In the debate over healthcare reform, references to outcomes mostly have to do with patients. But the impending overhaul of the health insurance system may lead to very different outcomes in employment. That's because health insurance coverage seems to guide the career choices of many older workers--and healthcare costs can guide the decisions of many employers.
If healthcare reform makes insurance much more affordable to individuals and businesses, it could result in a greater variety of career options for workers. For one thing, it would reduce barriers to entrepreneurship. Reform also could make it easier for workers to leave employers to whom they are "job-locked," or committed to solely for health benefits--a situation more common to older workers and those with pre-existing conditions.
It also could ease one of the greatest obstacles to older workers' job searches--even more pressing after nearly two years of recession and rocketing unemployment rates. "One of the long-standing barriers to hiring elderly workers is healthcare costs," says David Autor, an economist at the Massachusetts Institute of Technology. Because rates are higher for smaller employers, "if that concern were taken off the table," it would be easier for more businesses to hire older workers, Autor says.
Some employers worry about the potential for higher healthcare costs when hiring an older worker--although in most cases, a worker who's 50 or older will be more productive than someone younger who has less on-the-job experience, according to a 2005 report by the human resources and financial consulting firm Towers Perrin, prepared for AARP. Although it's unclear what precise shape healthcare reform will take, President Obama has insisted it will reduce the expense of benefits for small businesses. Last year, fewer than half of businesses with between three and nine employees offered health benefits, compared with 99 percent of businesses with 200 or more employees, according to the Kaiser Family Foundation.
A disadvantage. Small businesses pay as much as 18 percent more than large firms for the same health insurance policy, according to the president's Council of Economic Advisers. Employees at small businesses also tend to get leaner benefits packages and pay higher deductibles. "Small firms are likely to be at a competitive disadvantage in the market for hiring workers," according to the council's report. While Obama's goal may be competitive parity, opponents to existing healthcare reform legislation have argued that payroll taxes to pay for more affordable healthcare or mandates for levels of coverage could be prohibitive for small businesses.
Joanna Lahey, an economics professor at Texas A&M University, says there is little empirical evidence that proves insurers charge employers more in premiums for older workers--insurers don't exactly publicize their actuarial algorithms--but older individuals are charged more on individual plans. It would appear that older workers tend to accept lower wages in return for greater health insurance compensation. In New York, for example, after a law was passed prohibiting insurers from charging rates based on age, older workers' wages shot up.
Lahey's research finds that older workers often make new choices in employment when they are covered by insurance that is not provided by an employer. Her study looks at employment changes that occurred after the Department of Veterans Affairs decided to cover all veterans. Less-educated veterans were more likely to drop out of the workforce or work part time, while more-educated veterans were more likely to strike out on their own. Lahey suspects that if a public option in health insurance is good--in quality and price--there might be a similar effect.
This would, in general, be a good thing for the economy. Workers who choose to stay with employers merely to receive health insurance are not ideal for employers, who benefit more from motivated and productive workers. At the same time, workers are not helped by staying in jobs so they can maintain their coverage. There is what Lahey describes as a "loss of well-being" when, say, an older worker is ailing but continues to work until he or she reaches 65 and can be covered by Medicare. Yet many workers, particularly low-income ones, feel that's what they have to do.
Monday, October 5, 2009
How Healthcare Reform Might Reduce Unemployment
In the October 5, 2009 U.S. News & World Report article "How Healthcare Reform Could Get You Hired," Liz Wolgemuth explains how healthcare reform might reduce unemployment: