What is “Job Lock”?

Wikipedia defines “job lock” as “the inability of an employee to freely leave a job because doing so will result in the loss of employee benefits (usually health or retirement related).”

This article is dated May 2011.

Many people do not realize, but the current US health care system is limiting our individual freedom which is one of our core values. Here, we are not talking about the freedom to choose our doctors — although that is a different story. Here we are talking about basic freedom as in what jobs to take, what careers to go into, who to marry or stay married to, and even whether to stay in the United States.

Health policy research professor Karen Pollitz says the following in FrontLine’s 2009 documentary film “Sick Around America“:

I think people do make heroic changes in their lives — take a job or keep a job that they don’t want, decisions about getting married, decisions about retiring — driven by health insurance.

Job Lock

Because our health insurance system centers around employer-provided health insurance plans, people will choose jobs based on the insurance benefits they offer. In the FrontLine documentary, we saw how a large company such as Microsoft paid the bill for a complicated pre-term pregnancy that costs somewhere between half a million to a million dollars. And for those who works for Microsoft, they are lucky to have such a health plan provided to them.

However not everyone can be that lucky. What about those who work part time and do not qualify for health insurance? What about those who work for a very small company that does not offer health insurance? And what about those who work are self employed doing freelance work or running their own business? The reality is that even for those who are employed with insurance coverage, they can be laid-off and lose their health insurance at any time. Fortunately there is a Federal COBRA law where the individual can continue their coverage provided that they paid the full premiums themselves. But many can not afford these premiums and 90% do not opt for it. Even if one choose COBRA, that will last only for a limited time.

In any three-year period, one in four American’s will find themselves looking for insurance in the private individual insurance market as they transition between jobs. For all those who have to purchase insurance themselves, things can be tough or impossible as examples in the documentary had shown. That is because insurance companies practices “medical underwriting” — which means that insurance company will look through your entire health history to decide whether you are a good risk on not. If not, they will deny you coverage.

George Halverson says “I could not get insurance. I’ve had heart surgery, and so I am completely uninsurable in the private market. So it’s important that I keep my job.”

Take another example of 23-year-old Matt Johnson who had plans for a career in industrial chemistry. But when he got ulcerative colitis during the last year before college graduation, he had to put his career on hold in order to take a job at a Menards home improvement store simply because it offered the insurance coverage that he needed. He was facing medication costs of about $1000 a month otherwise. By working for a company that offers health benefits, the employee must be covered regardless of health or pre-existing conditions. If he had not taken this job and tried to purchase insurance on his own in the private individual insurance market where insurance company do not have to cover everyone, he would have a hard time finding any insurance company that would cover his pre-existing condition or the premiums would be astronomically high. He is essentially locked into this job.

There are many other cases where a person currently has a job that offers insurance but the person is unable to leave that job. Thomas Murray, President of the Hastings Center, had given the example on Science Friday NPR program where suppose a person has a child with diabetes and the person is currently in a job that offers health insurance that would cover the medical costs. Now if the person wanted to leave the job to start his or her own business, he/she would then lose that insurance coverage and it be impossible to find affordable insurance in the private individual market. Hence, the freedom to follow ones dream and to start one’s own business has been limited.

USNews article says …

The value of staying with the same employer—and the same health plan—goes beyond cost. Job-lock is most common among people with pre-existing conditions, as they may not be able to get coverage of those conditions in a new plan.” Last year, a survey of finance and accounting workers showed that as much as 78% of them said health care benefits were “most crucial to retaining them“.

A 2008 Kaiser Family Foundation survey showed 23% took a new job or stayed at a job mainly because of better health benefits.

Deciding when to retire depends heavily on whether you will have insurance coverage from another source after retiring early. As noted by Marketwatch, many are delaying retirement in order to retain their current health plans from their employers.

California’s Governor Arnold Schwarzenegger in video linked here talks about job lock.  The video also shows a few small business owners talks about their stories and how their decisions have been affected by health care choices.


Spouse with Health Insurance

In a similar but parallel situation, suppose that one is married to a spouse that has health insurance coverage (probably through his or her job), then one has to think twice before deciding to divorce that spouse — since that would mean severing that health insurance coverage as well.  Professor Pollitz says “because they just can’t afford to divorce their health insurance.”

Divorce360.com sites a person saying

I have been dragging my feet on a divorce because my husband has outstanding health insurance, and because I now have what would be considered pre-existing conditions by an insurance company, that would make it difficult if not impossible to get health coverage.

MSNMoney article describes “nondivorce” as the situation of living together for financial or health-benefit needs instead of getting a divorce.

A 2008 Kaiser Family Foundation survey showed that 7 percent got married for the health-insurance.

Decision to Leave United States

As shown in the Frontline documentary, realtor Jennifer Thompson, having cancer as a pre-existing condition, simply cannot find any insurance company that would cover her. And the insurance company whom she had been accepted and whom she had been paying her premiums to had retroactively rescinded her coverage. It is hard to believe that the United States, one of the richest country in the world, has these kinds of problems. She finally had decided to move to New Zealand, just one of many numerous developed countries that does not have the kind of problems that the United States has.

Why Other Countries Can Do It

Why is it that other developed country can have universal health care, when United States cannot?  They are able to do it because everyone is mandated to have insurance and insurance companies cover everyone, thereby pooling the risk.

The United States have made similar attempts.  Five states (New York, New Jersey, Massachusetts, Maine and Vermont) require that insurance companies cover everyone and can not deny anyone coverage.  But when individuals only starts buying insurance when they start getting sick, insurance premiums increase to three times higher than in other states that allow medical underwriting.  Some insurance companies stopped doing business in these states that require universal coverage.

So in 2006, Massachusetts mandated that everyone must purchase insurance so that insurance companies can pool the risk by covering both the healthy and the sick.  Even so, the large premiums can still be a problem for many.  The Abramses is a family of four in Massachuesetts with annual income of $63,000.  This is too high to qualify for government subsidies.  And they find it difficult to afford to buy insurance which costs around $12,000 a year.

So it is not a easy problem to solve.  As of the time of this writing in November 2009 the United States government is still busy working on a the health care reform bill.   Its citizens are waiting to see if a bill for health care reform gets past this year.