Employer-based coverage is the backbone of the current U.S. health insurance system. According to the Kaiser Foundation, about 158 million Americans now receive coverage through an employer, more than any other source. Yet the percentage of workers who obtain health benefits from their employer has steadily declined from 65% in 2001 to 59% in 2007.
The question for presidential candidates and the public is whether that's a good thing or a bad thing. Should employers be encouraged to cover more workers and relied upon as our nation's primary source of coverage? Or should we try to move away from the employer-based system?
Sen. Barack Obama leans toward the first option, with a health reform proposal that builds on the employer-based system. The Obama plan would actually pull more employers into the health care business by requiring small businesses to contribute either toward their employees' insurance coverage or a national health care plan. The government would help out with the new cost burden by providing a tax credit of up to 50% of premiums paid.
Critics, like Sen. John McCain, argue that employer-based coverage is an overpriced, inefficient means of purchasing health care. Actually, I don't think anyone would disagree with the assertion that the current coverage system is overpriced and inefficient. (How many times have we all heard that more than $1,500 of a GM car's price goes to health care?) But would moving away from employer-based coverage fix the inefficiencies without compromising care?
Mr. McCain says it would. By eliminating the tax credit which employers currently receive for offering health coverage, his health care reform plan would lessen the incentive for businesses to pay for employees' insurance and for employees to opt into their employers' plans. In effect, the proposal would try to move the U.S. system from a group-dominated one to a market targeted to individual consumers. The idea is that individuals could more accurately select the coverage they want or need by purchasing it on their own.
So far, American consumers seem leery of this concept. A Kaiser poll conducted in June found that 81% of respondents thought it would be harder to get a good price for health insurance if they had to buy it on their own and 80% think it would be harder to find or keep coverage if they were sick.
People who are already sick or who suffer from serious chronic diseases and are currently covered by an employer potentially have the most to lose in a system with more individual purchasing. They are very unlikely to find a better deal shopping on their own, and if their employers were to quit offering coverage, they could have trouble finding any insurance at all. Mr. McCain has acknowledged this problem and proposes to help those who are rejected (or priced out) for individual coverage through state-run high-risk pools.
Currently, 34 states offer such pools, which are funded through a mix of federal and state money and individual premiums. They vary widely in their benefit caps (a max of $75,000 in California), waiting periods for pre-existing conditions (ranging from none to a full year) and openness to new applicants (Florida hasn't let anyone in since 1991). Obviously, if employer-based insurance were to dry up, more federal money would have to be thrown into these pools, but it's an open question how much funding would be required.
The dollar figures and the success of these proposed plans depend entirely on how employers would respond to tax incentives. Would the Obama plan convince small-business owners to buy group coverage for their employees? Or would the McCain plan motivate employers to stop offering insurance? Experts on both sides offer contradictory predictions and cost projections, but no one could say for sure until a plan is put into effect.
No wonder Americans are nervous about changing the status quo. It's the paradox of health care reform—we're spending too much for too little, but no one wants to give up what they already have.