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Consider this: Why does your job offer health insurance, but not auto insurance? Certainly, you need to be healthy to come into work, but most Americans also need a car to get to work. For that matter, why doesn’t your job offer home or life insurance? What makes health insurance a common, nearly-ubiquitous benefit of employment in the United States?
The prevalence of employer group-based health insurance in America is a result of World War II. During the lead-up to the war in the Great Depression, there was an enormous surplus of labor relative to demand. However, as millions of Americans were sent overseas to fight in World War II, the labor pool shrunk dramatically. At the same time, the demand for labor skyrocketed as the federal government poured enormous resources into war production, creating a massive industry that desperately needed workers.
Given these conditions, businesses would normally raise wages in order to attract workers. However, the federal government also imposed wage controls on many American industries. In order to get around these wage controls, businesses began to offer health insurance to lure in prospective employees, along with other “fringe benefits.”
Following the war, Congress created a tax code that rewarded employer group-based health insurance. If businesses provided their employees with health insurance, that insurance benefit would not be taxed. However, if businesses simply raised their employees’ wages, the wages would be taxed. Understandably, most businesses decided to offer health insurance to their employees instead of raises.
In this way, the federal government largely created the employer group-based health insurance system. This system is unique to the United States. Every other developed country has some form of government health care, whether it’s truly socialized medicine such as in Britain, or a single-payer system like in Sweden. Our system is a result of both the unforeseen consequences of government involvement in business, and the natural American aversion to big government.
For most Americans, employer-based health care works. A March 28th Reason-Rupe poll found that:
• 87% of Americans are covered by health insurance
• 63% of Americans with health insurance are covered by employer group-based plans
• 23% of Americans with health insurance are covered by Medicare or Medicaid
• 58% of Americans are satisfied with their overall health care
• 23% of Americans are dissatisfied with their overall health care
So, the vast majority of Americans have health insurance coverage, a majority of Americans with health insurance receive it through their employer, and a majority of Americans are satisfied with things as they are.
What does this mean?
Simply put, there’s little reason to dramatically alter health insurance in America as things stand. Unfortunately, the provisions in ObamaCare will force a radical, fundamental shift in health care from employer group-based health insurance to health insurance exchanges controlled by the federal government. ObamaCare won’t destroy the employer group-based system, but it will change the basic dynamics of the health insurance market.
Still, while the polling numbers strongly support the continuation of the employer group-based system, not everyone is happy with it. After all, more than a tenth of Americans lack coverage, and nearly a quarter of Americans are dissatisfied with their overall health care.
What’s the best way to respond to those numbers? Congress could follow the ObamaCare route: mandating insurance and expanding federal control of health care through government health plans. For most Americans, this unconstitutional and expensive path toward addressing the problem is unacceptable.
The solution to helping people left behind by the employer group-based health insurance system isn’t an expansion of the government group-based health insurance system. Instead, we ought to encourage true, individual insurance.
What are some of the benefits of true insurance? The main benefit is portability. For most Americans, losing or leaving their jobs means losing their health insurance as well, since the two are connected. This increases the hardship of the unemployed, while simultaneously discouraging entrepreneurial Americans from leaving their jobs and their health insurance in order to start their own businesses.
But if you purchase health insurance separately from your job, like you purchase auto or homeowner’s insurance, that insurance now stays with you regardless of your employment status. The portability of true, individual insurance helps to calm some of the anxieties that come with unemployment while also freeing up America’s entrepreneurs to start businesses and to create jobs.
True insurance’s portability also helps to deal with the problem of pre-existing conditions in health care. The problem of pre-existing conditions should not be overstated, as it only afflicts about 1% of Americans. Still, it was a key impetus behind the push for ObamaCare, and all health care policy experts who hope to implement reform must address it. While by no means a silver bullet, the ability to keep the same insurance provider throughout several jobs, and possibly throughout your entire career, helps to alleviate the pre-existing conditions problem.
Most people acquire their “pre-existing condition” during their adult life, while in the workforce. When that happens, their insurance will most likely cover the new condition, similar to other ailments. But once these people change jobs, they now suddenly have a “pre-existing condition.” The portability and continuity of true insurance would do a great deal to reduce the number of Americans who have trouble accessing health care due to their pre-existing conditions.
Finally, true insurance provides Americans with greater choice and freedom with their health care. In a sense, when you apply for a job today, you’re also applying for that job’s health plan. Unfortunately, you don’t really know the details of the health plan until you’ve already taken the job and the plan.
What if you purchase true, individual insurance? You can pick a plan that the right premium and deductible. You can ensure that the plan covers the things you want covered. In short, you can get a plan that appeals to you, instead of being forced into your employer’s pre-packaged plan, which may or may not cost what you would prefer or cover what you want covered.
So, there are several major advantages to a true insurance system. How do we encourage its growth? The most important step to growing the true insurance market is to equalize tax treatment of the employer and true insurance systems. Full deductibility of all health care expenditures would help to level the playing field in the insurance market, thereby increasing patient choice.
The employer group-based health insurance system works for most Americans, but it’s not perfect. For those Americans who would prefer something different, we ought to forgo government group-based health insurance like in ObamaCare in favor of encouraging true, individual health insurance.
TAKE ACTION: Urge your Members of Congress to cosponsor the Patient OPTION Act!