Stuck in Your Job Because You Need the Health Benefits? You’re Not Alone.

In the United States, the majority of people get their health insurance through their job. Many have an immediate need for that coverage, either because they or someone in their families has a health condition that requires ongoing medical care. These are the millions of people for whom losing their employer-based coverage would have dire financial and health consequences. And for many of them, it means staying in a job they would rather leave to keep those health benefits. This phenomenon is referred to as 'job lock.'

Economist Scott Adams has found evidence of pretty wide-spread job lock. His research has found that:

• among men aged 25 to 55 with spouses, there is an approximate 22 percent to 32 percent reduction in job mobility stemming from health insurance coverage;
• there is slightly more job lock among married women; and
• job lock has increased since 1988.

Overall, Adams' results are consistent with earlier studies that found job mobility was reduced by 26 percent to 31 percent due to the lack of portability of employer-provided health coverage.

That means millions of people are not switching to more satisfying, perhaps even more lucrative jobs, because they need the health benefits being offered by their current employer. And they are right to be afraid. This is what can happen when they take the chance:

"Michael Courtney was 41 years old when he was diagnosed with a rare form of lymphoma. It started on his tongue, but spread quickly. He has had radiation and chemotherapy. Treatment will continue indefinitely. So will his bills.

"An auto mechanic, Courtney was hesitant about changing jobs because he didn't want to lose his health insurance. But a new employer promised immediate benefits so he took the job. He was even able to stay with the same insurance company that he had at his old job. But a month into the new job, he found that the new policy wouldn't cover his cancer for three months. His disease was a pre-existing condition. Already strapped with medical bills, he postponed treatment."

Some would-be entrepreneurs are also being stifled by the need to keep their employer-based coverage, which can only hurt the economy. As economist Jonathan Gruber notes:

"Universal health insurance, far from suppressing entrepreneurship, could be a boon to it. The main reason for this is a phenomenon known as "job lock," a term coined during the last round of debate over universal health coverage in the early 1990s. Job lock refers to the fact that workers are often unwilling to leave a current job that provides health insurance for another position that might not, even if they would be more productive in that other position...

"Some of tomorrow's potential entrepreneurs are today's employees at firms that provide health insurance. They may have powerful new ideas that will build the firms of tomorrow. But if they leave their current job to work on those ideas they may find themselves without access to reliable health insurance...

"There are fewer direct studies of the impact of job lock on entrepreneurship. But the most convincing research, by Alison Wellington, mirrors the findings of other job mobility studies: Americans who have an alternative source of health insurance, such as a spouse's coverage, are much more likely to be self-employed than those who don't. Wellington estimates that universal health care would therefore likely increase the share of workers who are self-employed (currently about 10 percent of the workforce) by another 2 percent or more. A system that provides universal access to health insurance coverage, then, is far more likely to promote entrepreneurship than one in which would-be innovators remain tied to corporate cubicles for fear of losing their family's access to affordable health care."

In his blog post "Health Care 'Job Lock' Stifles Entrepreneurship," Dr. Michael McCarthy highlights the problem:

"When I'm pitching my Web site, I'm often asked what my 'cash-burn rate' is.

"That's startup speak for: 'How long can you keep going until you run out of money?'

"But cash burn isn't my problem. My costs are low: You can run a Web site with laptop, an Internet connection and $6.95 web-hosting account.

"The wall I'm facing is my COBRA.

"COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1986, is the law that lets you stay in your employer's health-insurance plan for 18 months after you leave your job, provided you pay the premiums yourself.

"It's not cheap. But it does give you some breathing room between jobs.

"But once my 18 months are up, the chances of me finding affordable health insurance for my family on my own are slim, and I may have to punt on my startup and go hunting for a job with benefits.

"According to economists, up to 25 percent of workers would move on to other jobs, or strike out on their own, if they didn't fear losing their health coverage.

"Time and time again, we hear that innovation, led by entrepreneurs and small businesses, is going to recreate the U.S. economy so it can thrive in the 21st century. And as behemoths, like General Motors, Chrysler and Ford, totter toward possible extinction, our only hope is that someone is coming along with ideas for new businesses.

"But many of those potential entrepreneurs are not going to be given a chance to experiment and innovate if they can't strike out on their own. They are locked into their current job because of health insurance. Shackling workers to jobs they don't want hobbles the U.S. economy at a time when it needs to be nimble and quick."

Dr. McCarthy's situation illustrates the crux of the problem. In Washington state, where he lives, insurers cannot refuse coverage to someone who just had COBRA coverage, but they can charge whatever they want for that coverage.

It is not enough to simply guarantee people they can get health insurance coverage outside the job. They must know they will be able to afford that coverage and that it will cover the care they need. (See my post "What Should Be the Goal of Health Care Reform?")

A public health insurance plan option must be created to compete on a level playing field with private insurers. A public health insurance plan can break the near monopoly power of a few insurance plans to help drive value and lower prices in the health care market place. A public health insurance plan will provide everyone the choice of a comprehensive benefit package at a price they can afford.

So don't let Congress rip the heart out of Obama's health care plan! Learn more about a public health insurance option.

And then stand with President Obama and Dr. Howard Dean to demand the choice of public health insurance by signing the petition today

05-29-09 By Monica Sanchez | Comment (0)