Held Hostage By Health Care

Fear of losing coverage keeps people at jobs where they're not their most productive

With the democrats ascendant, the political climate is ripe for another push for universal medical coverage. Kelly Services Inc. (KELYA ) Chief Executive Carl T. Camden, a proponent of fixing health care once and for all, is taking advantage of the opportunity by rolling out new rhetorical ammunition. Workers, he says, are increasingly shackled to their jobs for no reason other than to cling to their employers' health insurance coverage. These are people, he says, "who don't leave a job even though they're unhappy and would be more productive somewhere else."

Economists and academics call this phenomenon "job lock." Studies say it could reduce job mobility by up to 25%, according to Brigitte Madrian, a public policy and corporate management professor at Harvard University's John F. Kennedy School of Government. A fluid labor market is viewed as a prime driver of U.S. economic growth relative to other industrialized countries.

Job lock creates friction by artificially tethering people to their jobs. Camden is one of a growing group of

CEOs--from the heads of the big auto companies to Starbucks Corp.'s (SBUX ) Howard Schultz to the Business Roundtable--who are pressing Washington to take action on this vexing issue. The only way to solve the stickiness in the labor market, Camden says, is to sever the link between jobs and health care.

It seems there's a health care refugee in every office. For many years, Kathryn Holmes Johnson sat at her desk fantasizing about getting a new job doing what she really loved: public relations. But the marketing executive at a local government agency in Virginia had a husband and two little girls who all had asthma and other health issues. They depended on her medical coverage. The $2,000 a year in co-payments for the family's prescription drugs alone would have turned into $85,000 without insurance. Looking for a job or switching jobs, Holmes Johnson feared, could jeopardize the family's coverage. So she stayed. And stayed. And stayed, a hostage to her health care.

The 1986 Consolidated Omnibus Budget Reconciliation Act (COBRA) was supposed to remedy this. It states that all large employers must make unsubsidized health coverage available to employees for the first 18 months after they leave a company. But COBRA policies for a family of four start at $700 a month. Only about 7% of people who lose their jobs say they can afford COBRA, according to Camden. And health insurers and employers are getting stricter about taking people with preexisting medical conditions onto their policies. "Nobody worries when they leave one job to go to the next that their Social Security will be interrupted," Camden says (KELYA ).


It's no wonder the loss of health insurance evokes the specter of a financial free-fall. Medical-related bankruptcies have jumped 2,200% since 1981, according to research from Harvard Law School professor Elizabeth Warren, director of the school's Bankruptcy Project. The middle class, she says, accounts for 90% of those.

Indeed, in surveys, the No.1 reason that would-be free agents balk is the fear of losing their health care. After all, one-third of jobs in the U.S. provide no health insurance at all--and the number is growing. Many Americans, such as low-wage retail workers, simply can't afford their employer's plan. Those with preexisting medical conditions can find themselves in an even bigger bind. "A new employer at a small company might find out your 6-year-old has leukemia and decide not to offer you the job," says Madrian.

And so many workers will keep hanging on to jobs they hate. One single mom in New York, for example, is sticking with her graphic design job solely to retain the health coverage for herself and her son. Half her pay goes toward her share of the monthly premium. Her wish? To start a business doing bath and body products. "I feel stuck," she says.

After a decade of working in a job she wanted to leave, Holmes Johnson found the courage to move on. "Starting my own thing was too overwhelming, and my husband's plan did not offer the coverage to make us feel secure," she says. A few months ago, she landed a public-relations position with a comparable salary at Washington law firm Sterne Kessler Goldstein Fox. After checking the firm's formula for prescription-drug coverage, she made the jump. In what other country, she wonders, would that be the deciding factor?

By Michelle Conlin

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