The Current State of Employment-Based Health Coverage

Abstract

merican policymakers and health policy analysts have a lovehate relationship with job-based health insurance. The policy A ress routinely runs articles about the demise of the current system of voluntary employer-sponsored health insurance coverage.' Conservatives argue that it ought to be replaced with individuallypurchased insurance, such as tax-favored spending accounts (see Mark Pauly's article this issue). Liberals assert that government insurance ought to supplant it. Meanwhile, as the debate rages on about the future of employer coverage, states and the federal government pass legislation buttressing and building on the existing employment-based system. Most recently, California has passed an employer mandate requiring employers to cover their workers (and many other states have contemplated similar legislation) and Maine has adopted a universal coverage initiative that includes avoluntary small employer insurance program offered through a state agency (Dirigo Health Care). Congress, in its recent Medicare reform legislation, not only extended publicly-financed prescription drug benefits to elderly Americans but also offered employers tax incentives to keep providing the prescription drug benefits they offer to their retirees2 There is nothing new about this debate, nor the conflict in views it represents. Since its origins in the 1930s, employment-based coverage has been viewed with skepticism. Nonetheless, nearly three-quarters of a century later, the vast majority of Americans under 65 who have health insurance, and about 38 percent of those 65 and older who continue to hold private health insurance coverage supplemental to Medicare, obtain it through their current jobs (or in the case of retired workers, former jobs)? The model of privately-sponsored and voluntary employment-based coverage is hardly anyone's ideal of health system design, but it is a nearly unanimous second choice. Origins and Rationale of Job-Based Coverage Private health insurance in the United States has always been jobbased. In other words, it is an employee benefit thatif offeredis part of the overall compensation package that employees receive along with their wages. Health insurance in the United States began on a large scale during the Great Depression, when hospitals developed Blue Cross prepayment plans to ensure that patients could pay their bills. Early Blue Cross plans were sold exclusively to employment-based groupseven dependents were initially excluded. Insurance coverage received a substantial boost during and after World War 11, when the federal government imposed price and wage controls and employers seeking to attract workers offered health insurance as a substitute for wage increase^.^ Employer-sponsored coverage as a component of employee compensation was further encouraged through provisions of the tax code that were formally codified in 1954. Employer payments for coverage are, like wage payments, exempt from corporate taxation. Unlike wages, however, employer insurance payments are also exempt from payroll and ...

Trends in Private Insurance, Medicaid/State Children's Health Insurance Program, and the Healthcare Safety Net

“…As a result, the percentage of workers eligible for health benefits through their own employer fell slightly between 2001 and 2005, from 76% to 74% 5 . Approximately 65% of uninsured employees worked for employers that did not offer health insurance coverage 6 . Another 20% worked for firms that offered insurance, but they were not eligible for the insurance benefit 6 .…”

“…Approximately 65% of uninsured employees worked for employers that did not offer health insurance coverage 6 . Another 20% worked for firms that offered insurance, but they were not eligible for the insurance benefit 6 . The remaining 15% were offered coverage by their employers but turned it down, with two‐thirds of those declining coverage citing cost as the reason 6 …”

“…6 The remaining 15% were offered coverage by their employers but turned it down, with two-thirds of those declining coverage citing cost as the reason. 6 Children of working poor families are particularly vulnerable. More than a third of employers reported having higher cost sharing for dependent coverage than employee coverage in both 2003 and 2004, 7 possibly explaining a recent decrease in the number of workers electing family coverage, particularly in small firms.…”

Keeping up with the Cadillacs: What Health Insurance Disparities, Moral Hazard, and the Cadillac Tax Mean to The Patient Protection and Affordable Care Act

“…Translating Health Insurance into Health Care: Issues of Affordability among the Insured Historically, health insurance in the United States has been primarily employment based (Davis 2001;Glied and Borzi 2004), and labor unions incorporated health benefits into collective bargaining following the failure of the Wagner-Murray-Dingell bill for national health insurance in 1942 (Derickson 1994;Gottschalk 2000). ESI plans remain popular among workers because they are often more generous (fewer exclusions, higher actuarial value, 1 lower deductibles and co-pays) and more affordable than non-group private plans.…”

The Politics Of Paying For Health Reform: Zombies, Payroll Taxes, And The Holy Grail

“…It is inequitable; leaves many Americans uninsured; promotes "job lock"; does not accommodate part-time, self-employed, and other "new economy" workers; places companies in the burdensome and intrusive position of making health care choices for their employees; and doesn't effectively control costs. 11 Nevertheless, an employer mandate has repeatedly emerged as reformers' health financing strategy of choice. Richard Nixon's 1974 reform plan relied on an employer mandate, as did Jimmy Carter's (1979) and Bill Clinton's (1993) national health plans.…”