Job Tied Health Insurance


An article published in Vox explains why the US is the only country that ties your health insurance to your job? “It’s clear there are much simpler ways to run a health care system. Some rich countries have all public insurance, some use private coverage, but they have a few things in common: They insure pretty much everybody, their systems cost less money, and whether you have health care has nothing to do with whether you’re employed. Open enrollment, if it exists at all, is a much simpler exercise”, writes the article.

In the United States, however, 57 percent of Americans under 65 get insurance through their jobs, and attempts to reform that system have all failed. The Affordable Care Act chose to build around it rather than abolish it. The health care industry has proven effective at protecting itself. And I have seen enough focus groups discussing ideas like Bernie Sanders’s Medicare-for-all plan to attest that, while people might not be very happy with the insurance they have now, they are also wary of change.

A survey suggested that more than one-third of Americans avoid health insurance because of the costs. “One contributor to falling US life expectancy is that the US health care system trails other countries at preventing avoidable deaths and treating chronic health conditions.”

Eric Toder, institute fellow at the Urban-Brookings Tax Policy Center, told Vox “In an ideal world, that might not be the best way to organize the health care system”.

Why employers prefer your healthcare?

During the late 19th and early 20th centuries, when better medical schools and clinical practices improved critical care, that resulted in a higher number of hospitals. As a result, the cost of individual health care increased, with average US families paying up to 5% of their annual income.

According to the article, some employers saw the benefit of offering health insurance to their employees, which was beneficial to hospitals and policymakers as well. “These plans pooled together large groups of people, some healthy and others not. Health insurance would only work with a delicate mix: You need some people to pay in more than they take out because there will be those others who receive more in care than they contribute financially. They also simplified matters for insurers, who could collect premiums from one employer rather than many individuals.”

The government didn’t tax health benefits as income, but companies could deduct the cost from their taxes. More people started getting health insurance, from 20 million to over 142 million in 1950. Because these benefits, it has been impossible for the government to break the system until now.

The truth, though, is that it is impossible, under the system the US has set up, to keep your plan. If you lose your job, you lose your plan. If you change jobs, you lose your plan. Even if you never change jobs, your employer could easily decide to change insurers or adjust your benefits.

Workers find this lack of control frustrating. Many recent labor disputes have hinged on health benefits, as employees get fed up with being asked to pay more and more of their own money for medical care.

Because of the government’s inability to intervene in this system, the employee share of premium costs is increasing, resulting in a higher cost of health care in the US. “In a larger sense, the US is locked into a system of employer-sponsored insurance, a quirk of history that sets our system apart from those of our economic and cultural peers”, Vox reports.