Health Care

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Think of it as a Liability: Healthcare and the American Way

In the United States, healthcare is coupled with employment, so, for those who are not working, healthcare becomes a liability.

At least, "liability" is a word that is used often when discussing healthcare in the United States. Healthcare for the unemployed, underemployed, or retired is the greatest “liability," the latter having been described as a “specter" in The New York Times piece, “And You Though Pension Funds Were Scary."

In this article (which debuted in The Times and then made its way into local papers across the country) Gretchen Morgenson describes the slow-mo collapse of the post-employment health plan.

Why should we care?

Because if we can’t depend on an employer for retirement health benefits, then we must depend on government, or, on ourselves. Many expect their lifetime work with a company like Ford Motor or I.B.M. to pay off in the golden years, but research firms like Glass, Lewis, and Company are telling us that retirement benefits are shaky, not solid.

Though the fall of post-retirement health plans would most directly affect current retirees, the impact would ripple through the entire healthcare structure. Watching their parents or grandparents shift from employment-based benefits to government-based benefits may cause the young and middle-aged to realize that they have a stake in what’s been going on with Medicare. Upon surveying the situation, workers may decide that they want to start securing their own healthcare futures, putting funds into those newly-approved health savings accounts.

What is a post-employment health plan?

Post-employment health plans are a retirement benefit earned through years of service. Much like pensions, post-employment health plans are paid by employers for employees after they’ve retired. Only 5% of companies offer these health plans, but they are big companies and, thus, big employers. Verizon, Boeing, Goodyear, GM, and the already-mentioned Ford and I.B.M. are examples of companies that offer post-employment health plans.

Sounds like a good deal, and fair, since employment is the only road to mostly-paid health benefits (apart from Medicaid, which is a healthcare program for low-income citizens).

So, what’s the problem?

The problem is that employers have been thoroughly under-funding these retirement health plans.

According to Morgenson, most industrial companies are only funding 13.2% of these plans, while pensions, which are also under-funded, are 65.6% funded. If companies find themselves unable to pay for the health plans they’ve promised, taxpayer dollars will have to come in and save the day.

The gross under-funding may be attributed, in part, to companies underestimating growing healthcare costs. Morgenson suggests that companies are estimating their healthcare costs to drop significantly in the next five years.

It is highly unlikely that healthcare costs will drop in the near future, but current accounting laws allow companies like General Motors to assume that they will. Such an assumption allows the company to underemphasize liabilities, making the company and its stock more attractive to investors.

Trading health

Accounting laws allow companies to project healthcare costs at an unrealistically low rate, so long as the discrepancy between the estimate and the real cost does not exceed 10% of the company’s total liability.

What? In other words, companies can legally downplay how much they are going to have to pay out in healthcare costs in the future. If a company were to accurately estimate and report future healthcare obligations, it may scare off investors.

But are companies really in the wrong here? They have to keep their stock up in order to thrive, profit, and keep themselves in a position to pay the healthcare benefits they’ve promised.

The real culprit may be the aforementioned marriage between healthcare and employment. When people’s health is in the hands of private companies, we must expect benefits to rise and fall with the market.

Some say that tying healthcare benefits to the market is the best way to insure low cost and high quality. What do you think?

Read more on current healthcare issues, and the history of healthcare. Discuss this issue with other WomenMatter readers in one of our online forums. And when you’re ready, contact your representatives and let them know what you think.

Posted on: 12/30/2003

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