Friday, June 10, 2011

Study That Claims Businesses Will Drop Insurance Coverage is Highly Suspect

This week, you may have heard or seen news reports on the results of a study just released Tuesday by the corporate consulting firm McKinsey & Co. The findings of the study are dire, purporting that 30 to 50 percent of U.S. employers will discontinue offering health insurance to their employees when the Affordable Care Act goes into full effect in 2014, based on survey responses from 1,300 employers.

What you haven't seen is a copy of the actual survey, which would show us exactly what questions were asked and how they were worded, how many different industries were sampled and the size of the sampled companies, how much information or "spin" prefaced the questions, and so forth. The reason you haven't seen anyone reporting this information is because McKinsey only bothered to release their report on the study - not the study itself.

This makes their extraordinary claims about the findings highly suspicious. For one thing, they starkly contradict every projection to date made by reputable nonpartisan organizations about the effect of the ACA upon employer-offered health insurance. In fact, on Wednesday Nancy-Ann DeParle on the White House blog characterized the McKinsey findings as "an outlier," citing studies from the nonpartisan Rand Corporation and the Urban Institute and the consulting firm Mercer (emphasis is mine):

The Rand Corporation: "The percentage of employees offered insurance will not change substantially, but a small number of employees in small firms (defined as those with under 100 employees in 2016) will obtain employer-sponsored insurance through the state insurance exchanges."

The Urban Institute: "Some have argued that the Patient Protection and Affordable Care Act would erode employer-sponsored insurance (ESI) by providing incentives for employers to stop offering coverage. Others have claimed that most businesses would face increased costs as a result of reform. A new study finds that overall ESI coverage under the ACA would not differ significantly from what coverage would be without reform."

Mercer: "In a survey released today by consulting firm Mercer, employers were asked how likely they are to get out of the business of providing health care once state-run insurance exchanges become operational in 2014 and make it easier for individuals to buy coverage. For the great majority, the answer was 'not likely.'"
 Additionally, the nonpartisan Congressional Budget Office's analysis of the effects of ACA implementation on employer-offered health coverage also seems at odds with the McKinsey findings. Their report states that a net 3 million fewer Americans would be covered by employer-offered insurance in 2019 as a result of several factors:
  • Between 6 million and 7 million people would be covered by an employment-based plan under the proposal who would not be covered by one under current law (largely because the mandate for individuals to be insured would increase workers’ demand for coverage through their employers).
  • Between 8 million and 9 million other people who would be covered by an employment-based plan under current law would not have an offer of such coverage under the proposal. Firms that would choose not to offer coverage as a result of the proposal would tend to be smaller employers and employers that predominantly employ lowerwage workers—people who would be eligible for subsidies through the exchanges—although some workers who would not have employment-based coverage because of the proposal would not be eligible for such subsidies. Whether those changes in coverage would represent the dropping of existing coverage or a lack of new offers of coverage is difficult to determine.
  • Between 1 million and 2 million people who would be covered by their employer’s plan (or a plan offered to a family member) under current law would instead obtain coverage in the exchanges. Under the legislation, workers with an offer of employment-based coverage would generally be ineligible for exchange subsidies, but that “firewall” would be enforced imperfectly and an explicit exception to it would be made for workers whose offer was deemed unaffordable.
The White House's DeParle also pointed out two factor that will combine to give large employers little to no incentive to drop insurance coverage: 1) there will be penalties for large employers who do not offer their employees health insurance, and 2) offering health care coverage is a key tool for employers to attract the top talent to work for them.

So, given that McKinsey's survey results are so far outside the results of studies by other reliable nonpartisan organizations - not to mention rather illogical - there is ample reason to question the methodology of the McKinsey study. In fact,  of Time's Swampland blog tried to get some answers on this topic by calling McKinsey & Co. directly. The only thing they would say that wasn't "no comment" was that no third party had paid for the study. All her questions about the methodology of the survey, they declined to answer. Here's a sampling of the kind of information Pickert was trying to find out:
  • What were the precise breakdowns of size, geographic location and industry for the businesses included in the survey? This would tell us if the sample was representative of American business as a whole. Small businesses, for instance, might be more likely to drop coverage due to the structure of the ACA.
  • How were the businesses chosen? An unbiased sampling method here is key. If the list of businesses was culled from Chamber of Commerce memebrship or McKinsey client lists, this is important to know. Ditto if the list was generated in a more randomized way.
  • What was the response rate? And how were businesses surveyed? If 13,000 businesses were contacted, but only 1,300 responded, such a 10% response rate could call into question the results. Also, there is, for example, a huge difference between surveys conducted in person, over the phone and over the Internet.
  • Lastly, this tidbit was included in the McKinsey Quarterly article about the survey:

    “…our survey educated respondents about [employer sponsored insurance] implications for their companies and employees before they were asked about post-2014 strategies.”

    In other words, those conducting the survey may have primed respondents to say they would keep or drop coverage.

So what we have here is a survey that McKinsey won't let anyone see, questions about methodology they refuse to answer, and a possible coaching of the respondents to answer in a certain direction. And this study - which radically contradicts every other reputable study - just happens to be released right about the time that a court case challenging the ACA's constitutionality arrives at the US 11th Circuit Court of Appeals.

Hmm. Whatever are we to make of this coincidence?

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