How Smaller Employers Can Offer Health Care Coverage to Their Workers Without Bankrupting Them: Risk & Insurance

How Smaller Employers Can Offer Health Care Coverage to Their Workers Without Bankrupting Them: Risk & Insurance
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Derrick Wong is the Employee Benefits Practice Leader at Risk Cooperative, a minority-owned insurance brokerage and risk advisory firm based in Washington, DC. He holds a BS in Business Management from St. John Fisher College and has more than 12 years of experience as a licensed professional in the health insurance industry. Derrick can be reached at [email protected]

The Affordable Care Act (ACA) extended health coverage to more than 20 million uninsured Americans and strengthened consumer protections. However, the legislation did not substantially modify employer-sponsored coverage, the primary source of private health insurance in America.

Despite the widespread availability of employer-sponsored health insurance, low-wage workers, particularly in the health care sector, continues to face overwhelming challenges to obtain adequate, affordable coverage.

A US Census Bureau report from 2019 indicates the health care workforce comprises nearly 7 million people within three categories of low-paid health care jobs:

  • Health care support workers (orderlies, medical assistants and pharmacy aides)
  • Direct care workers (home health workers, nursing assistants and personal care aides)
  • Health care service workers (housekeepers, janitors and food service workers in hospitals and nursing homes)

According to the US Bureau of Labor Statistics, the average wage for direct care workers was just $14.15 an hour in 2021, nearly $8 per hour below the average wage in the United States.

Amid ongoing and increasing health care labor shortfalls, the demand for home health and personal care aide services is projected to grow 33% by 2030. As baby-boomers age and the population of Americans over 65 increases, this surge in demand for workers, without providing them proper access to health care, is concerning.

For one thing, rising costs for employer-sponsored coverage diminish these low-income workers’ pay, as health insurance represents a larger share of their total compensation. In fact, costs of health insurance and medical care pushed as many as 7 million individuals in low-wage households into poverty.

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Moreover, the prohibitive cost of providing health insurance makes it more lucrative for companies to eliminate low-skilled jobs through offshoring and automation.

Current ACA guidelines favor applicable large employers (ALEs) that have the resources to meet the regulatory requirements and offer high-quality health insurance; whereas smaller ALEs struggle to offer adequate insurance coverage. Providing government support in the form of targeted subsidies would help to remedy this health care cost chasm — not only for health care workers but across all industries.

One model, the Service Contract Act, helps medium-sized enterprises with low-income employees by requiring employers to allocate funds toward health benefits for government contract employees. Federal funding is provided to these employers within the government contracting sector to help them meet the requirement. A program to support medium-sized enterprises in other sectors would bolster the opportunity for employers to provide comprehensive, affordable health care coverage to employees without risking insolvency.

The country’s aging population, combined with the uncertainty of a future pandemic, highlights the necessity of protecting access to health care for essential workers.

As policymakers continue to explore opportunities to build upon the ACA, they should prioritize solutions focused on the needs of the low-income workforce, especially those who provide quality care to the masses. &

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