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The Accidental Reason Companies Like Hobby Lobby Control Our Health Care

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HOBBY LOBBY EMPLOYER INSURANCE
Why do employers play such a big role in American health care? Ask President Franklin Delano Roosevelt. | ASSOCIATED PRESS

The Supreme Court's ruling Monday that Hobby Lobby can refuse to cover contraception for workers is yet another reminder that our bosses have a lot of control over the health care we receive -- and that's not likely to change any time soon.

Jobs are the most common source of health insurance in the United States, a peculiar fact that sets the country apart from its international peers. That's why losing a job typically has meant losing health coverage, and it's why workers whose needs aren't met by their company's health plan have little recourse. They can go work elsewhere, pay much more money for health insurance on the open market or shell out cash for medical care that's not covered by their benefits.

Dumping employer-based health insurance is something of a cause célèbre among liberal and conservative economists alike. These intellectuals believe "decoupling" health insurance from jobs would be a more rational and fair way of pooling medical costs. Whether employer-based insurance should be replaced by a big national health care program or a private insurance system where individuals buy their own coverage depends on which economist you ask.

Getting rid of the current system would also let you avoid situations where your boss decides he doesn't want cover your medical treatments -- or shouldn't have to pay for something he believes is morally wrong, like, say, birth control.

But people who aren't eggheads tend to have a pretty strong bias for the status quo, and so do the politicians they elect.

More than 150 million Americans are covered by employer-sponsored group health insurance. That's more than Medicare, Medicaid and individual insurance plans combined. And workers seem to like it that way: 88 percent said they were satisfied with their insurance last year, according to a survey by the Employee Benefit Research Institute. One reason might be that companies pay part of the monthly premiums.

President Barack Obama and the Democrats who wrote the Affordable Care Act understood this, and they also knew that fear of change among the already insured was a huge reason why President Bill Clinton's health care reform agenda blew up in his face. So they sought to preserve the system that provides almost half the country with insurance, rather than scrapping it.

The furor over the cancellation of a tiny fraction of health insurance plans last year suggests those Democrats were onto something.

hobby lobby employer insurance
President Barack Obama, seen here not rocking the boat.

How did the U.S. wind up with a health insurance system so different from those of other rich nations, nearly all of which have universal health care programs, including those where employers play a role? How did employers became responsible for providing health insurance, and how did workers become dependent on their bosses for health care?

It's an accident of history. During World War II, the federal government imposed wage and price controls on private companies that made it impossible for them to raise pay levels in order to attract employees at a time when a huge chunk of the workforce was fighting (and dying) overseas. But the feds also decided that fringe benefits like medical insurance were exempt from wage controls. After the war, the federal government ruled that these benefits weren't subject to income tax, either.

hobby lobby employer insurance
"The only thing we have to fear is a distorted health care market 70 years from now."

This made juicy benefits cheaper for employers than higher pay, and advantageous for workers, too, since no one pays income taxes on the value of these benefits. The U.S. Treasury would have collected $185 billion more in taxes last year if health benefits weren't exempt, according to the Center on Budget and Policy Priorities. The Congressional Budget Office refers to it as the biggest so-called tax expenditure on the federal books.

The number of Americans who get health insurance at work is expected to rise, not fall, in the coming years, despite the emergence of an alternative in the form of the health insurance exchanges created by Obamacare. For one thing, the exchanges aren't a great option for workers whose companies have health plans, because people with access to health insurance at work mostly don't qualify for federal subsidies if they buy it on their own.

For another, the Affordable Care Act requires companies with at least 50 full-time employees to offer health benefits or pay a penalty to offset the cost of the government doing it instead. That mandate has been delayed twice already, so maybe it'll never take effect. But if it does, the Congressional Budget Office projects that companies will, by and large, continue to provide insurance to workers.

Companies themselves say the same thing when asked, at least when it comes to full-time employees. In a typical poll, published by Towers Watson and the National Business Group on Health in May, 98 percent of employers agreed it was important to offer health benefits to full-time employees next year and in the near future.

Your Boss Still Wants To Give You Health Insurance


hobby lobby employer insurance
Source: Towers Watson/National Business Group on Health

And as much as employers might like to get out of the costly health care business, they're not clamoring to let the government take it over and raise their taxes while taking away the control they currently have.

Plus, American companies are accustomed to using rich benefit packages as a way to lure and keep the workers they value, especially given the tax advantages. Competition for labor makes employers loath to be the first ones to dump their benefits and direct workers to the Obamacare exchanges, lest the employees flee to rival firms where the health plans haven't been killed.

There are some small signals that the status quo might change, however. If the health insurance exchanges stabilize and grow, and people like the coverage they find there, companies could become less fearful of a backlash. The same Towers Watson survey found that just a quarter of employers are "very confident" they will provide health insurance a decade from now, down from 43 percent 10 years ago.

Your Boss Is A Bit Unsure About The Future Of Health Benefits


hobby lobby employer insurance
Source: Towers Watson/National Business Group on Health

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