The Problem With Employer-Sponsored Health Care

Source: Thinkstock

Source: Thinkstock

Roughly 60% of American workers have their employer pay for, or at least subsidize, their health care costs. That usually takes the form of employer-provided health insurance plans, which have become a staple of most compensation packages for full-time employees. Despite that, the system is still shutting out swaths of unskilled or low-wage workers as businesses look to cut costs. Though the Affordable Care Act has helped lower the number of uninsured, the norm of allowing our employers to pick up the tab for our health care plans is a bit odd, and is probably not the most efficient way to make sure everyone is covered.

Why is it that we have employer-sponsored health care plans as a part of our compensation packages, anyway? The answer isn’t exactly clear. In fact, it may be one of the more ambiguous caveats in all of American business. There has been plenty of research and a ton of papers published regarding the subject as a whole. NPR dug into the topic and traced things back to the 1920s, when hospitals were attempting attract business from individuals who weren’t on the verge of death, as most people would forego regular checkups and preventative care.

But by finding ways to allow people to pay a little bit for health care every month — in the same manner they might pay for cosmetics — eventually led to a prototype of the modern insurance system being born. A group of schoolteachers in the Dallas area became the guinea pigs for the system, and that experiment ultimately ended up with the company that is known today as Blue Cross.

After that, the system spread throughout the states and legislation was proposed to make these types of plans tax-free. Since everyone needs medical care in some form, employers found that by providing health care for their employees as a form of tax-free compensation, they could save money. After all, those employees were going to be spending their money at the hospital anyway, so they might as well find a system that saves both employees and employers money.

Brendan Smialowski/AFP/Getty Images

Brendan Smialowski/AFP/Getty Images

Obviously, the system has become much more complicated and convoluted over the years.

Today, many people are shut out of the healthcare system altogether due to incredibly high prices and unaffordable premiums offered by insurance companies. Millions of people aren’t offered insurance as part of their compensation packages, and as a result, need to figure things out on their own. The Affordable Care Act took aim at some of these issues, although it did so in a pretty abstract and roundabout way, and ultimately became more of a windfall for insurance companies than the actual reform the country needs.

Then what about the system itself? Is it outdated and ineffective? To most people outside of the United States, the idea of having your employer supply your health insurance is fairly strange in the first place. After all, America is the only world power that doesn’t have a publicly-financed universal healthcare system, and without such a system in place, things can get weird.

That weirdness has really reached a crescendo as of late, particularly following the Supreme Court decision mandating that a for-profit corporation — in this case, Hobby Lobby — can actually mandate the types of healthcare provisions its employees receive, all based on the religious beliefs of the company’s owners. Hobby Lobby’s arguments were based on a stack of flawed science and misunderstood concepts, and the fact that the Supreme Court ruled that an employer’s particular religious belief — which can be made up off the top off their heads, for all the Court cares — now takes precedent over the medical needs of their employees.

The case in itself is ridiculous, but it brings us to one important conclusion: The era of employer-sponsored health care needs to end.

It was a system that worked for a while. But if employers are now going to be able to pick and choose — based entirely off of how they feel in accordance with their religious beliefs — how their employees can receive care, the whole plan needs to be scrapped, or reevaluated to the highest degree. Of course, there’s also the problem of testing whether or not an employer’s religious beliefs are genuine, which was not exactly made clear in the Supreme Court’s decision.

With the Hobby Lobby ruling as a precedent, if a company’s leadership decides it doesn’t believe in treating cancer because that will somehow save a few bucks, who’s to question it?

So, what can be done to supplant the system? While most people are quick to jump to an obvious solution — a single-payer system — there are market-based approaches that make sense as well. “The answer is not to start interfering with religious liberty, or engage in an arcane legal dispute about whether a private corporation is a “person,” or to strengthen mandates on employer coverage,” writes Stuart Butler from The Brookings Institute

“The correct strategy is to push forward with tax reforms and other steps that would lead to the disappearance of most employer-sponsored insurance. That’s actually something both advocates of single-payer systems and conservatives should agree on.”

It’s hard to imagine that Congress – which hasn’t been willing to do much of anything — would somehow pass legislation to allow this idea to gain traction. Our representatives have shown time and time again that they are unwilling or unable to rework the tax system in any meaningful way, and considering this approach would take widespread cooperation across the aisle, it’s unlikely to see it come to fruition.

Of course, the single-payer system that every other industrialized nation has in place is also very attractive, but the fierce resistance it would encounter from conservatives makes it even more far-fetched. It’s ironic, considering that many of the people such a system would probably help the most are the most vehemently against it. There would be issues with that system as well, but nothing that couldn’t be worked out. It’s important to keep in mind that the grass is always greener on the other side, too.

So, how do we actually send the employer-sponsored health care system off? It’s clear that with the way things are going in the courts that it needs to be changed — and fast. Of course, people are always free to purchase their own insurance, but the current system also makes that a considerable financial burden. Unless politicians can find a way to work something out among their competing ideologies, we shouldn’t expect much to change. But the need for the system to evolve will become more apparent when a large employer decides that cholesterol medication or chemotherapy isn’t a part of the dominant shareholder’s belief system.

Follow Sam on Twitter @Sliceofginger

More from Business Cheat Sheet: