Please humor me as I make one last blog post on “A Growing Divide: The State of Working Virginia.” The ground-breaking study by the Commonwealth Institute presents two more sets of important data: the percentage of Virginia workers with health care insurance, and the percentage of workers with pensions.
It’s a classic good news/bad news situation. Here’s the good news: Virginians fare better than other Americans. We have a smaller percentage of the population without health care coverage, and a smaller percentage without pensions. Here’s the bad news: Like the United States overall, our numbers are heading the wrong way.
The health care insurance trends can be seen in Figure 10 (taken from the study), which depicts total private and public health care coverage.
Summarizes the report: “In an environment where health care costs are rising rapidly, often substantially outpacing inflation, employers are finding it increasingly expensive and therefore financially difficult to continue to provide the same level of benefits. In particular, small businesses have found it difficult to afford to provide coverage for their employees.
“Consequently … this has contributed to substantially fewer workers receiving health insurance benefits through their employer compared to two decades ago. In fact, since 1979 the percentage of the working population that obtains health insurance coverage from their employer has decreased from a high of 70 percent to a near all-time low of 57 percent in 2006”
From 70 percent to 57 percent — that is significant erosion in the private sector. Indeed, if the trend does not reverse itself, as it did briefly a decade ago, we can fairly label it a crisis. To pay the cost of treating the medically indigent, hospitals and other health care providers shift costs to private-sector plans. If those plans shrink in the numbers of people they cover, the cost shifting becomes increasingly acute and onerous. Either private insurance becomes more unaffordable, prompting more businesses to drop their plans, or health care providers such up the losses. Neither path is financially sustainable.
While the medical-insurance piece of the privately funded safety net is fraying, “A Growing Divide” concludes, so is the pension piece. Says the study: “Following an eleven year surge in pension coverage through 2001, the state has seen steady decreases in the percentage of workers that are covered by these plans and was down to 46.5 percent in 2006, a decline of almost 10 percentage points in just five years.”
I’m not certain this is quite the crisis it seems. Does the decline in “pensions” signify only a decline in the number of traditional, fixed-benefit plans? If those plans are being replaced with 401(k) plans, that’s not necessarily a bad thing. Employers may be shifting some of the risk of financial performance to employees, which could be a mixed blessing, but 401(k)s are portable. As the workforce becomes increasingly mobile, switching jobs with ever greater frequency, employees don’t lose accumulated pension benefits when they’ve failed to “vest” in a plan. Instead, they they take their 401(k) retirement benefits with them wherever they go.
I would like some clarification on that final point before concluding that an increasing percentage of Virginians are heading to the poorhouse in their old age.
Summarizes the report: “In an environment where health care costs are rising rapidly, often substantially outpacing inflation, employers are finding it increasingly expensive and therefore financially difficult to continue to provide the same level of benefits. In particular, small businesses have found it difficult to afford to provide coverage for their employees.
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