Job-Based Coverage Under Trumpcare

Over the last few months, there have been concerns among proponents of Obamacare that Trump is going to radically alter health care coverage in America, to the point that even people with job-based coverage may lose their health insurance. In 2015, nearly half of people with health insurance in the U.S. had coverage through their jobs. Group health plans are still popular, and millions of Americans rely on their employers for medical coverage. It’s true that Trump and the Republican Congress have big changes in the works for health care reform, but it’s not yet clear what impact these changes may have on employer-sponsored health plans. Conservatives tend to support job-based health plans because they’re cost effective.

The ideas being proposed under Trumpcare regarding job-sponsored coverage are not new. Several changes have already been taken into consideration by both parties at various times. Now, both parties will need to come together to ensure that employee health insurance remains a vital part of the American economy. Here’s how job-based insurance might evolve under Trump.

Republican Views on Current Job-Based Coverage

The Republican healthcare initiative is not so much an attack on the current status quo as it is an effort to offer more through the same recognized and established forum. Paul Ryan, Speaker of the House and the politician who’s leading the charge on a conservative health plan consensus, insists that consumer choice is at the center of the Republican plan. Many conservatives feel that there aren’t enough choices, whether people get their insurance through work or through a state-funded program. They blame limited choices on the rise in premium costs. Under Trumpcare, consumers would be able to:

  • Buy coverage across state lines
  • Price shop by seeing costs laid out more clearly from providers
  • Change jobs without losing financial assistance for health care

This last idea is an attractive feature, which we’ll discuss in a separate section below. In general, the Republican plan wants to focus on consumer-directed health care, which translates into people taking more personal responsibility for their health care choices, whether it’s through a work-based plan or a private policy.

Increasing Affordable Healthcare Plan Choices

Republican proposals so far revolve around expanding access to health insurance even further than the ACA has already done. One way to do this is to ensure that businesses can offer better and more affordable products to their employees. By no means does Trumpcare seek to eliminate job-based health plans. Instead, the president-elect and his supporters in Congress want to strengthen these plans so that they’re more viable for more people.

From a conservative standpoint, one of the biggest failings of the Affordable Care Act was making all new health plans cover essential benefits. This aspect of Obamacare is great for those who need specific services, like maternity care or rehabilitative equipment, but it’s not as welcome to people who are unlikely to want, need or use these essential benefits. Insurers had to charge more because they were covering a greater portion of care and more services than they were prior to the ACA. Republicans dislike the one-size-fits-all approach to health care, and they want to see a return to individual choice, even among employer-sponsored health plans.

What’s interesting about this concept, though, is that employers don’t always offer a wide array of health plans to their workers. Even large companies tend to narrow down the options to a couple of plans because it’s more economical to choose one or two group plans for an entire company. Private exchanges, which are a relatively new concept, allow employers to offer workers more choices in health plan and insurer, but few companies utilize this feature. In 2016, just 2 percent of employers with more than 50 employees used private exchanges according to a Kaiser Family Foundation survey. But the survey also found that 18 percent of employers with more than 50 workers and 28 percent of employers with over 5,000 workers are considering using these exchanges in the future.

In group plans, it’s not always easy to offer diversity of choice since businesses are covering most of the cost. The same Kaiser survey found that employers covered about 82 percent of the cost of individual group health plan premiums in 2016, meaning an individual worker paid just 18 percent of the cost of a plan. On average, that amounts to about $94 a month for an individual policy. Families pay a higher portion of the group premiums (30 percent), but it still results in an average family contribution of about $386 a month for job-based coverage.

Despite these relatively affordable rates, there are plenty of families in the U.S. who can’t afford work-based coverage but don’t qualify for subsidies on federal or state exchanges. This situation is known as the family glitch. It happens when your job offers technically affordable health insurance for you, the worker, but doesn’t offer affordable coverage for your family. Under the ACA, employers who must offer coverage by law have to make that coverage “affordable.” In this case, affordability means it can’t cost more than 9.69 percent (in 2017) of your annual income – but this doesn’t apply to your family. Dependent coverage is exempt from the requirement.

The family glitch affects 2 to 4 million Americans. They can’t afford coverage through work, but they can’t get a subsidy on the individual marketplace because their job technically offers affordable coverage as required by law. Republicans would like to see a resurgence of available price offerings that make healthcare coverage possible for every American, no matter what their income level may be. Accessing these types of plans through an employer would make them even more affordable. The Republican plan doesn’t intend to do away with employer-sponsored coverage. Instead, it seeks to extend the offerings to cover all employees.

Reducing the Trade of Benefits for Take-Home Pay

Employees can find themselves in a job-lock situation when they stay at a company because of the health benefits. The job market is filled with premium benefits offerings but with lowered take-home pay as a result. Families become dependent on good coverage, and they can’t afford to pursue other job options, even if they meant higher pay. What Republicans propose is taking away the tax breaks that foster this benefits-for-pay environment. Americans would benefit from having affordable health insurance as well as better take-home pay. This could happen by giving back the already earned income that is being drawn out for benefits premiums.

Offering Non-Income Based Tax Credits to Fill Gaps

Under the Affordable Care Act, Americans who earn up to 400 percent of the federal poverty level qualify for tax credits that bring down the cost of health insurance premiums on private marketplaces. This has helped millions of people gain access to health insurance who didn’t have it before. But there are gaps, and Republicans want to address these gaps by creating a “health care backpack.” The health care backpack concept is simple: everyone can get financial assistance to buy health insurance, but instead of being based on income, the subsidy is based on age. The older you get, the more assistance you would receive because older people typically require more services and care.

There are obvious benefits to this plan. For one thing, everyone gets help regardless of income – higher-income and lower-income families alike would be able to buy health insurance or roll the money into a health savings account to take care of medical expenses. The healthcare backpack policy also allows people to take their subsidy with them when they change jobs or start working for themselves.

As beneficial as this age-based tax credit system would be, there are also downsides, and the plan raises questions about funding. If everyone gets a subsidy, where is the money going to come from to fund this plan? Furthermore, Republicans don’t believe in an individual mandate, which means that healthy people don’t have much of an incentive to sign up for health insurance. This leads to a lack of health care funding in general if risk pools are only filled with older, sicker enrollees. These issues will need to be addressed if the healthcare backpack strategy is going to work.

Encouraging Lower Cost Options for the Underemployed

Obamacare changed the definition of “full time” as it relates to health benefits. People who work 30 or more hours a week are considered full time for purposes of determining which employers have to offer health insurance. The issue here is that people still need 40 hours (or more) of work, but they’re not being compensated accordingly. Employers looking to cut costs in order to provide health insurance may be tempted to reduce hours even as the cost of living continues to rise. Admittedly, this has not been a major problem so far.

Between 2009 (before the ACA was passed) and 2013 (when the law took full effect), the rate of people working between 31 and 34 hours a week dropped by just over 1 percent. In a workforce of over 150 million people, it’s not statistically significant that hundreds of thousands of people have gotten their hours cut. However, it is economically, financially and personally significant to the people being affected. More people may end up working multiple jobs just to make ends meet, which defeats the purpose of having affordable healthcare.

A smaller paycheck means there is less money available to pay premiums. The Republican healthcare initiative wants to promote and encourage more affordable options that can offer at least basic coverage to the seriously underemployed American. These plans would include:

  • Basic emergency care
  • Limited doctor visits for wellness check
  • Catastrophic healthcare protection

Such plans exist under Obamacare, but they’re restricted to people under 30. Employer-sponsored health plans typically include much more comprehensive coverage, making them practically unaffordable if not legally unaffordable to the average worker. There needs to be a way to offer people health insurance through work that isn’t prohibitively expensive, which is what Republicans want to do with their new health plan.

Eliminating Healthcare Mandates

Most people, regardless of political opinion, agree that the individual mandate imposed by the ACA is an unsavory aspect of the new healthcare system. It’s also ineffective because it’s not high enough to compensate for the cost of average premiums. For businesses, the cost is even more negligible. With an ineffective and socially undesirable feature like the individual mandate, it should come as no surprise that Republicans plan to axe it right from the start.

It should be noted, though, that the individual mandate is what makes insurance more affordable for millions of Americans. Requiring everyone to have insurance means that healthy people will be compelled to sign up – thereby offsetting the cost of care for older, sicker beneficiaries. How Republicans plan to keep insurance affordable without requiring people to sign up has yet to be addressed in detail.

Cultivating an Environment to Increase Self-Insurance Options

There has been a rise in businesses banding together to offer a safe and cheap pool of self-insurance products for employees. Republicans would like to expand and nurture this idea as a way to bring quality, affordable products to working Americans. They would also like to see community-based pools that encourage involvement from non-profits, private citizens and businesses. Allowing everyone to have a part in reducing the cost of health insurance nationwide – in other words, a consumer-driven healthcare system – is one of the driving forces behind Republican proposals.