Changing Healthcare Delivery in America By Corbett Brown, Chair, Graduate and Professional Students Assembly

Recently President Obama referred to the American employer-based provision of healthcare as “an accident.” He was right, and this accident, instead of being cleared from the free-market roadway, has been causing chain-reaction wrecks ever since it first began.

Historically, employer-based healthcare started during World War II when the Federal Government enacted wage restrictions and a salary freeze. No longer could employers use salary as a means to persuade new talent to choose his/her company as a place to work. However, government meddling did not stop savvy leaders of business from developing creative incentives to attract new talent. These business leaders used expanded benefits packages as a way to pay for certain expenditures for the employee, which were previously individually paid, thus freeing up that portion of the take-home pay for whatever the employee desired. This was an ingenious method used to attract employees, and it worked so well that it became widespread. That was the first accident, or unforeseen consequence of government restrictions on wages.

Although President Obama used accident in a singular sense, this accident really occurred in stages. The first stage occurred when the government froze wages and salaries, and the second stage occurred when the Federal Government amended tax laws to allow for employers to use pre-tax dollars for the purchase of health insurance, while not providing the individual American, nor his or her family the same allowance. In reality, employers could, and do, purchase the same coverage as an individual does on his/her own for less due to the fact that the individual is using dollars that have already been taxed. This is an inequality that does not make much sense, and is truly the accidental result of taxation without individual consideration.

The employer-based health insurance accident would not be so terrible if it was not for the many chain-reaction wrecks that it has caused. One chain-reaction wreck is the loss of health insurance when one leaves employment, since his/her health insurance and that of his/her family is tied directly to the work-place, and is not portable without COBRA insurance, which by-the-way is too expensive for most. Since many individuals are unable to afford COBRA insurance while in-between jobs, they choose to remain uninsured. These workers who are in-between jobs make up a large segment of the total uninsured in America.

Unfortunately that chain-reaction wreck led to another, job-lock. Job-lock is when one is afraid of changing jobs for fear of losing coverage by not being able to either afford new coverage or be approved for new coverage in the case of preexisting condition. This leads to decreased job mobility, which is especially true for females and older workers, and causes employees to stay with jobs they would otherwise leave.

Additionally, while there are many who are afraid to leave a job, the majority of Americans are forced to change jobs numerous times during their working career. According to the United States Department of labor: Bureau of Labor Statistics, baby boomers born in the years “1957 to 1964” had on average “10.8 jobs from ages 18 to 42.” The high frequency of job-changes makes the notion that health insurance should be tied to one employer even more ridiculous.

The solution to this problem comes through making needed changes to the tax laws, providing individuals and families the use of pre-tax dollars to purchase their own health insurance. This insurance would be portable since it is private and unassociated with the workplace. A side effect of this action would be that the number of uninsured Americans would decrease due to the increased portability of health insurance, and employees would have increased mobility within the job market.

Another benefit of allowing individuals and families to have the ability to use their own pre-tax dollars to purchase health insurance is that it would be individualized, and more closely represent the needs of the individual or family. This would create stronger competition within health insurance providers, which would in the long run decrease costs for consumers and increase the number of plans that meet their needs and wants.

This “accident” was a result of restrictions on the marketplace, and can be fixed by unshackling the marketplace for all Americans.

Related posts:

1. Consumers Favor More Healthcare Choices By Nick Smith-Wang of the Penn Republicans
2. WHAT ASPECT OF HEALTH CARE DELIVERY IS MOST IN NEED OF REFORM? By Arnold Rosoff, Professor of Health Care Management and Legal Studies
3. Can America Do Better? Insights from Health Economics

Leave a Reply

You must be logged in to post a comment.