Even if You Have Employer-Subsidized Health Insurance, You Don't Really

At the excellent "think-tank" blog on economics and finance, The Baseline Scenario, James Kwak has posted an article on health insurance that draws back the curtains, blows away the fog, and shatters the mirrors of illusion. The "in-your-face" title is "You Do Not Have Health Insurance." He says that unless you are over 65 in the U. S., the word "insurance" does not really apply. I'll quote the first section to spell out the heart of his argument, which will knock you over.

Right now, it appears that the biggest barrier to health care reform is people who think that it will hurt them. According to a New York Times poll, “69 percent of respondents in the poll said they were concerned that the quality of their own care would decline if the government created a program that covers everyone.” Since most Americans currently have health insurance, they see reform as a poverty program – something that helps poor people and hurts them. If that’s what you think, then this post is for you.

You do not have health insurance. Let me repeat that. You do not have health insurance. (Unless you are over 65, in which case you do have health insurance. I’ll come back to that later.)

The point of insurance is to protect you against unlikely but damaging events. You are generally happy to pay premiums in all the years that nothing goes wrong (your house doesn’t burn down), because in exchange your insurer promises to be there in the one year that things do go wrong (your house burns down). That’s why, when shopping for insurance, you are supposed to look for a company that is financially sound – so they will be there when you need them.

If, like most people, your health coverage is through your employer or your spouse’s employer, that is not what you have. At some point in the future, you will get sick and need expensive health care. What are some of the things that could happen between now and then?

Your company could drop its health plan. According to the U.S. Census Bureau (see Table HIA-1), the percentage of the population covered by employer-based health insurance has fallen every year since 2000, from 64.2% to 59.3%.

You could lose your job. I don’t think I need to tell anyone what the unemployment rate is these days.

You could voluntarily leave your job, for example because you have to move to take care of an elderly relative.

You could get divorced from the spouse you depend on for health coverage.

For all of these reasons, you can’t count on your health insurer being there when you need it. That’s not insurance; that’s employer-subsidized health care for the duration of your employment.

Once you lose your employer-based coverage, for whatever reason, you’re in the individual market, where, you may be surprised to find, you have no right to affordable health insurance. An insurer can refuse to insure you or can charge you a premium you can’t afford because of your medical history. That’s the way a free market works: an insurer would be crazy to charge you less than the expected cost of your medical care (unless they can make it up on their healthy customers, which they can’t in the individual market).

In honor of the financial crisis, let’s also point out that all of these risks are correlated: being sick increases your chances of losing your job (and, probably, getting divorced); losing your job reduces your ability to afford health insurance.

There is more in the article, explaining some further dangers about companies rescinding policies, denying claims, not covering various critical procedures, and COBRA that help us realize how precarious our health coverage is. As he points out, unless your job is insured (there is no way you can lose your job or go out of business), your access to health care is not insured.

We need this reform. Make it plain to your Congressional Representatives.