Stanley Feld M.D.,FACP, MACE
Last week McKinsey published an in-house survey that showed that at least 30% of corporations would drop employee sponsored healthcare insurance (ESI) and let employees buy their own “affordable” “government subsidized” healthcare insurance (Public Option”) through the Government’s Healthcare Insurance Exchanges in each state. Adding thirty percent of the corporate work force to Healthcare Insurance Exchanges would place states and the federal government in deeper debt.
The McKinsey survey echoes what Doug Holz-Eakin (economist and former head of the CBO) and John Goodman (a healthcare economist and CEO of NCPA) have said about the impact of President Obama’s Healthcare Reform Act.
“If Mr. Holtz-Eakin is correct that there will be 11 million more people in the exchange, then costs could be nearly 40% higher than the $511 billion price tag. If between 78 million and 117 million people are moved into the exchanges the NCPA predicts the costs could more than triple to $2 trillion dollars more than expected over the first decade.”
“Most of this extra expense would come from workers losing their employer-sponsored insurance.”
Immediately, President Obama’s administration attacked McKinsey’s honesty. The Obama administration accused McKinsey of patronizing their clients and working for the sponsors of the survey.
The administration had no proof to support any of its accusations against McKinsey. Its aim was to tarnish McKinsey’s reputation as well as intimidate McKinsey and other organizations that might draw negative conclusions about his healthcare law.
Nancy Parmalee, the deputy chief of staff who is running “ObamaCare” from the White House in her Whitehouse blog, launched a ferocious attack on McKinsey.
“Unfortunately, the study misses some key points and doesn’t provide the complete picture about how the Affordable Care Act will strengthen the health care system and make it easier for employers to offer high quality coverage to their employees. Here are the facts:
She said the McKinsey survey is an outlier. She also accused the survey of being fixed. The results of the McKinsey survey were the opposite of the results of respected independent organizations and the CBO.
She said “McKinsey says they obtained their data after they “educated respondents” about reform and that their survey used proprietary research. We don’t know what respondents were told or whether they had the chance to check with their colleagues or crunch the numbers for their business before responding.”
In Ms. Paralee’s mind McKinsey cooked the survey in favor of a negative result about Obamacare. She then quotes the findings of three independent surveys.
Respected independent organizations have examined whether employers will continue to offer coverage. Here’s what they found:
The Rand Corporation: "The percentage of employees offered insurance will not change substantially, but a small number of employees in small firms (defined as those with under 100 employees in 2016) will obtain employer-sponsored insurance through the state insurance exchanges."
The Urban Institute: "Some have argued that the Patient Protection and Affordable Care Act would erode employer-sponsored insurance (ESI) by providing incentives for employers to stop offering coverage. Others have claimed that most businesses would face increased costs as a result of reform. A new study finds that overall ESI coverage under the ACA would not differ significantly from what coverage would be without reform."
Mercer: "In a survey released today by consulting firm Mercer, employers were asked how likely they are to get out of the business of providing health care once state-run insurance exchanges become operational in 2014 and make it easier for individuals to buy coverage. For the great majority, the answer was 'not likely.'"
The White House has routinely tried to intimidate its health-care critics. Nancy Parmalee’s facts in the administration’s campaign against McKinsey are wrong. She misread the studies she quoted.
- The White House sponsored the Urban Institute study cited by Nancy Parmelee. Bowen Garrett who now works for McKinsey wrote it.
- Some of the notable work on employers discontinuing to sponsor healthcare insurance and pay the penalty comes from Eugene Steuerle of the Urban Institute. His paper predicts a mass discontinuation of ESI by corporation of all sizes.
“Even so, droves of employees—potentially tens of millions—are likely to shift out of employer-provided insurance over the next decade or two, especially as newer firms and their employees find it more profitable to get the exchange subsidies than the subsidies for health insurance provided by the employer.”
Eugene Steuerle of the Urban Institute wants universal coverage run by the government as the single party payer. I could just see President Obama saying, “Don’t worry Gene we will get there.”
Nancy Parmalee also misstated the Mercer findings. The graphs show exactly what Mercer reported. It is not dissimilar to McKinsey’s survey.
"Obamacare incentivizes companies to drop health coverage for their employees. Employers who drop coverage have to pay a fine, but the fine is cheaper than offering health insurance. Employees will be able to buy their insurance on state-based “exchanges,” where they can take advantage of the law’s new subsidies.
(Americans making less than 400 percent of the federal poverty level are eligible for subsidized coverage on the exchanges.) AT&T has calculated that it would save $1.8 billion a year by dumping its workers into the government’s lap.
Other companies are keeping quiet about their plans for now, but make no mistake: If Obamacare remains the law of the land, nearly every corporation in America will do what AT&T has contemplated. So will cash-strapped state governments."
McKinsey released the entire methods, detail and results of its survey. The survey was non biased, well designed and answered each of President Obama’s administration’s criticism.
1.McKinsey and not clients funded the survey.
2.Ipsos, a well-established neutral opinion research firm, conducted the survey.
3.The companies surveyed were representative of corporations and businesses from the broader economy.
4.Respondents were required to be either the “primary decision maker” or “have some influence in the decision-making process” for employee health benefits.
5.Respondents were informed of Obamacare’s exchange subsidies in a neutral, factual manner.
6.Employer surveys (McKinsey survey) and economic simulations (CBO’s analysis) are different. CBO analysis has underestimated the result by a factor of five.
The attack on McKinsey was unfounded. Hopefully, McKinsey’s reply will not inhibit others from revealing the truth about President Obama’s policies not only in healthcare but in other areas.