Health care reform: Freedom for disgruntled workers?

June 21, 2012: 5:00 AM ET

If the Affordable Care Act, or even parts of it, is upheld, Americans will be able to opt for health care outside of their job. How will employees respond?

FORTUNE -- How many people do you know who take a job or stay at one for the health benefits? Many do.

"Today, employees really don't have a lot of choices besides the plans that their own employers sponsor," says Sandy Ageloff, the southwest health and group benefits leader at Towers Watson. And employment-based health benefits insure well over half of the of the country's nonelderly citizens, according to an April 2012 study by the Employee Benefit Research Institute.

But that may change, depending on the Supreme Court's ruling on the Affordable Health Care Act, which should come later this month. There are several potential outcomes: the Court may give the act a full go-ahead, it could strike it down whole hog, or some parts may be upheld while others -- particularly the individual mandate, which requires just about every American to purchase some form of health coverage -- may get the boot.

One signature part of the Affordable Care Act is that by 2014, states are required to create health insurance exchanges, which are intended to provide an affordable alternative to individual and company-sponsored insurance plans. So, what happens to the workforce when employees no longer feel tied to jobs for the health benefits?

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Currently, company-provided health insurance contributes to a kind of job-lock in the U.S. "This is a big thing," says Aparna Mathur, an economist and resident scholar at the American Enterprise Institute. "We are seeing inefficiencies in the labor market in the sense that there are vacancies out there, but mobility is really low because people are uncertain if they should be switching jobs."

Theoretically, options for health insurance outside of employer-offered plans could free up the workforce. "Definitely if you had health insurance that was mobile, you would see more efficiency in the labor market, people could transition to the best job possible," Mathur says, instead of being cautious about switching jobs because of uncertainty about benefits. 

Don't expect a sea change by 2014, though. For people to feel confident enough to leave their jobs, they would need to have health care alternatives, such as state exchanges, that were cost-competitive with employer plans. But as things stand, Mathur says, the already-cash-strapped government would have to fork over an unsustainable amount of money to offer public care with premiums low enough to compete with companies in the long term. U.S. healthcare will be in a state of great uncertainty for the next seven or eight years, Mathur predicts. It's hard to say what will happen when the dust clears.

But there's evidence from other countries that people might become more adventurous job seekers if they could get decent, affordable benefits from places other than their employers. Take Canada, where the government pays for its citizens' medical services requiring hospital stays. Many employers still provide key health benefits such as covering a person's salary during medical leave, but, "if the worst happens to employees, they know they're not going to go bankrupt or lose all their savings as a result of having to pay hospital care," says John Cardella, the executive vice president and chief people officer at Ceridian Canada. That allows Canadians to take more risks when shifting jobs, Cardella says. "Essentially, employees are not anchored because of health benefits. That just doesn't happen in Canada."

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Having an affordable, non-employer health care option tweaks the relationship between the organization and its employees, says Jim Winkler, senior vice president of Aon Hewitt's Health and Benefits consulting practice. In countries where healthcare isn't as big of a factor, "it's the difference between encouraging people to complete a health risk questionnaire, not because they're worried about medical spending, but more because they're worried about people missing work."

That is a subtle but key shift. In both the United States and Canada, companies see employee health as a return on investment. But in countries where companies aren't the primary provider of health care, investment in corporate wellness programs is more about keeping workers productive and healthy than saving money on the cost of care.

In the United States, on the other hand, "most employees, in some ways, don't trust their employer, but yet they still want the employer to provide those benefits for them," says Dexter Shurney, the medical director for the Employee Health and Care Plan for Vanderbilt University and Medical Center.

The financial crisis put extra strain on the relationship between employees and their companies. In the post-recession workplace, workers are feeling increasingly dissatisfied with their health benefits, yet more dependent on their employers that offer them, according to a 2011 study by Mercer. That makes sense, given that employees have seen their health benefits shrink over time as companies and insurers struggle to curtail costs.

But despite those costs, most employers want to keep providing care, Ageloff says. About two-thirds of employers surveyed in a 2010 Towers Watson study said that they plan to continue to sponsor health care plans for the foreseeable future, regardless of what happens with the Affordable Care Act. Providing good care attracts talent, she says, and companies like having control over employee plans.

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In some ways, the debate about who should pay for health care is missing the main point, says Vanderbilt's Shurney. Neither companies nor state exchanges will be able to effectively manage the cost of care unless both sectors work together to encourage Americans to get healthier.

According to Shurney, 80% of chronic disease in the United States is preventable through lifestyle choices. If the government and companies could join forces to help more Americans sleep enough, eat right, work out, and rest more, people would miss fewer days of work and healthcare costs would plummet, no matter who foots the bill.

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Shelley DuBois
Shelley DuBois
Writer - Reporter, Fortune

Shelley DuBois writes on management issues for Fortune.com. Before joining Fortune, she was a producer for National Public Radio's Science Friday and worked for Wired. Shelley has a graduate degree in science, health and environmental reporting from New York University. She lives in Brooklyn.

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