• McKinsey Issues

    UPDATE: I was wrong that Q41b did not mention the penalty. I fixed the post.

    Stop emailing me, please! I know that McKinsey released their survey.

    It’s a long document, and I have many things going on. So this is a preliminary read, and the top of my head thoughts. My biggest concern is question 41a and 41b, which is the same question given to small or large employers. Here it is:

    41a/b. Individual health insurance exchanges. Starting in 2014, there will be state-run exchanges forindividuals to more readily purchase medical insurance on their own. Here are some additional facts:

    ■         Insurance products will be “guaranteed-issue” (i.e., a person cannot be turned down because of a pre-existing condition)

    ■         Insurance companies cannot charge exorbitant rates because of a person’s health. The onlyfactors they can use to “rate” an individual are age and smoking status.

    ■         Individuals whose employers do not offer health coverage, and who have household incomesbelow 400% (around $43K for a single person and $88K for a family of 4) of the federal poverty level, will receive government subsidies to offset their healthcare cost. Individuals with incomes above 400% ofthe FPL will receive no subsidies.

    Assume exchanges become an easy, affordable  way for individuals to obtain health insurance.

    If your employees were to obtain insurance on an exchange instead of through your company, here are examples what they would likely pay for basic coverage (based on their annual household incomes):

    Single person Family of Four
    Household Income Maximum Annual Premium Household Income Maximum Annual Premium
    $21,660 $1,365 $44,100 $2,778
    $27,075 $2,180 $55,125 $4,438
    $32,490 $3,087 $66,150 $6,284
    $43,320 $4,115 $88,200 $8,397

    [For question 41b, a line is added: “You would also pay a penalty of $2,000 per employee after the first 30 employees.”]

    Given this information, how likely do you think your company would be to discontinue employee healthcoverage?
    Definitely would

    Probably would

    May or may not

    Probably would not

    Definitely would not

    Here’s the problem with that question. Nowhere in there is the mention that employers who dump employees onto the exchanges will face a penalty if they get subsidies from the government! If I read this, why wouldn’t I send employees to the exchanges?  They sound great! My employees get a subsidy, so we all win!

    I still have a problem with this question. The whole thing reads like exchanges are awesome, with so many benefits and subsidies, then finally tacks on a line about the penalty. I even missed it the first time I read it. I don’t think they are lying (and never have), but I still believe the question may be biased towards making respondents think harder about dropping coverage. There’s a lot of stress on the benefits to employees.

    Think I’m wrong? Here’s question 41c:

    41c. Have you previously calculated how many of your employees would benefit economically if yourcompany were to discontinue offering health insurance?

    Yes

    No

    I don’t know

    It’s hinting to respondents that employees will benefit if the company discontinues health insurance. Employees benefit, no penalty to me – what’s the downside?

    I’d need to hear a pretty strong argument how this isn’t biased towards pushing employers to think harder about discontinuing coverage. Note, I’m not dismissing the fact that some employers will drop coverage. I just think this question is written in such a way as to make it seem like a better idea than it might be.

    Update: Edited for clarity.

     

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