Can insurance still be employer-based?

Published on Wednesday, 2 July 2014 23:43 - Written by

One unintended consequence the U.S. Supreme Court’s Hobby Lobby decision could have is the further erosion of our employer-based health insurance model. Already, there’s talk on the left about ending the employers’ role in providing (and thereby choosing) health care coverage for workers.

Combined with some other notable trends, this could very well hasten the end of our current health care system. Are we ready with a replacement?

Many who object to the Hobby Lobby ruling want employers out of the equation.

“The ruling raises the question of why, uniquely in the industrialized world, Americans have for so long favored an arrangement in health insurance that endows their employers with the quasi-parental power to choose the options that employees may be granted in the market for health insurance,” writes economist Uwe Reinhardt in the New York Times. “For many smaller firms, that choice is narrowed to one or two alternatives — not much more choice than that afforded citizens under a single-payer health insurance system.”

The decision could cause us to re-examine our model, he contends.

“The Supreme Court’s ruling may prompt Americans to re-examine whether the traditional, employment-based health insurance that they have become accustomed to is really the ideal platform for health insurance coverage in the 21st century,” Reinhardt writes.

In fact, that re-examination already is under way. That’s because several trends are becoming clear. The simple fact is that employer-based insurance doesn’t work when fewer and fewer of us are employed.

The Baby Boomers are retiring, the number of working-age Americans on Social Security Disability Insurance is at an all-time high, and recent declines in the unemployment rate are mostly due to people who have stopped looking for work. According to the Bureau of Labor Statistics, the workforce participation rate is at a 35-year low.

Now add to these trends the fact that the Affordable Care Act provides incentives for employers to push workers onto the ACA exchanges, and the end of employer- based insurance is that much more likely.

“The road to comprehensive health care reform will be littered with casualties. One of them might be employer-provided health coverage,” writes John Wasik in the Fiscal Times.

Wasik explains that employer-based insurance is a relatively new thing. Many employers began offering insurance in the 1940s and ‘50s when the federal government offered them a tax break to do so.

“The health-insurance write-off came about as an indirect way to incentivize employers to keep wages stable after World War II,” Wasik notes. “Fringe benefits such as pensions and health plans took on a life of their own as employers increasingly upped the ante to attract and retain desirable employees.”

The ACA upends this system. Because it includes a “Cadillac tax” on more generous health insurance policies, government is now providing disincentives to employers who offer health insurance.

Meanwhile, more and more Americans are covered by Medicare and Medicaid.

The real point here is that employer-based insurance may no longer be a workable system. Are Republicans ready with an alternative?

We’re listening.