McKinsey’s story starts to crumble

Another day, another wave of controversy over the McKinsey report.

Many people — including White House officials — argue the report claiming one-third of employers will drop employee coverage because of health care reform is an “outlier.” And they’re relying on a slew of studies to back them up.

One such study is now in the spotlight, though, as it turns out it’s authored by Bowen Garret, McKinsey’s own chief economist at their Center for U.S. Health System Reform.

In the Urban Institute study, which the White House used to refute the latest McKinsey report, Garrett writes that “overall ESI coverage under the ACA would not differ significantly from what coverage would be without reform.”

That’s the opposite of what McKinsey concluded when they reported 30 percent of respondents will “definitely” or “probably” stop offering employer-sponsored health insurance after 2014.

That’s not cooling any tempers over McKinsey still not releasing the full extent of its findings. Although many have called for its release while questioning its methodology, McKinsey spokeswoman Yolande Daeninck insisted all the information about the survey that’s available is already in the McKinsey Quarterly article available on the company’s website.

“You don’t know anything about how [McKinsey] came up with the number, which raises the question, ‘What does this really mean?’” says Paul Fronstin, director of the health research program at the Employee Benefit Research Institute.

The McKinsey article also said they had “educated” employers before asking them their questions about intents for the future, which caused questions over bias from Democrats.

Many other organizations who've released full reports, including the Rand Corp. and the Congressional Budget Office, have found there won't be a significant change in employer-sponsored health insurance numbers resulting from the reform bill.

But turns out, employers’ decisions about health insurance for employees might have more to do with their own finances than with any kind of reform.

It’s the economy, stupid

“I don’t believe small businesses are dropping coverage now because of reforms that don’t take effect until 2014,” says Alan Katz, president of the Alan Katz Group and past president of the National Association of Health Underwriters. “I do know groups have dropped coverage because of the economy. So what we’re seeing now is clearly driven by financial concerns, not health care reform.”

According to EBRI statistics, workers in nearly all broadly defined occupations experienced a statistically significantly decline in health coverage between 2008 and 2009 due to the recent recession.

“During a recession, some employers will drop coverage, some will increase the worker share of the premium, and some may change eligibility requirements,” the EBRI report says. “Structural changes in the economy during a recession, such as the substitution of part-time workers for full-time workers, reduce the number of workers eligible for health benefits.”

The fact that employers are dropping, or intend to drop, health coverage is ultimately due to financial concerns, Fronstin says.

Still, “health care reform does enable different financial concerns because right now, employers provide these benefits voluntarily. They don’t have to. They’ve never had to, except in Hawaii and Massachusetts; there has been no mandate,” he says.

“[Employers] spend on average $10,000 per worker with family coverage. They are already doing that voluntarily. And under the law that takes effect in 2014, if they don’t do so, they are going to pay $2,000 per worker,” Fronstin continues. “Today, if they don’t do so, they’ll pay nothing per worker.

“So to say this is because of health reform — it’s still all about dollars and cents.”

The reason Democrats remain so up in arms over the survey is because it goes against what President Obama and his supporters have been saying about the ACA: that if you like what you have in terms of health care, you can keep it. The McKinsey survey suggests that won’t always be possible, Fronstin says.

When asked about the Democrats’ outrage over the report, Daeninck told BenefitsPro the firm has no comment.

‘Too early to tell’

Still, though, Fronstin says what McKinsey is reporting might be on track.

“You can make the argument that employers are going to move in this direction [of dropping coverage for employees], and there’s a good chance they will, but I think it’s too early to tell,” Fronstin says.

In general, it’s a real disservice to rely on numbers from surveys, Fronstin says.

“There are surveys saying that 1 percent or 3 percent or 10 percent or 34 percent of employers will drop coverage in 2014. But the real question is what does that trigger? What does it look like in 2015 if this happens, and in 2016 and in 2025?” he says. “It’s not as much about what life looks like in 2014 but what it triggers. It’s the dynamics over time that’s important. You can’t capture that in a survey.”

Plus, employers often will react to other employers.

“When your competitor drops coverage, if you had no plans to do so, well now you might,” Fronstin says.

“With so many reports coming out with so many different conclusions the only thing we know for sure is that one of them will be right,” Katz says. “But then a broken clock is right twice a day, so it’s important to keep things in perspective.”

Get more: Coverage of McKinsey's employer health care survey

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