- The Foundry: Conservative Policy News Blog from The Heritage Foundation - http://blog.heritage.org -
Criticism of McKinsey Survey on Employer Health Coverage Falls Short
Posted By Daniel Graulich On July 6, 2011 @ 2:54 pm In Health Care | 3 Comments
The recent McKinsey survey  showing that 30 percent of employers would drop coverage shouldn’t be controversial . Economists have consistently shown how an employer mandate will negatively affect employment and wages . In fact, even the Congressional Budget Office (CBO) concede such affects .
Answering critics’ calls, McKinsey released the details of its survey  three weeks ago, showing that their survey methodology was sound . The survey included a large sample size, representative industries, respondents directly involved in the decision-making process regarding health benefits, and questions/information presented in a neutral manner. Nonetheless, critics—including the White House  and Senate Democrats —have continued to vehemently criticize the report, calling it an “outlier .”
The main argument being put forth is that the McKinsey report is simply a survey that is not predicative of the future. While it is true that the report was geared primarily toward assessing employers’ attitudes toward Obamacare, critics have failed to address the economic arguments that underlie the implications. Economists Doug Holtz-Eakin and James Capretta  have shown that in terms of cost, it would be a “win-win”  for employers to shift employees with incomes up to four times the federal poverty line (or $94,000 for a family of four in 2014) into the exchanges, as employees would receive premium subsidies much more generous in scope than that of the employer tax exclusion for health benefits. Employers win as well, as they could cut costs even after having paid a penalty .
Much of the current projections on which Obamacare defenders rely (including CBO, the Rand Corporation , and the Urban Institute ) have overlooked employers’ desire to maximize these cost-savings . This also implies that the costs of Obamacare are likely significantly underestimated .
These projections rely on observations from studies that evaluate health insurance outside the Obamacare policy framework. As Heritage analyst Paul Winfree points out , these studies fall short by “not accounting for the underlying behavior of workers/firms to large changes in the policy environment.”
Critics have also pointed to the Massachusetts health reform to show that employers are not likely to drop coverage en masse. However, as Avik Roy has noted , since the Massachusetts law is isolated to one state, it ignores the fact that many firms operate in more than one state. Therefore, it is difficult for firms to drop coverage in one state and not another because of competition between firms and the interconnected nature of health care benefits that employers offer their employees.
Ultimately, much of the criticism of the McKinsey report up to this point has be unfair or has failed to address the concerns raised by the report altogether. The findings of the McKinsey survey are important and contribute a great deal to the debate about what we should expect from Obamacare.
Daniel Graulich is a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm 
Article printed from The Foundry: Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2011/07/06/criticism-of-mckinsey-survey-on-employer-health-coverage-falls-short/
URLs in this post:
 Image: http://www.foundry.org/wp-content/uploads/doctors-10-6-28.jpg
 McKinsey survey: https://www.mckinseyquarterly.com/article_page.aspx?ar=2813&l2=12&l3=63&srid=526
 shouldn’t be controversial: http://www.foundry.org/2011/06/08/huge-number-of-businesses-to-drop-health-insurance-thanks-to-obamacare/
 how an employer mandate will negatively affect employment and wages: http://www.heritage.org/Research/Reports/2011/01/Obamacare-and-the-Employer-Mandate-Cutting-Jobs-and-Wages
 concede such affects: http://nation.foxnews.com/obamacare/2011/02/10/cbo-director-obama-health-law-will-cost-800000-jobs
 details of its survey: http://www.mckinsey.com/en/US_employer_healthcare_survey.aspx
 methodology was sound: http://news.yahoo.com/mckinsey-health-insurance-survey-rigorous-195939594.html
 White House: http://m.whitehouse.gov/blog/2011/06/20/not-prediction
 Senate Democrats: http://www.nytimes.com/2011/06/21/business/21insure.html?_r=1
 outlier: http://www.whitehouse.gov/blog/2011/06/08/getting-insurance-work
 Economists Doug Holtz-Eakin and James Capretta: http://online.wsj.com/article/SB10001424052748703954004576089702354292100.html
 “win-win”: http://www.dispatchpolitics.com/live/content/editorials/stories/2011/03/19/employer-mandate-will-do-harm.html?sid=101
 paid a penalty: http://www.csmonitor.com/USA/Politics/2010/0321/Health-care-reform-bill-101-What-will-it-mean-for-business
 Rand Corporation: http://www.rand.org/pubs/research_briefs/RB9589/index1.html
 Urban Institute: http://www.urban.org/publications/412295.html
 desire to maximize these cost-savings: http://www.heritage.org/research/reports/2010/09/the-uncertainty-of-health-care-projections
 significantly underestimated: http://www.washingtonpost.com/opinions/coming-soon-a-bigger-costlier-obamacare/2011/06/14/AG4eAqXH_story.html?fb_ref=NetworkNews
 Paul Winfree points out: http://blogs.forbes.com/aroy/2011/06/11/the-mckinsey-health-insurance-study-democrats-strike-back/#comment-1112
 Avik Roy has noted: http://www.avikroy.org/2011/01/fiscal-risk-of-employer-dumping-under.html
 http://www.heritage.org/about/departments/ylp.cfm: http://www.heritage.org/about/departments/ylp.cfm
Copyright © 2011 The Heritage Foundation. All rights reserved.