"Employment-Based Health Insurance: Is Health Reform a ‘Game Changer?’" 

U Illinois Law & Economics Research Paper No. LE10-010

DAVID A. HYMAN, University of Illinois - College of Law
Email: dhyman@illinois.edu

Employment-based health insurance is the Rodney Dangerfield of health policy: it gets no respect. Prominent health policy scholars and the media routinely condemn the linkage between employment and health insurance. Liberals view the existence of employment-based coverage (“EBC”) as the major stumbling block to instituting a one-payer system. From the opposite end of the political spectrum, free market enthusiasts attack EBC for distorting decisions about employment and coverage, and obscuring the true cost of health care. Employers are lukewarm about their role in the health insurance market; as the former head of General Motors aptly observed, “when I joined GM 28 years ago, I did it because I love cars and trucks. I had no idea I’d end up working as a health care administrator.”

EBC may not get much respect, but it is a fundamental and long-standing reality of American health policy. Approximately 160 million Americans obtain their health insurance through their place of employment, or the place of employment of an immediate family member. This article explains how EBC became such an important part of American health policy, and evaluates the likely impact of the Patient Protection and Affordable Care Act of 2010 (“PPACA”) on EBC. It concludes that PPACA is likely to have a range of unintended consequences.

"Examination of the Short-term Impact of the COBRA Premium Subsidy and Characteristics of the COBRA Population" 

EBRI Notes, Vol. 31, No. 6, June 2010

PAUL FRONSTIN, Employee Benefit Research Institute (EBRI)
Email: FRONSTIN@EBRI.ORG

On Feb. 13, 2009, Congress passed the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5), which included a provision for the federal government to pay 65 percent of the premiums for individuals covered under the continuation of employment-based health insurance by COBRA who incurred an involuntary job loss between Sept. 1, 2008, and Dec. 31, 2009. The subsidy was made available for up to nine months, and has been extended by Congress three times. At this writing it now lasts 15 months, having been extended through May 2010, and eligibility has been expanded to individuals who first became eligible for COBRA due to a reduction in work hours and then experienced an involuntary employment termination between March 2, 2010, and March 31, 2010. This paper examines trends in coverage through a former employer. It examines recent trends and also compares the characteristics of individuals with COBRA coverage with those of individuals having employment-based coverage through a current job. Current data indicate that the COBRA subsidies that became available in April 2009 do not appear to have had an immediate impact on the percentage of individuals with coverage through a former employer, but it is too early to tell from nationally representative surveys if and when take-up of COBRA accelerated. Data through August 2009 (and limited data through November 2009) are expected to be available in September 2010, when it will be possible to examine the impact that the premium subsidy has had on take-up of COBRA.

The PDF for the above title, published in the June 2010 issue of EBRI Notes, also contains the fulltext of another June 2010 EBRI Notes article abstracted on SSRN: "Income of the Elderly Population Age 65 and Over, 2008."

"Spousal Health Shocks and the Timing of the Retirement Decision in the Face of Forward-Looking Financial Incentives" 

Boston College Center for Retirement Research Working Paper No. 2010-7

NORMA COE, affiliation not provided to SSRN
Email: nbcoe@hotmail.com
COURTNEY VAN HOUTVEN, Duke University
Email: courtney.vanhoutven@duke.edu

A long and still growing strand of the retirement literature examines the role financial incentives play in the timing of the retirement decision. A more recent second strand of work has focused on the role of health shocks in the retirement decision. This paper combines these two components of the literature in order to measure the marginal impact of current wealth (including pension accrual), forward-looking financial incentives (peak-value pension wealth), and health shocks on married individuals’ retirement decision. This paper helps to clarify whether previously omitted forward-looking financial incentives can explain the strong role attributed to health shocks in the retirement decisions of coupled individuals. We find that financial incentives are the most important determinant of retirement behavior empirically. A husband is about half as responsive to his wife’s financial incentives as he is to his own. Interestingly, we find that married men are responsive to their wives’ health shocks, on both the intensive and extensive margin, but find wives’ decisions concerning work are largely unaffected by their husbands’ health shocks.

"The Health-Related Tax Provisions of PPACA and HCERA: Contingent, Complex, Incremental and Lacking Cost Controls" 

New York University Review of Employee Benefits and Executive Compensation, Forthcoming
Cardozo Legal Studies Research Paper No. 301

EDWARD A. ZELINSKY, Benjamin N. Cardozo School of Law
Email: zelinsky@yu.edu

Americans must, into the indefinite future, confront difficult issues pertaining to health care and health care costs. The Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010 (HCERA) do not alter the status quo as much as their advocates and their detractors contend nor do PPACA and HCERA resolve the fundamental challenges confronting the U.S. health care system, including the problem of escalating health care outlays. In important respects, PPACA and HCERA will exacerbate that problem.

Four factors underpin this sobering assessment. First, PPACA and HCERA, while significant, are more incremental in nature than either their proponents or their opponents acknowledge. These laws build upon – indeed, extend - the existing systems of private health insurance and employer-provided health care. Second, many provisions of PPACA and HCERA have delayed effective dates. It is an open question whether future Presidents and Congresses will allow these deferred provisions to go into effect as scheduled. Third, key provisions of PPACA and HCERA are enormously complex. By virtue of such complexity, these laws will impose prodigious enforcement burdens upon the Internal Revenue Service (IRS) and equally immense compliance obligations on taxpayers, in particular, small businesses and many individuals of modest means. The prospects for a complexity-induced political backlash to PPACA and HCERA are considerable. Fourth, these acts merely postpone the tough decisions that must be made about health care and about health care costs in particular. These laws’ efforts to control health care outlays are tepid and deferred. Moreover, PPACA and HCERA, by expanding access to medical services, will increase demand for such services and thereby stimulate health care expenditures.

While Republicans and Democrats alike portray the adoption of PPACA and HCERA as a pivotal moment in American life, we Americans are fated to conduct a prolonged – indeed, an indefinite – debate about health care and its costs. PPACA and HCERA write an important, but hardly final, chapter in that debate.

This is not surprising. Democracies rarely make radical breaks from the status quo nor should they. Cost control entails sacrifice which the American political system is today incapable of demanding from the American people.

"Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account Balances, and Rollovers, 2006-2009" 

EBRI Issue Brief No. 343, June 2010

PAUL FRONSTIN, Employee Benefit Research Institute (EBRI)
Email: FRONSTIN@EBRI.ORG

This paper examines HSA and HRA assets, account balances, and rollover amounts. It examines the types of individuals likely to have a consumer-driven health plan (CDHP). It then examines differences in account balances by demographics, income, contribution levels, and engagement in an individual’s own health care, using a regression equation. Rollover amounts are then examined. In 2009, there was $7.1 billion in consumer-driven health plans (CDHPs), which include health savings accounts (or HSAs) and health reimbursement arrangements (or HRAs), spread across 5 million accounts. This is up from 2006, when there were 1.2 million accounts with $835.4 million in assets, and 2008, when 4.2 million accounts held $5.7 billion in assets. Increases in average account balances appear to have leveled off. In 2006, account balances averaged $696. They increased to $1,320 in 2007, a 90 percent increase. Account balances averaged $1,356 in 2008 and $1,419 in 2009, 3 percent and 5 percent increases, respectively. The typical CDHP enrollee was more likely than traditional plan enrollees to be young, unmarried, higher-income, educated, and exhibit healthy behavior. No differences were found between CDHP enrollees and traditional plan enrollees with respect to gender, race, and presence of children. Overall, the number of people with a rollover, as well as the total level of assets being rolled over, have been increasing. The average rollover increased from $592 in 2006 to $1,295 in 2009.

"The First Individual Mandate: What the Uniform Militia Act of 1792 Tells Us about Fifth Amendment Challenges to Healthcare Reform" 

BRADLEY A. LATINO, Seton Hall University School of Law
Email: brdltno@gmail.com

Beginning in 2014, the Patient Protection and Affordable Care Act (PPACA) will require many to purchase a private health insurance policy or pay a monetary fine. Once considered an unprecedented Act of Congress, the debate over this "individual mandate" recently rediscovered a very similar provision in the Uniform Militia Act of 1792 (UMA). The Act made militia service compulsory for every white, able-bodied male citizen between 18 and 45, and required they supply themselves with a field-ready musket and other gear.

This paper first establishes historical and legislative context for the Militia Act, then analyzes how the UMA might affect Fifth Amendment-based challenges to healthcare reform. The two mandates are indistinguishable under current Fifth Amendment doctrine, which permits both. The UMA also provides a strong historical argument against the addition of new substantive rights that would prohibit federally-mandated purchases.