Does employer-sponsored health coverage make sense?

It was recently announced that the “large employer mandate” provision of the Affordable Care Act has been postponed for a year, until 2015.
As a policy matter nationally, the delay in requiring coverage among employers with more than 50 full-time workers may not be a big deal. Most companies this size provide a health benefit, and the rules mandating how the rest would have to contribute to the cost of providing such coverage were admittedly complex, so getting it right is a reasonable concern in the delay.
It is important for example that employers not be allowed to game the requirement through any number of clever, even devious methods, such as limiting workers’ hours to avoid covered status. Workers will still be required to have coverage starting in 2014 under the individual mandate, and the health-insurance exchanges intended to facilitate buying individual and small-group coverage will be in place by then.
At the end of the day though, it will still be a complex game, but one goal of reform should certainly be simplification. This raises again the whole issue of whether providing health coverage through one’s employment, an arrangement unique to this country, really makes any sense.
Health insurance as an “employee benefit” arose originally from an anomaly in the free market. After World War II the government had imposed wage and price controls. Companies seeking to attract employees in the industrial boom that followed the war started offering coverage as a perk, one that has stayed with us for a number of reasons.
Government would otherwise have to raise taxes to provide such coverage, although one could argue that the tax exemption for the benefit already is an enormous tax subsidy. But perhaps even more significant has been the rise of the commercial health-insurance industry itself, with all of the attendant political clout you might expect. It is quite clear that workers have paid for health coverage by forgoing wage increases. In the last decade nearly all of what should have been expected as wage growth has been absorbed by the increasing cost of health coverage.
Health care costs often make American goods uncompetitive in global markets, and businesses decry the unpredictability of the expense, particularly premiums for fully insured products. Most company benefits limit the employees’ choice of coverage to one or a very few company-sponsored plans rather than allowing employees and families to select the most appropriate coverage for them. This shortcoming may be alleviated by the health-insurance exchanges (to be called HealthSourceRI in Rhode Island).
We don’t need employers to be involved in the health care of their employees, but we do need their money to sustain the system. This could be accomplished in any one of a number of fairly straightforward ways.
A simple, but dedicated payroll tax comes to mind. I haven’t done the analysis, but we could certainly calculate what the rate would need to be to cover all workers to approximately the level of benefits now generally covered by employers. My guess is it would be less than those providing reasonably comprehensive coverage pay now.
The tax could vary with health costs of course, but shouldn’t fluctuate wildly the way health premiums do. Eventually the health-benefits exchange would operate like a single, very large self-insured plan.
In Rhode Island there are many dedicated volunteers and state officials working on two critical initiatives, the economic development of our state, and reducing the cost of health care here so as to make the system more accessible to more people. This may be an idea that could help both causes. •


Ted Almon is president and CEO of the Claflin Co. and co-chair of the executive committee of HealthRIght.

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