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Center for Labor Research and Education

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Commentary: Health care reform: Shared risk, responsibility

Ken Jacobs
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San Francisco Chronicle

When Congress resumes work after Labor Day, the members must act swiftly to pass the Affordable Health Choices Act. Contrary to the misleading attacks, this uniquely American plan represents our best hope for expanding access to affordable coverage. Why? Because the House bill upholds the twin principles of shared risk and shared responsibility. As the legislation moves forward, any changes made should not abandon these two crucial ideals.

Shared risk means distributing the cost of health care services across large numbers of participants – including people of various ages and health conditions. In today’s market, individuals are denied coverage based on pre-existing conditions, how old they are or where they live. If everyone is insured and private insurers are barred from weeding out the sick, risk can be spread more evenly, so no one is denied coverage or priced out of the market.

Under the reform bill, a health insurance “exchange” will offer individuals and small businesses a variety of private plans and the information they need to select the best fit for their family. (Larger firms may be allowed to join later.) The exchange will also offer a public plan option, which is present in all the bills passed out of committees in the House and Senate but remains a major subject of debate, is essential for keeping costs down.

A Medicare-like public plan, offered as a choice to those in the exchange, will lower administrative costs and bring competition into markets where there are few health plans to choose from. A public plan option will not drive private insurers out of business: It will keep them honest.

The second ingredient of successful reform is shared responsibility. This means that employers and individuals should be expected to contribute to the cost of their coverage once affordable options are available. The federal government must offer subsidies through the exchange to low- and moderate-income families so insurance is affordable.

Employer responsibility is equally vital. Requiring larger employers to either provide coverage or contribute to the exchange helps fund health reform and ensures that reform will not undermine employment-based insurance. Otherwise, firms may be tempted to drop their coverage and shift costs to the public.

An employer requirement will also help level the competitive playing field. When employers do not provide coverage, the cost -estimated at between 5 and 10 percent of health premiums – is shifted to employers who do. Will an employer requirement hurt small businesses and cost jobs? Mom-and-pop businesses are exempt from the requirement and, in fact, will receive subsidies to help buy coverage. A recent UC Berkeley study of San Francisco’s employer health insurance requirement found no evidence it reduced the number of jobs.

Reform will remove a major obstacle to entrepreneurship. Individuals will be able to choose jobs on the basis of which use their skills best, rather than on the availability of health benefits. And firms providing coverage will benefit from slower increases in health premiums. The reforms proposed by the Affordable Health Choices Act represent a win for the nation’s health and for the health of our economy. Congress should make them a reality.

Jacob Hacker is a political science professor at Yale University and author of “The Great Risk Shift: The New Economic Security and the Decline of the American Dream.” Ken Jacobs is the chair of the UC Berkeley Center for Labor Research and Education.