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Criticism of McKinsey Survey on Employer Health Coverage Falls Short

Posted By Daniel Graulich On July 6, 2011 @ 2:54 pm In Obamacare | Comments Disabled

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The recent McKinsey survey [2] showing that 30 percent of employers would drop coverage shouldn’t be controversial [3]. Economists have consistently shown how an employer mandate will negatively affect employment and wages [4]. In fact, even the Congressional Budget Office (CBO) concede such affects [5].

Answering critics’ calls, McKinsey released the details of its survey [6] three weeks ago, showing that their survey methodology was sound [7]. 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 [8] and Senate Democrats [9]—have continued to vehemently criticize the report, calling it an “outlier [10].”

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 [11] have shown that in terms of cost, it would be a “win-win” [12] 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 [13].

Much of the current projections on which Obamacare defenders rely (including CBO, the Rand Corporation [14], and the Urban Institute [15]) have overlooked employers’ desire to maximize these cost-savings [16]. This also implies that the costs of Obamacare are likely significantly underestimated [17].

These projections rely on observations from studies that evaluate health insurance outside the Obamacare policy framework. As Heritage analyst Paul Winfree points out [18], 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 [19], 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 [20]


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URL to article: http://blog.heritage.org/2011/07/06/criticism-of-mckinsey-survey-on-employer-health-coverage-falls-short/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/doctors-10-6-28.jpg

[2] McKinsey survey: https://www.mckinseyquarterly.com/article_page.aspx?ar=2813&l2=12&l3=63&srid=526

[3] shouldn’t be controversial: http://www.foundry.org/2011/06/08/huge-number-of-businesses-to-drop-health-insurance-thanks-to-obamacare/

[4] 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

[5] concede such affects: http://nation.foxnews.com/obamacare/2011/02/10/cbo-director-obama-health-law-will-cost-800000-jobs

[6] details of its survey: http://www.mckinsey.com/en/US_employer_healthcare_survey.aspx

[7] methodology was sound: http://news.yahoo.com/mckinsey-health-insurance-survey-rigorous-195939594.html

[8] White House: http://m.whitehouse.gov/blog/2011/06/20/not-prediction

[9] Senate Democrats: http://www.nytimes.com/2011/06/21/business/21insure.html?_r=1

[10] outlier: http://www.whitehouse.gov/blog/2011/06/08/getting-insurance-work

[11] Economists Doug Holtz-Eakin and James Capretta: http://online.wsj.com/article/SB10001424052748703954004576089702354292100.html

[12] “win-win”: http://www.dispatchpolitics.com/live/content/editorials/stories/2011/03/19/employer-mandate-will-do-harm.html?sid=101

[13] paid a penalty: http://www.csmonitor.com/USA/Politics/2010/0321/Health-care-reform-bill-101-What-will-it-mean-for-business

[14] Rand Corporation: http://www.rand.org/pubs/research_briefs/RB9589/index1.html

[15] Urban Institute: http://www.urban.org/publications/412295.html

[16] desire to maximize these cost-savings: http://www.heritage.org/research/reports/2010/09/the-uncertainty-of-health-care-projections

[17] significantly underestimated: http://www.washingtonpost.com/opinions/coming-soon-a-bigger-costlier-obamacare/2011/06/14/AG4eAqXH_story.html?fb_ref=NetworkNews

[18] Paul Winfree points out: http://blogs.forbes.com/aroy/2011/06/11/the-mckinsey-health-insurance-study-democrats-strike-back/#comment-1112

[19] Avik Roy has noted: http://www.avikroy.org/2011/01/fiscal-risk-of-employer-dumping-under.html

[20] http://www.heritage.org/about/departments/ylp.cfm: http://www.heritage.org/about/departments/ylp.cfm

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