There is little good news on employer-based insurance. Sixty-one percent of all firms offered health insurance to their employees in 2006, a decrease from 69% in 2000. People starting their own small business may not be able to acquire insurance since they or their family members may have pre-existing conditions or are in poor health. And those who lose their jobs are likely to lose their health insurance. All of this explains why under our employment-based health insurance system, labor inefficiency develops because people are as likely to base a job decision on a company’s willingness to offer health insurance rather than where their skills would be put to best use.
Even if one does have employment-based health insurance, there may be substantial disincentives for employers to offer health insurance that includes preventive care or uses advanced information technology. Employees simply don’t stay around long enough to make those investments pay off. Employees averaged only four years of continuous employment with their firm in 2006.
In manufacturing industries, the average job tenure was 5.5 years; in the hospitality and leisure industries only 1.9 years. Continuous enrollment in a health insurance plan is usually for an even more limited time.
Enrollees may drop their health insurance plan if shifting to Medicare or when a spouse acquires health insurance for the entire family. Enrollees may switch health insurers because of a change in health status or they become dissatisfied with higher premiums or poor service. Health insurer enrollment will be terminated if an employer no longer offers health insurance or if one leaves or is laid off from a job. Since continuous enrollment in a health plan is so abbreviated, one can ask why employers would invest substantial sums in preventive benefits and computer technology when the subsequent employer will realize the benefits from these programs.
What might happen if employers ceased to provide insurance, but there was a vibrant private sector market open to all? That is a vision held by some reformers in the U.S. For a case study, we should look to Israel, a healthcare marketplace I have studied up close for many years. Under that nation’s system of universal healthcare, there are four competing health insurers, equivalent to PPOs, which individuals can select among in an open-enrollment period four times a year.
Enrollment with a health insurer is for an extended period of time, in part, because the employer is not involved. Only 1% of the population switches health insurers each year. Incentives exist, therefore, for each health insurer to provide good preventive healthcare and to install IT in order to strive to keep long-term costs low.
Maccabi Healthcare Services, the fastest growing health insurer in Israel, with a 24% market share, is a case in point. Preventive services are pursued vigorously. Programs are available for cardiac rehabilitation, detection and prevention of cardiovascular disease. Examinations for early detection of breast cancer, melanoma and intestinal cancer are performed. Educational support is available for diabetics and asthmatics as well as for smoking cessation and nutrition.
Unfortunately, there are no studies on the specific outcomes of such prevention, although life expectancy rates in Israel are on par with other Western countries.
IT has been implemented for the physician, pharmaceutical and hospital sectors.
Maccabi’s medical staff of 400 employed, salaried physicians consists of both primary-care doctors and specialists, with contractual access to another 3,000 physicians. Each time a physician visit takes place, its results are inserted into the digital record. Laboratory tests are computerized so that each physician has access to results from tests such as ultrasounds, X-rays and mammograms, which are integrated into a central diagnostic center. In addition, Maccabi owns 43 pharmacies, and enrollees have access to another 600 pharmacies throughout Israel. The record of drugs taken, possible drug interactions and contraindications are posted to the patient’s computerized medical file. Any hospital stays are also fully documented. Patients may also access the computer to schedule forthcoming appointments.
Computer technology has improved Israel’s quality of care in at least two ways. First, mistakes are avoided, such as misleading and incomplete information provided to physicians by the patient during illness, or incomplete records kept by one or more attending physicians. Second, each PPO in Israel has its own database that can be used to ascertain how patients have responded to treatments over a long period of time. Each PPO may abandon treatment or adopt new treatments when evidence shows how well past treatments have fared.
By removing the role of the employer in health insurance coverage, the U.S. would increase the likelihood of achieving increased preventive care and greater installation of IT in addition to gaining greater labor force efficiency.
Such an individual-based health insurance system in the U.S., with government safeguards to prevent cream-skimming, would create incentives for health insurers to compete, in part, by offering and advertising preventive services in order to attract and retain potential enrollees. In this way, the market for health insurance would resemble other markets in the economy, with benefits for employers and employees alike.
Warren Greenberg is a professor of health economics at George Washington University and president of the Washington Institute for Israel Health Policy Research.
