Employer-Based Health Insurance
Published in The Journal Record
April 6, 2016
I must admit I have become addicted to political talk shows this campaign season. It doesn’t take much consistent viewing to reach the conclusion that most candidates have a standard canned answer to difficult policy questions.
On the Republican side when queried about their pledge to eliminate the Affordable Care Act (known as Obamacare), almost to a person we get a typical answer as to what they would substitute in its place. The first statement is to replace it with a health care plan driven by the needs of doctors and patients and not the government. I’m not sure I have a clue as to what this really means. The second answer is they would require that health insurance could be sold across state lines, and they are supportive of health savings accounts.
Both of these items have merit but fall woefully short of any comprehensive approach to either the financing or the delivery of health services. One item that rarely receives mention is what to do about employer-based health insurance. It is generally thought that insurance provided to employees is both a blessing to those employees, as well as a factor in accelerating health costs. Most economists would tell us that, as the price of a product approaches zero, demand approaches infinity. That is our employer-based health insurance in a nutshell. Depending upon the richness of the workplace plan many employees are shielded from the economic consequences of their health care decisions.
When you add to this phenomenon the fact that health care coverage is tax free to the employee and tax deductible to the employer there is every reason to speculate that employer-based health coverage is a direct component in an ever-accelerating costly medical system. The ACA contains a provision commonly called the Cadillac Tax which is clearly meant to restrict employers from providing ever more lucrative health insurance packages. The unfortunate truth is if employers simply wanted to provide care at the most affordable prices they would provide a far different product than has historically been the case. Clearly the most efficient employee-based insurance plan would include extremely narrow panels of doctors and hospitals. It would incorporate very high deductibles and have restrictive mechanisms to discourage the use of high cost treatment and diagnostic technology. The sad truth is the average employee would hate the most efficient plan.