Although many may think today that we have always had employer-sponsored health insurance (ESI) in this country, that is not the case. While some companies offered coverage in the 1930s, the basic concept gained momentum only after the start of World War II. The war effort required a rapid buildup of industrial capacity in the face of a severe labor shortage as many men went off to war. Employers needed a healthy workforce, and needed to compete for workers. Federal wage and price controls made it difficult for them to offer higher pay, so that ESI became an important recruitment tool. Employers were helped by an IRS ruling that made their costs of ESI tax-deductible; these benefits also were not taxable for employees. (Somers, AR, Somers, HM. Health and Health Care: Policies in Perspectives. Germantown, MD. Aspen Systems Corporation, 1977, pp 109-11)
We have had about a 75-year experiment with ESI, but its track record is one of continued decline over the last 30 years -- fewer people covered, less coverage for more costs, and less value of that coverage. ESI was more an accident of history than a well-planned financing system for health care. Today, rapidly accelerating costs are the Achilles heel for ESI, both for employers and employees, as they are for the entire market-based 'system' itself.
ESI arose at a very different time than today. Beyond the labor shortage, American business was dominant with little concern about foreign competition, and labor unions were strong. Many workers could reasonably expect to hold their jobs for their working life.
But those days are long gone. Most workers these days have multiple jobs, even careers, over their working years. By 2002, only about one-half of employed men or women could claim to have held their job for ten years. (Tejada, C. A special news report about life on the job--and trends taking shape there. Wall Street Journal, September 25, 2002: B5) Loyalty between employers and employees has dropped way off in recent years, part-time workers are not eligible for benefits, and union membership hovers around 10 percent of the workforce.
These markers show a long decline of ESI, as well as the decreasing benefits to enrollees:
Beyond the increasing unaffordability of ESI for employees, employers -- big and small -- have the same problem with no end in sight. General Motors says it spends about $5 billion on health care expenses each year, adding between $1,500 and $2,000 to the sticker price of every car out the door. That burden is many times higher than what neighboring competitors just across the border in Canada pay for health care, rendering GM much less competitive in global markets. (Johnson, T. Healthcare costs and U.S. competitiveness. Council on Foreign Relations, March 23, 2010) Small business (with fewer than 100 employees), accounting for about 40 percent of the private U.S. workforce, cannot keep up with the growing cost of ESI coverage. The small employer market has been one of the most profitable for private insurers, with premiums climbing by 74 percent between 2001 and 2008.
The so-called health care reform legislation, the Affordable Care Act of 2010, will not fix this problem. Having handed over a combined employer and individual mandate to the private insurance industry, with minimal regulatory clout, the bill (if and when it is implemented) lacks any semblance of cost containment measures. Federal waivers already give employers whatever they want, as illustrated by a recent HHS ruling that allows McDonald's Corp. to keep its very low limits of annual coverage of just $2,000 a year. (Adamy, J, Johnson, A. Rules eased for some health plans. Wall Street Journal, November 23, 2010: B1) Whereas President Obama promised that the average American family would save $2,500 a year on health insurance premiums, the Congressional Budget Office later projected that their cost would only increase. (Hemingway, M. Obama promised $2,500 health care savings; CBO says plan is $2,300 price increase. Washington Examiner on line, March 10, 2010)
M. Obama promised $2,500 health care savings; CBO says plan is $2,300 price increase. Washington Examiner
Adding all of this up, we can only conclude that employer-sponsored health insurance, and the overly expensive, wasteful private insurance industry upon which it is based, is in its death throes. As the Vice chairman of Ford Motor Co. said in 2004: "Right now the country is on an unsustainable track and it won't get any better until we begin -- business, labor and government in partnership--to make a pact for reform. A lot of people think a single-payer system is better." (Downey, K. A heftier dose to swallow. The Washington Post, March 6, 2004). Some 50 years ago, Walter Reuther, as the national president of United Auto Workers, saw the future this way:
"When American corporations reached the point where they couldn't make their business more efficient without making it less profitable, when their dependency ratios soared to unimaginable heights, when they got tens of billions behind in
their health-care obligations, when the cost of carrying thousands of retirees forced them to stare bankruptcy in the face, they would come around to the idea that the markets work best when the burdens of benefits are broadly shared." (Reuther, W. as cited by Gladwell, M. The risk pool: What's behind Ireland's economic miracle and GM's financial crisis? The New Yorker, August 28, 2006, p 35)
We have to move beyond denial of this problem, and rein in markets that fail the public interest. We can no longer afford ESI or the private insurance industry. Unless we move past political gridlock on this big issue toward a new partnership between labor, business and government, they can bankrupt us all!
There is an answer, of course, in plain sight -- not-for-profit, improved Medicare for All, funded by broadly shared progressive taxes that cost patients, families and business less than they are now paying while assuring universal coverage in a less bureaucratic and more accountable system.
Author of Do Not Resuscitate: Why the Health Insurance Industry is Dying and How We Must Replace It and Hijacked! The Road to Single-Payer in the Aftermath of Stolen Health Care Reform (Common Courage Press, 2008 and 2010)
To buy books from John Geyman visit: http://www.copernicus-healthcare.org
He calls for a new model while ignoring the fundamental differences in those models: less care (no reduction in outcomes) and less compensation for practitioners.
He discusses increasing premiums, but does not mention that rates of profit for insurance companies are pretty much fixed. Insurers make about %3 profit of all money that flows through them. $100 yields about $3 in profit. $200 yields about $6 in profit. The percentage appears to be fixed.
If cost is the problem, then address cost. Address the unnecessary treatment and the overcompensation of some health care workers (mostly physicians). Address the belief that more care means being healthier.
I agree with that - in 1980 I worked in a supermarket. part timers got a basic health plan. full timers got full boat - dental, optical and so forth
there was no such thing as a deductible or co pay - they payed it all. the premium was only a few bucks out the paycheck as well
Plus as mentioned below - that the US health system makes labor mobility more dificult
Well Duh, but the difference is that EVERYONE pays 2-3% more in taxes and EVERYONE is covered. That means the old, young, pre-existing conditions, disabled, rich, poor.
Employers would no longer need to worry about the administration of their employees health insurance.
Employees would be free to move between employers as they would no longer be tied to an employer who can fund their health insurance.
In Australia we have a much higher minimum wage and comparatively similar tax rates to the US and we manage to have a fairly good universal health care system.
Sorry did I use the word EVERYONE.... hmmm sounds like communism to me. (Have you noticed that the ONLY country on the world that keeps rattling on about communism is the US go figure)
Mr. Geyman is right about one thing. Businesses are abandoning employer-provided health insurance in droves. Within a few years, only the largest and most profitable corporations will still be offering these benefits. Most Americans will either be uninsured or underinsured. By then, the political environment may make reform inevitable. But for now, most Americans would rather cling to the philosophical illusion of high quality, free-market health care, than opt for a practical single-payer alternative.
I buy this insurance through a Professional Employment Organization so that I can provide benefits similar to those offered by the biggest in my industry.
I'm totally indifferent whether I pay for these extra costs to insurance companies or as taxes.
Asking whether taxes go up or not, is not a useful question.
The useful question is the Total Cost of health care for the employee (and the employer) vs. the "basket" of benefits.
How does changing who is paying reduce cost in any significant way?
The only benefit of a single payer system is increased ability to negotiate. But that does not mean that people will be paying less. When insurance companies were really strong and able to really control costs people got upset. Why? Because they health care provider claimed that they were not able to do their job and that the payer was making medical decisions. People were not any less healthy, but they were upset that they were not receiving the "appropriate" level of care.