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Will company health plans go the way of company pensions?
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One of the criticisms of the various health care reform plans currently being batted about in Congress right now is that creating a public option, in which health care coverage is available through the government, will encourage companies to drop their own health care plans to save money. Because of those, some charge, the administration is not being honest when they claim that those who have and enjoy their current coverage will be able to keep it. That decision will not be up to the individual, but their employer.
Some point to pension programs as evidence that government health plans will erode corporate health plans. Whereas as many as 60 percent of Americans were part of a pension plan in the 1970's, only about 13% rely on pensions as their primary retirement plan today, according to Maura Jane Farrelly. The decrease certainly seems signficant, and since many of those not relying on pensions are instead relying on Social Security for retirement, it seems to reinforce the criticisms of the public option for health care.
However, the comparison is inaccurate. The Social Security program began in 1935 as part of the Roosevelt New Deal. At the time workers largely expected to retire late in life and live off whatever savings they had, or rely on family for support. Pension plans became popular during World War II, when wage freezes made labor unions look for other ways to gain concessions for their members. The use of pension plans increased until the 1970's, as mentioned above.
Social Security, then, did not lead to the decline of pension plans. The two were largely unrelated. What did cause the demise of pensions? The 401(k) plan. Named for the section of the Internal Revenue Code which allowed for them. By then companies had largely changed their employment practices, in part due to the recession and high unemployment of the 1970's, and the idea of employees staying with a single company for life was becoming increasingly impractical. 401(k) plans allowed companies to offer some sort of retirement benefit to employees while allowing employees to keep whatever they had earned if they moved to another job.
In short, the 401(k) was seens as a win-win for both companies and employees. The plans were easier for employers to administer, while still providing a tangible benefit to attract employees. Workers, who less and less could expect to stay with the same company until retirement, saw the plans as protecting their long-term interests by allowing their retirement benefits to potentially follow them from job to job. The popularity of the 401(k) plan was what led to the decline of pension plans.
So is it fair to say that offering a public health plan will drive employers to eliminate health care plans as a benefit? No. By itself a public option health plan should do no more to eliminate private health plans than Social Security did. But should health care reform in any way increase the burden on private companies, such as through taxing health benefits or adding administrative costs, the disincentive to companies may be sufficient to make them opt out, forcing their employees onto the public plan.
Similarly, if health care reform includes provisions for making health care plans portable, it may also lead companies to change the health care plans they offer. This, however, may be seen as a plus rather than reform forcing Americans to change their plans. If portable health plans are similar to 401(k) plans, companies may simply choose to make contributions to the employee's own plan rather than provide one of their own. Like the 401(k), this would be seen by both sides as a positive.
So would providing a public option health plan force Americans to change their health plans? The answer is a definite "maybe". It all depends on other components of any reform bill that is passed. A public option is by itself neither an incentive or disincentive. The devil is in the details.
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