Health Insurance Through Your Job Totally Makes Sense…

If you watch this clip of Paul Ryan explaining to a nun why he doesn’t support a universal health care bill, you might notice that the house speaker immediately changes the subject from health to jobs. He’s discussing upward mobility. You’ll hear applause at one point when Ryan tells the story of a (hypothetical) person in poverty who should have more incentives to work.

In other words, if you work really hard and follow your dreams, you might someday have the privilege of health care.

Ryan can get away with this kind of response because many of us Americans automatically connect health care to work.

It’s true that Americans with great jobs probably have little reason to worry about accessing care. However, as anyone knows who has worked part-time, on a contract basis, or for a small business, benefits don’t always come with employment. Also, workers earning lower incomes may not even be able to get care because their employers choose low-cost plans with high deductibles, or because employees don’t feel they can fork over their share of premiums. And even the aforementioned lucky ones are not immune to workplace strife, causing them to leave or switch jobs. So equating employment with ability to go to the doctor is a dangerously false equivalency. It also assumes that requiring employment for health care access is the right thing to do, in opposition to the majority of Americans, who say the federal government should make sure all Americans can get health care (Pew, 2017).

The US is the only country in the world with health care access tied so intimately with employment. (Reinhardt, 2014). This unlikely yet widely-accepted marriage is an “accident of history” that would not have come about as a result of intelligent planning (Blumenthal, 2006). Its growth has brought about an extremely regressive system in which those with bigger paychecks get better health care, and those without the best jobs struggle to get care.

How did this connection between health care and employment become so strong that everyday, smart-thinking citizens applaud a politician who talks about one when he was asked about the other? And what are the pitfalls of the employer-sponsored health system?

To answer these questions, we must go back to the time before the American medical system was much good to anyone. In the early 1900s, Americans spent on average $5 per year ($100 in today’s money) on medical care. The hospital was the place you went to die. When medicine began to improve in the 1920s, medical facilities became much more effective — but also relatively expensive. The new antibiotics that cured infection, the expertise needed to treat patients, and the cleanliness required for successful operation were among the factors contributing to cost.

Hospitals now had a marketing problem. People had never paid good money for medical treatment so they didn’t want to start. Imagine not having any reason to believe that a hospital could cure you or that it would be a good place to have your baby. Why would you go if you could help it — much less spend money?

At Baylor Hospital in Dallas, one worker noted that Americans spent more on cosmetics than on medical care. Could there be a way to gradually finance care the way that people pay small amounts for a lipstick here, a powder there and so on?

Baylor Hospital offered an arrangement to a group of Dallas schoolteachers that cost 50 cents per month. If any of them could benefit from a hospital visit, Baylor would then pay for it (Blumberg and Davidson, 2009). This employer group insurance became extremely popular during the Great Depression. Baylor continued marketing it, and this is how Blue Cross was born (Blue Cross and Blue Shield, 2013). Shortly thereafter, commercial insurers began to enter the market as well.

At around the same time, in 1933, President Franklin Roosevelt made the decision not to pursue universal health care, which might have gone alongside the new Social Security program. The economist Wilbur Cohen postulated that Roosevelt could have achieved universal health care during the worst of the Great Depression. His decision against it might have resulted from the American Medical Association lobby at the time (Blumenthal, 2006).

The 1940’s ushered in wage freezes imposed by a U.S. government afraid of inflation in the overheated wartime economy. To compete for scarce workers, companies relied on fringe benefits — such as health insurance (Blumenthal, 2006). In 1943 and again in 1956, legislation passed to make employer-provided health benefits non-taxable, sealing the deal on employer incentives to provide it (Blumberg and Davidson, 2009).

Fast-forward to 2015, when American employers spent an estimated total of $640 billion on health care benefits (Centers for Medicare and Medicaid Services, 2015). This money is not equitably distributed, however. Highly-paid workers at the richest companies enjoy lower cost-sharing on their health insurance benefits. For example, among well-funded and successful Silicon Valley companies, employees can expect to pay about 19% of their premium; 25% if they include family members on their plan. Further, such benefits tend to be comparatively rich, with low or zero deductibles and copays (or deductibles subsidized by the employer) (Silicon Valley Employee Benefits Index, 2016, pp.26–40)*. These employees don’t have to think twice before going to the doctor. Their out-of-pocket expenses are nominal, even though they make good money.

By contrast, lower-revenue companies such as small retail chains and restaurants don’t pay as much for their employees’ benefits (Social Security Administration, 2013). And their lower-paid workers may have to pay a larger share of their wages for worse plans, with higher deductibles and copays (Cowley, 2015). A retail employee working 30 hours a week and making $10 per hour may agonize over taking a sick child to the doctor when the plan doesn’t even start paying anything until a $5,000 deductible is met. Also, these companies are more likely to limit or not offer coverage to spouses and family members (Kaiser Family Foundation, 2016). In addition, at least 39% of workers who are part-time, contract, temporary or on call aren’t covered by any private health insurance plan (Poefeldt, 2015).

The logic here is that it makes good business sense to lure executives and highly-skilled workers to top companies, and to keep them happy. Benefits are an important part of that. This is also known as “recruitment and retention.” Lower-skilled or temporary workers are a dime a dozen.

Of course, companies with lower revenue and higher employee turnover find it harder to afford expensive health insurance plans. It is well-documented that the U.S., largely through its employer-sponsored health insurance system, pays far more money than other industrialized countries for inferior health outcomes (e.g. Brink, 2017; The Commonwealth Fund, 2015). Where is this money going? Our system funnels billions of dollars to wealthy corporations and executives in the pharmaceutical, insurance, medical device, and consulting industries. (Read doctor and medical journalist Elisabeth Rosenthal’s 2017 book An American Sickness for details and data on how this happens.)

And there you have it: our accidental, well-worn, regressive and wasteful employer-sponsored health care.

As a capstone to this arrangement of questionable morality, human resource workers and financial officers may find themselves involved to a certain extent in their employees’ health. In the past decade or so, a proliferation of vendors have stepped up to help employers monitor their workers’ wellness — for a fee — with the logic that healthy employees cost the company less (Reinhardt, 2014). A majority of larger companies incentivize their employees to fill out “health risk assessments” that ask questions about lifestyle and disease risk factors. (Kaiser Family Foundation, 2016).

It’s time to decide that employer-sponsored health insurance is not what we want as a nation, as a society. Once we mentally uncouple health care from employment, Paul Ryan can’t pull this one over on us anymore. (Not that Sister Erica Jordan was buying it.) But that’s just a start. We can work to build a single-payer system in which all get the care they need. Let’s use the billions of dollars that currently accrue to wealthy industries and executives to make a better system in which the funds go to take care of people.

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*Silicon Valley Employee Benefits Index, LLC. Silicon Valley Employee Benefits Index, 2016. San Francisco: SVEBI, 2016.