A Compromise in Care

Last week’s announcement by the University of its decision to alter the structure of its healthcare plans for non-union employees is a perplexing one.  The new plan offers some benefits: lowering premiums, decreasing the annual out-of-pocket maximum, and improving dental coverage. But the biggest change is the introduction of coinsurance, meaning that employees will now have to pay all or a portion of the cost of many non-preventive procedures that the old plan fully covered. Citing a need to “curb cost growth” and “to improve our incentives to become better consumers of healthcare,” the University argues that these changes are necessary to “avoid more significant changes […] in the longer term.”

Bill Jaeger, the director of the Harvard Union of Clerical and Technical Workers, reacted negatively to the changes, noting that though his members “are not yet directly affected,” he expects “the University to negotiate about the possibility of their application to our members.” He also argues that the alterations were “a short-term step in the wrong direction.” This tension between Harvard and its employees illustrates a fundamental flaw in the U.S. healthcare system’s reliance on employment-based insurance.

The United States is alone among industrialized countries in the extent to which it ties health insurance to a person’s condition of employment: 55.1 percent of Americans relied on employment-based insurance in 2011. This practice has numerous drawbacks, including “job-lock,” or the reluctance of employees to leave jobs with good benefits, and the difficulty of having a balkanized market of businesses negotiate effectively with insurance companies. Employees, too, lack the information or incentives to minimize the cost of their care.

Most relevant to Harvard, employment-based health insurance creates friction between employer and employee. The University is right that its previous plan was generous; the new iteration is closer to “national norms.” Jaeger, conversely, is right that cost-sharing measures like the ones introduced often harm poorer and sicker workers, though reimbursements for lower-income employees will counteract this effect. Studies cited in Harvard Magazine’s piece on the employee health changes also show that cost sharing does not necessarily reduce overall spending.

Harvard is hardly at risk of going bankrupt because of its healthcare costs, but removing the issue of health benefits from the University’s sometimes tense negotiations with unions like HUCTW would undoubtedly improve mutual relations.

Recent changes to the U.S. healthcare system–most notably the introduction of a more robust individual insurance market with subsidies–may be the beginnings of a shift in how Americans obtain insurance, but the system is still too wedded to employment-based coverage. In the short term, we hope that the University finds cost-saving efficiencies that do not substantially burden employees or interfere with their access to necessary care. In the long term, however, systemic change in U.S. health policy will be necessary to avoid the kind of situation in which Harvard now finds itself.