And You Thought Health Insurance Was Bad

By KIM BELLARD

I spend most of my time thinking about health care, but a recent The New York Times article – How the American Unemployment System Failed – by Eduardo Porter, caught my attention.  I mean, when the U.S. healthcare system looks fair by comparison, you know things are bad.

Long story short: unemployment doesn’t help as many people as it should, for as much as it should, or for as long as it should. 

It does kind of remind you of healthcare, doesn’t it?

The pandemic, and the associated recession, has unemployment in the news more than since the “Great Recession” of 2008 and perhaps since the Great Depression.  Last spring the unemployment rate skyrocketed well past Great Recession levels, before slowly starting to subside.  Still, last week almost a million people filed for unemployment benefits, reminding us that unemployment is still an issue.

Keep in mind that unemployment rates do not tell the full story, as they don’t count those only “marginally attached” to the workforce – people who would like to work but have given up – and counts part-time workers who would like to work full time as “employed.”  The “true” unemployment rate is reckoned to be much worse than the official rate.

Congress has enacted several COVID relief measures, including in late December, to extend duration, amount, and applicability of unemployment benefits, but our unemployment systems remain predominantly state designed and administered.  The shortcomings of these systems have been severely exposed over the past few months: neither the processes nor the actual technologies supporting them proved robust enough for the volume of applicants.  Last December Pew Trusts reported that “unemployment payments were weeks late in nearly every state.” 

It’s not just a timing problem.  Mr. Porter reports:

  • “In 2019, only 27 percent of unemployed workers received any benefits, a share that has been declining over the last 20 years.
  • The benefits have eroded as well, to less than one-third of prior wages, on average, about eight percentage points less than in the 1940s.”

The states range from 58% of unemployed workers in New Jersey who receive benefits to 9% — 9%! — in North Carolina.  Robert Moffitt, a Johns Hopkins economics professor, told Mr. Porter: “The program was set up to have tremendous cross-state variation.  This makes no sense. It creates tremendous inequities.”

In case you were wondering, red states tend to be on the lower side of the median.  I would be remiss if I did not note that all 12 states that have still not passed Medicaid expansion also fall below the median in percent of unemployed workers receiving benefits.   

Cheap is cheap.

An April 2020 paper by Steven Wandner of the National Academy of Social Insurance identified some key issues with unemployment insurance (UI):

  • Congress has neglected the program, except in crises;
  • Oversight by the DoL has weakened;
  • State laws, programs, and policies have varied;
  • The U.S. economy has changed significantly, both in terns of industries and mix of employment (e.g., away from manufacturing and full-time jobs);
  • The workforce demographics have also changed significantly (e.g., female and older workers, dual income households).

Mr. Wandner concludes:

The UI program is and has been broken for a long time. Nationally, UI taxes have not been sufficient to provide adequate partial wage replacement to unemployed workers. There is great variation between the UI programs from state to state. A minority of states have a well-functioning UI program, but the program is not working well in most states—in large part because of resistance to paying for a more adequate UI program.

As with our healthcare system, “broken” isn’t really a good description.  Each is working the way they’ve been designed.  Unfortunately, if you’re poor or sick, and especially if you are both, they’re not designed to help you.  Not until the poor and sick start making significant campaign contributions anyway, or at least vote in larger numbers.

Andrew Stettner, a senior fellow at the Century Foundation, told Vox: “The system has been hobbling along, and now a crisis has hit.  Then people realize we actually want this thing to work, and it doesn’t work in the way people thought it would.” 

Many unemployed workers, of course, also lose their health insurance when they lose their jobs, since ours is a predominantly employer-based health insurance system.  As many as 15 million people may have lost their employment-based coverage due to the pandemic.  If they work for the right kind/size of employer, they may be eligible for COBRA coverage, but paying for it may be difficult, between loss of employer contribution, low UI benefits, and delays in receiving UI. 

At least under ACA they may have coverage options, including subsidies, through the Marketplace or Medicaid, — unless they live in one of the states without Medicaid expansion.

Even in the states that have expanded Medicaid, the economic crisis has hit their tax revenue severely, while increasing the number of Medicaid enrollees, creating a double whammy.  The same, of course, is happening with the money to pay unemployment benefits, causing almost half the states to ask for federal loans.

In other words, when we have the worst crises – like a pandemic — both our unemployment insurance and our health insurance systems do worst.  Those are the times we rely most on the government, but our federalism system of shared federal/state responsibilities is failing the latest crisis.

Mr. Porter sees hope:

Perhaps there is an upside to the current crisis: The glaring insufficiencies of the regular unemployment system may encourage states and the federal government to undertake comprehensive changes.

Perhaps.  If the pandemic continues long enough – as it might – it might force deep structural changes.  So far, the various relief bills have just added more patches to our patchwork quilt approach towards UI.  But if in the coming months vaccines mitigate the impact, and the economy picks up, then our typical reaction will be to commission some studies and just kick the can further down the road. 

ACA made our health insurance system less patchwork, with more uniform requirements, more subsidies, less discrimination against preexisting conditions, and broader Medicaid options.  The Biden Administration may, and should, further improve these.  Let’s hope that it takes a hard look at how it can do something similar with unemployment insurance.

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor.

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