that, of course, increased costs to the state. What a lot of people donít understand is that no matter how poor someone is, if they donít have children they will not qualify for Medicaid. Medicaid historically has been limited to children, some low-income parents and people with disabilities.

Why should the insured care about the uninsured?

People who are uninsured are unlikely to get preventive care. When they do get care, possibly in the emergency room, problems that could have been solved cheaply are now very expensive.

Who foots the bill?

Everyone. Federal and state governments pay more to hospitals, which translates into our tax dollars. Employers pay more in premiums because hospitals charge more for services to try to recoup some of the costs.

How has the middle class been affected?

In the last five years, people at the bottom and middle of the income scale have not seen their earnings rise while people at the top have seen huge increases. In North Carolina, someone who is in the middle or bottom 20% in income pays about 10% of their income in state and local taxes. Someone in the top 20% pays about 6%. We have this growing inequity in how much money people have, and one thing that we have found over and over again is that the poorer people are, the fewer healthy choices they have. There is a direct correlation between a familyís income and the risk of premature death.

Whatís the ultimate solution?

More and more there is agreement that we should cover everyone with health insurance. Our system really does not make any sense. But I donít see any agreement on tackling what I think is a problem for the government and for employers: the increasing cost of health care. It is foolish to talk about solutions to our health-care problem without trying to rein in the costs, and I do not see the political will or interest in doing that.