Health Care Reform and Labor Mobility

I was surprised that arguments about the impact of health care reform on labor mobility got so little attention during the debate over the legislation. It's an important benefit to include in the evaluation of health care reform (I made this argument several times, and there were many others who made this point as well, but it never seemed to resonate):

Economy will get a boost from health care overhaul, by Mitchell Schnurman, The Fort Worth Star-Telegram: American companies can hire and fire workers with relative ease... Workers are free to move around, too, but for too many, health insurance has become a ball and chain. If they have a family or a pre-existing condition, it can be too risky to leave a big employer and join a small company, where coverage could be dropped at any time.

Health reform ... will change that... By guaranteeing access to affordable insurance, individuals will eventually gain as much flexibility as their employers, and that could usher in a new era of risk taking and innovation.

More people will be able to take a flier on a startup or join a small business. Entrepreneurs will find it easier to recruit talent, especially older workers. ...

One study reported that 1.6 million workers are "locked" into their jobs because they can't give up the benefits. Worries about health insurance reduce job mobility by as much as 50 percent, studies show, squashing opportunity and hurting efficiency.

Eliminate that friction, and guess who wins? Individuals and small businesses, which have ceded much of the labor market advantage to large employers that can afford to run the benefits gantlet.

"This is a big win for small businesses because they can be judged on the quality of their companies, not their health insurance," says John Arensmeyer, CEO of Small Business Majority, a nonprofit advocacy group.

Health reform is also likely to lower prices, or at least the pace of increases, for small companies. On average, small companies pay 18 percent more for the same coverage because they have less leverage with insurers. ...

By 2014, state and regional insurance exchanges will be in place, competing for millions of customers from small companies and the individual market. No one will be denied coverage, and rates are set within a narrower band. Over the next decade, changes from reform, including the exchanges, could save small businesses up to $855 billion, according to a study by Jonathan Gruber at MIT. ...

Large employers used to be known for stable work environments and generous pensions, and workers joked about the "golden handcuffs" that bound them. That's rare today except in government work. But health insurance remains a point of differentiation because big companies have the resources to manage it aggressively. ...

It's tough to compete for skilled workers when there's little prospect of getting insurance. Health reform levels the playing field. ...

One of the things that Republicans say they care about the most -- economic growth through the innovation that comes from small businesses -- will be helped substantially by the health care reform legislation Republicans did everything they could do to stop. That says something about what they really care about, and it does not appear to be small businesses or the uninsured.

When we talk about the net cost of health care reform, it's important to consider all of the costs and benefits. It's difficult to put a dollar value on mobility, but having observed people stuck in jobs they hate -- really hate -- just to keep health insurance, I'd guess it's worth a lot. And those benefits come on top of the $855 billion that small businesses stand to gain from this legislation, and come in addition to all the other benefits that come with health care reform.

When you hear about the net cost of health care reform in terms of what it will do to the deficit and the accumulated government debt, those are just the costs and revenues that the government must bear, it does not net out all the implicit and explicit benefits to the private sector that come from the legislation  (implicit and explicit costs to the private sector should also be added in, but I'd argue that the benefits to the private sector very clearly exceed the costs). When the benefits accruing to individuals and small businesses are included, the gains from reform are evident.