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Health Care Reform to Free Employees from Job-Lock

Updated on May 15, 2013

Health Care Reform to Free Employees from Job Lock

Many employees are chained to their jobs by employer-provided health insurance.  Health care reform will free them from job-lock.
Many employees are chained to their jobs by employer-provided health insurance. Health care reform will free them from job-lock. | Source

Job-Lock Definition

Job-lock refers to the reluctance of employees to leave their jobs because doing so will risk the loss of valuable benefits such as affordable employer-provided health insurance.

In 2010, 55% of Americans received employer-provided health insurance. The insurance is heavily subsidized, with employers picking up more than 70% of premium costs. The insurance is also provided to employees without any regard to pre-existing conditions, age or other factors.

As a result of job-lock, millions of employees have remained in their current jobs because they fear the loss of affordable health insurance if they were to leave. Many employees have refrained from starting their own businesses or joining small companies without comprehensive benefits. Others have been reluctant to switch to better paying jobs or jobs with better growth prospects. Still others have put off retirement.

Job-lock has imposed significant costs on the U.S. economy. It has inhibited entrepreneurial activity by preventing employees with great ideas from starting new businesses to exploit them. It has discouraged ambitious employees from moving from slow-growing large companies in mature fields to fast-growing small companies in high-tech fields. It has chained employees to lower-paying and less productive jobs.

Health Care Reform is a Key to Unlock Job-Lock

The health care reform of the Affordable Care Act ("ACA") will free many employees from job-lock starting in 2014.

Under the ACA, people in each state will be able to purchase health insurance from a health benefit exchange. Every policy sold by the exchanges will cover a package of "essential health benefits" including ambulatory and emergency care, hospitalization, maternity care, mental health and substance abuse treatment, prescription drugs, lab tests, rehab, chronic disease management and dental and vision care for children. Every policy will cover 60%, 70%, 80% or even 90% of all health care costs for the average person, depending on its cost. Thus, the ACA will insure that employees freed from job lock will have access to high-quality insurance plans.

The insurance policies sold by the health benefit exchanges will be prohibited from excluding people due to pre-existing conditions. Thus, employees currently locked into their jobs because they or their family members suffer from a medical condition will be free to find a better job without fear that they will be unable to replace their existing employer-subsidized health insurance with an affordable high-quality policy.

Many employees who anticipate needing to take a pay cut to start their own business or take a more satisfying job will be eligible for a tax credit to help pay for their insurance premiums. The ACA will thus enable many entrepreneurial employees to take the risk needed to commercialize their great ideas. The Health Reform Subsidy Calculator operated by The Henry J. Kaiser Family Foundation provides estimates of the cost of coverage under the ACA and the size of any premium tax credits.

Job-lock has been particularly severe for older workers since they and and their families use more health services than younger employees, and typically must pay much higher premiums for health insurance in the individual market. The ACA will be especially helpful for freeing older employees from job lock since it imposes restrictions on the price of health insurance policies for older people as opposed to younger people. Today, premiums for a 64-year old worker are typically five times higher than for a 19-year old. Under the ACA, this differential is capped at three times higher.

Health Care Reform Will Enhance Worker Mobility

The opportunity to purchase affordable health insurance through the health benefit exchanges will free Americans from job-lock. This freedom will enhance worker mobility as more Americans start their own businesses, move to smaller and faster-growing companies, and switch to better paying jobs with higher growth prospects. For a lucky few, the ACA will be a key to enjoying early retirement as it will help severe the strong tie between employment and pre-age 65 health insurance that has existed since the imposition of wage controls by the US government during World War II.

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      Casimiro 4 years ago

      It has never made sense to me that employers should be providing healthcare policies, and not just because of the job-lock it creates. I'm sure most companies would be quite willing to give up that role. It's going to be interesting to watch the long-term changes to how health insurance is handled. I just hope everyone can calm down during the next few years while the bugs are worked out. It would be far better to have gone single-payer, but that may start to happen in the next decade or two.

    • lisa42 profile image

      lisa42 4 years ago from Sacramento

      I've never even thought about the ACA would impact people's ability to change jobs, but I do know that good health insurance was always a quality I looked for in a job and one of the biggest challenges I faced when I was laid off.

    • technologyvault profile image

      Richard 4 years ago from Utah

      If there is any benefit from Obamacare from a reduction in "job lock", it is negligible in context of all the problems caused by the tangled mess that bloated government causes. Obamacare has already turned out to be much more expensive than it was originally sold.

      I agree with Casimiro. Health insurance and employment were only joined together because of government interference, and the relationship between employment and health benefits has been an awkward one ever since.

      The best solution would be to completely decouple health insurance, etc. from employment.

      Here is an interesting evaluation of how the public in general and business owners in particular feel about the ACA: http://www.bankruptingamerica.org/the-top-5-things...

    • profile image

      Casimiro 4 years ago

      Well, technologyvault, that's not exactly what I meant. I see your point, that health insurance coverage by employers was instigated by government, but my preference would be to have a single-payer system where the single-payer would be the government. Good health of its citizens benefits any country and only a large enough entity such as the government can provide it effectively. For example, the percentage overhead of Medicare and Medicaid in terms of administration is in the low single digits. Private insurance co.s must worry about stockholder profits, executive bonuses, marketing, etc., which really drives up the price of their product. I hope that the ACA at least begins to change the paradigm in the U.S., which has, by far, the most costly per capita healthcare in the world.

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