Sunday, November 6, 2011

Thoughts on Employer-Based Insurance in U.S.

I fail to understand why corporations oppose moving away from the employer-based insurance schemes which have predominated in the United States the past 70 years. As health care premiums continue to rise and corporations are forced to spend more than ever on their employees' health, I would think that they would jump at the opportunity to shift some of the coverage responsibility to the government. This would free up time, energy, and resources to focus on their business related objectives. Additionally, the government would be better equipped to gain expertise in health coverage compared to corporations which could result in more efficient delivery of care and improved health for the population. The government would be less distracted by profit seeking goals and would instead focus on improving the health of its citizens and delivery of care through a more cost-effective approach.

Despite drastic increases in health care premiums and overall costs for health care, corporations, in general, are opposed to getting rid of the employer-based model. One opposing stance is that by providing health insurance to their employees this increases employees’ loyalty. This is probably true, but if everyone was covered through a government funded insurance plan, companies would be liberated from the expectation to provide health benefits. The fact that employers are expected to provide coverage is a historical accident dating back to the 1940’s. By shifting to a government program, this would free up businesses to increase loyalty through other means, such as increased pay or higher bonuses at year end.

A second view expressed is that corporations feel that they are better at managing health care costs than the government. If this is the case, why are companies spending so much time and energy coming up with new ways to provide coverage? Furthermore, why are corporations continuing to increase cost sharing with employees, who ultimately carry the burden as a result? To me, this suggests that companies are unable to keep up with rising costs and therefore are failing to control costs effectively. Perhaps, corporations would argue that costs would be even more outrageous if the government controlled insurance plans, but I have not seen any actual data to support this. I am not trying to suggest that corporations are at fault for the rising health care costs, but I am arguing that they are not in any better position to curb rising costs than the government.

Corporations may also believe that they would end up paying more in taxes to cover a government insurance program than the costs they incur now to provide coverage for their employees. I find it difficult to believe that the tax burden placed on corporations to fund a public insurance plan would be greater than the amount they pay for their employees right now. The car industry provides a good example of how large the health care burden is on business; Chrysler, for example, spends more on health care than they do on steel. That is probably why the CEO of Chrysler is one of the lone business leaders to support a government insurance plan over employer-based plans.

Lastly, corporations may argue against government plans on principle or ideology. In essence, those who believe this are taking responsibility to make sure that their employees are covered and that they have adequate opportunities to pursue better health. However, as health insurance premiums and overall costs continue to rise, employers are finding it more difficult to provide for their employees. As corporations are less able to provide insurance, the government will have to take on more of the coverage responsibility.

As a result of the numerous ways to reduce health care costs – from full coverage, managed care, preferred provider, cost-sharing, health savings accounts, and more – a confusing web of options have been developed by employers. However, none have proven to be the silver bullet for cost containment within the employer-based model. As fewer companies are able to keep ahead of the costs, a better option may be a single payer public plan. With one agency providing coverage, premiums could be lowered through broader risk pools and administrative costs could be reduced. Additionally, companies would see significantly reduced cost for health care and, most importantly, patients would see more money invested in their health.


  1. I just discussed my discontent with the employer based system with Dr. Levin-Scherz. He didn't give me much hope that this system was going anywhere. He emphasized the anti-government ideology of many business leaders as well as the aspect of control. He suggested that business leaders see providing health insurance as another piece of their enterprise and they are not willing to give that up. Additionally, he stated that hospital and many physician groups are opposed to moving to a government based program out of fear of lower reimbursement rates. I suppose I should take another look at Regina Herzlinger's approach of innovating within the system.

  2. Agreed. Thanks for getting us started Branden!