US employers will stop offering health insurance in five years

Mr. Smith, I see no sign of your employer.
Mr. Smith, I see no sign of your employer.
Image: AP/Toby Talbot
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At least, that’s if you believe health tech entrepreneurs and their advisers.

Currently, 54.9% of Americans get their health care from an employer-sponsored insurance plan. That number has been steadily falling in recent decades as health-care costs have increased, leading fewer companies to offer coverage. But the idea that employers might get out of the business altogether in five years thanks to the new US health-care law is a dramatic change.

One feature of the Affordable Care Act (a.k.a. “Obamacare”) passed in 2010 is new insurance marketplaces called exchanges, which allow people to shop for individual insurance plans, and get government aid to do so if they have low incomes. “On the consumer side, I think we’re going to see a lot more people go to exchanges, private or public,” Brad Weinberg, a physician and entrepreneur behind Blueprint Health. “People are going to be willing to take a lot of risk, and in five to ten years, most employers will get out of the insurance game. Most benefit managers don’t want to promote that.”

Weinberg was speaking at a panel organized by ZocDoc, a fast-growing health tech start-up. His four fellow panelists concurred with his view. One of them, Bill Frist, a Republican former senator, said that as the health-care law is implemented (he does not expect it to be overturned, however much his former colleagues in the Senate may be itching to do so), he expects more employers to let their workers turn to exchanges to buy coverage.

But the transition won’t be entirely clear-cut, said another panelist, Tom Daschle. A Democratic former senator who, along with Frist, now advises ZocDoc and other companies, Daschle predicted that companies will set up or join private exchanges, subsidizing their employees and letting them shop for plans that way. Companies like IBM are already experimenting with such a scheme for their retirees.

Not everyone is so sure that employer-sponsored insurance is coming to an end. The non-partisan Congressional Budget Office, for instance, predicts that only a small number of employers will drop coverage. That’s partly because they have two incentives to keep it in place: potential tax benefits if they do sponsor coverage, and penalties if they don’t pay their employees enough to buy their own health insurance. Indeed, the law’s authors went out of their way to write it so as to leave most people’s insurance coverage unchanged.

To some extent, the people on the ZocDoc panel were talking their book. Their business (the other two panelists were Amanda Parsons, a deputy commissioner at New York City’s Department of Health, and Richard Fernandez, the COO at Steward Medical Group, a large hospital network) depends on finding ways to help people navigate a changing health care system. More disruptive change means more opportunities for them. But the logic of the law—and its goals of reducing health-care costs and their malign affects on the economy—make a future where companies spend less time managing health benefits more likely.