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Big Changes To Employer-Based Health Care Won't Come Easy


It's MORNING EDITION from NPR News. I'm Renee Montagne.


And I'm Steve Inskeep.

Let's look for the truth behind some much discussed news about the Affordable Care Act. Congressional forecasters said last week that the law may cause fewer people to work full-time jobs.

MONTAGNE: Critics distorted that finding, saying the law was eliminating jobs. In truth, forecasters were mainly saying that people would leave full-time jobs that they had been keeping for the health benefits. ObamaCare makes it possible for more people to buy insurance outside their jobs in the private market.

INSKEEP: Politics aside, the true forecast is meaningful enough. Health insurance has been linked with employment for generations, but it always hasn't been this way, and it may not always have to be.

NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: More than half of all working-age Americans get their health insurance through their job. As President Obama noted at the White House this week, that's unusual.

PRESIDENT BARACK OBAMA: Partly because of historical accident and some decisions that FDR made during wartime back in World War II, our health care has been much more tied to employers. That's not the case in most other developed countries.

HORSLEY: During World War II, pay raises were strictly limited by the government. But benefits were not. So many employers began offering health insurance as a way to attract scarce workers, and the idea stuck. As recently as 2000, workplace health insurance covered nearly 70 percent of Americans under the age of 65. As employers cut costs though, that number has been shrinking. By 2010, it had dipped to less than 60 percent.

JOHN GRUBER: I liken the existing employer insurance system to sort of a crumbling building.

HORSLEY: Jon Gruber is a health care economist at MIT.

GRUBER: You can knock it down and start over. Or you can make sure you build the safety net around it, to make sure that when pieces of the building fall off, no one gets hurt.

HORSLEY: Knocking it down and starting over is what Republican presidential hopeful John McCain proposed back in 2008. He wanted to replace the tax break for employer-provided insurance with a tax credit that anyone could use to buy their own coverage. Obama preferred a less radical fix.

OBAMA: I don't think that an employer-based system is going to be, or should be, replaced anytime soon. But what the Affordable Care Act does do is it gives people some flexibility.

HORSLEY: Obama worried doing away with employer-provided insurance all at once would be too disruptive. Hence the slogan, if you like your plan, you can keep it. But ObamaCare did create the new marketplaces as an alternative. Economists of all stripes see some advantages in loosening the ties between health insurance and the workplace.

Harvard's Greg Mankiw, who was an advisor to George W. Bush, calls those ties a historical artifact.

GEORGE MANKIW: You don't get other kinds of insurance through your employer. You don't get your car insurance through your employer. So there's no particular reason why health insurance should be gotten that way.

HORSLEY: But the federal government still offers a big sweetener to people who get health insurance through the workplace. Unlike your paycheck, that insurance is tax free. MIT's Gruber says that tax break costs the government some $250 billion a year, more than all the subsidies in the new health care law combined.

GRUBER: It's incredibly expensive. It's regressive, in that the sense that the richer you are, the bigger tax break you get. And most importantly, it's inefficient in that it induces employers to buy insurance that's too generous because they're buying it with tax-free dollars.

HORSLEY: The health care law does whittle away at that tax break, beginning in 2018, when the most expensive workplace health plans will face a new federal levy. But health policy expert Linda Blumberg, of the Urban Institute, says bigger changes to employer-provided coverage won't come easily.

LINDA BLUMBERG: When you have this long-standing history, it's hard to let it go. That may be something that occurs over time. But until you change that tax structure, you won't really see a big out-flowing of individuals from employer-based insurance.

HORSLEY: In other words, what Gruber calls the crumbling building of workplace health insurance may take a long time to come down. In the meantime, a new building - the insurance market set up by the Affordable Care Act - is slowly taking shape and looking a little less rickety than it did early on. As of last month, more than three million people had moved in.

Scott Horsley, NPR News, the White House.

INSKEEP: That three million is the number of people who've signed up for individual insurance in the new health exchanges, including one million in January. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.