The foundations of America's private health-insurance market appear to be slowly crumbling - not just for the poor, but also for working Americans accustomed to middle-class lifestyles.
Large employers, which since World War II have provided comprehensive health insurance to most American workers, are scaling back coverage. In a few cases, they're doing away with it altogether.
That's sparking labor unrest and swelling the ranks of the uninsured.
In the 1960s, more than 80 percent of US workers had health insurance through their employers. Today, in the face of skyrocketing premiums, that's down to 62 percent.
Small businesses have been the first to drop coverage, but several new studies point to an alarming trend: Big firms are now cutting back.
Some, like Wal-Mart, only offer catastrophic plans to cover primarily life-threatening situations. Others are requiring workers to pay significantly higher portions of their care, both in terms of premiums and deductibles.
The combination has fueled a sharp increase in the number of uninsured who work in large firms. Thirty-two percent of the uninsured, or nearly 1 in 3, now work for companies that employ 500 workers or more. That's up from 25 percent in 1987, according to a recent report from the Commonwealth Fund.
Experts say that sends warning signals about the state of the traditional private health-insurance market.
"It's threatened because coverage is just so expensive now," says Sherry Glied, a professor at Columbia University's Mailman School of Public Health and one of the study's authors. "The money is just not there. Neither corporations nor private individuals can continue to afford the double-digit increases in health costs."
The change at large firms is a result of both short- and long-term trends.
The recession has forced businesses to scale back spending and shift some of the increasing healthcare costs onto employees. Those increased premiums and deductibles have prompted some workers, particularly those at the bottom of the wage scale, to opt out of the coverage.
That's a trend experts expect to see continue. A study by the Kaiser Family Foundation found that more than three-quarters of large firms are likely to increase the amount their employees pay this year.
Long-term changes in the labor market have also contributed to the large numbers of uninsured. Most notable is the loss of manufacturing and union jobs, many of which carried comprehensive health benefits. They've been replaced with low-wage retail jobs, many of which don't provide insurance at all. And many that do, like Wal-Mart, the nation's largest employer, offer plans covering only catastrophic care.
That's not good enough for Alba Goens, a bakery manager in Orange County, Calif. She's worked at Ralph's Supermarket for 20 years and now makes $13.97 an hour. Kroger's, Ralph's parent company, wants to severely cut back the insurance that's offered, in part to help it compete with Wal-Mart. Ms. Goens, who is recovering from what doctors diagnosed as thyroid cancer, does not want to lose her benefits. So, along with more than 70,000 other union employees at three supermarket chains, she is now walking a picket line.
"Most of the people here started working for these companies because of the insurance, not the pay," says Goens. "Now they're talking about cutting our benefits by 50 percent."
Because Wal-Mart is the nation's largest employer, it's put pressure on an array of other large retail stores to cut back coverage as well.
Consider a recent study by the Institute for Labor and Economy at the University of California at Berkeley. It found that 700,000 uninsured people who were eligible for the state Medicaid program were in families with a wager earner employed by a company of more than 1,000 employees. Critics, including the AFL-CIO, call that "the Wal-Mart effect."
But the company defends its policies, noting while its health coverage is optional, "roughly 50 percent" of employees take advantage of it. Another 40 percent are covered through other sources - spouses, parents, or retirement or government programs. That leaves only 10 percent uninsured. "Almost 40 percent of our associates had no medical insurance at all prior to employment at Wal-Mart - these are people who would have fallen through the cracks," wrote Christi Gallagher, a Wal-Mart spokeswoman in response to questions submitted by e-mail.
But the AFL-CIO doesn't buy that. It just completed a study of Wal-Mart's insurance policies. It found that in 2001, "Wal-Mart workers paid between 41 percent and 47 percent of the total cost of the company health plan, while similar employees at large companies pay 16 percent of the total premium for single coverage and 25 percent for family coverage." That, despite earning an "average of $7.50 to 8.50 an hour."
"Wal-Mart pushes its health costs onto individuals who have very little to pay for it," says the AFL-CIO's Gerald Shea. "As a result, almost half can't afford it, and that forces taxpayers other employers to pick up the slack."
Conservatives like Edmund Haislmaier, a visiting fellow at the Heritage Foundation in Washington, contend that the solution can be found in the tax code. Currently, it favors employer-based coverage by giving companies a tax break for insurance costs. He argues that the responsibility for buying insurance should be shifted from employers to individuals, who would then receive a tax credit. At the same time, he advocates reforms to streamline the market.
"We have artificially blocked the alternative that one might have expected to arise in response to changes in overall employment," Mr. Haislmaier says.
But many moderates and liberals oppose the tax-credit idea, saying it will only lead to a further unraveling of the private healthcare system. They argue instead for regulatory reform, subsidies to help companies buy insurance, and the expansion of public programs like Medicaid. Their main reason for this approach is that the people most affected right now are low-wage workers.
"You can't buy a $2,500 insurance policy when you're making $12,000 a year," says Ms. Glied. "It just doesn't add up, and it doesn't matter who's providing it."
Others hope that when the economy recovers, large companies will begin to offer coverage or improve what they already have. "I've been surprised by how resilient the employer-sponsored insurance is," says Gary Claxton, a vice president of the Kaiser Family Foundation. "These benefits are very important to employees, and companies respond to that when they have to attract employees."