Separation of Employment and Health Insurance - Book Excerpt
Separation of Employment and Health Insurance:
An Interim Step for Any Option
What might be good middle ground for all the reform strategies and concepts in order to create workable positions today? Some would say a reasonable answer is consumer-driven health care (CDHC), a concept that combines limited legislation and market forces and is driven or influenced by consumer behavior. It is a very embraceable position for anyone who does not want massive change, anyone who does not believe that health care services should be a right (citizen rights carry extended burdens), and/or anyone who doesn’t want to see an increase in their income tax.
One of the pillars of CDHC is the growth in the number of health insurance policy holders based upon consumer choice and discretion; insurance decisions are based upon cost and value. The cost of health insurance is optimized for individual buyers and small business by increasing the risk pool, or in other words, by adding as many people as possible to spread the risks and costs. Currently, employer-based insurance is taking a large percentage of healthy subscribers out of the small business and individual plan risk pool. This is one reason to justify the separation of health insurance and employment-to create greater equality regarding the cost of health insurance.
Secondly, with costs being more equitable, this will encourage individuals and small business to obtain health insurance. We need to get the younger uninsured population to buy insurance; they have accidents and this contributes to hospitals’ charity care and write-offs which further encourages cost shifting as discussed in chapter 2. For all of those who are daunted by the number of uninsured Americans, this should be a compelling reason to separate employment and health insurance-to encourage the uninsured to become insured.
Thirdly, the employer need to provide health insurance presents an unfair disadvantage to U.S. companies competing with foreign companies. As mentioned in chapter 1, employer-based health insurance was introduced as a way for employers to compete for workers after World War II, when the U.S. manufacturing industry began its powerful emergence. Back then, employers’ hands were tied from paying higher wages as the government tried to avoid postwar inflation. Businesses responded creatively to market competition for workers, and that was good. But now that practice is hurting competition-separation of employment and health insurance would increase the competitiveness of U.S. companies.
Last but most importantly, is the empowerment of individuals. This separation would provide individuals with more choices of both health insurance and employment. The tethering of employment and health insurance falsely restricts free market movement. Some employees will not change jobs because they “need the insurance”. There is nothing worse than when an employee quits their job but stays employed at the company. Without health insurance hand cuffs, employees will be freer to change jobs, going where they will be more enthusiastic and therefore more productive. This would be a win for both employees and employers-separation of employment and health insurance would empower individuals to seek jobs where they will be most productive and provide them more choices when buying health insurance.
There are a few more points itemized in chapter 9 about this topic, but the point is: It is time to us to change this outdated practice of employment-based health insurance benefits. We need to see meaningful debate and movement towards the separation of employment and health insurance. The numbers need to be analyzed to determine whether or not tax deductions, or tax credits, should be given to individuals who buy at least a high-deductible health plan. Those dollars would be directed into health savings accounts (HSAs) designated for the exclusive use of health care expenses. Some politicians are proposing tax credits as such, which is an excellent start; yet we need to incorporate strategies for the separation of employment and health insurance as well. Let’s think this through all the way, not just put a band-aid on the problem.
This change would definitely increase the incentive for consumers to understand their health care costs. Knowing costs can change behavior - moving us towards greater efficiency in the way we consume health care services. CDHC purists are encouraged by the increase of enrollment in individual health plans. In order to step into the early majority of adoption based on the Everett Rogers Technology Adoption Lifecycle model as shown below, we need to surpass the combined 16% of innovators and early adopters. We will do this when there are more price-competitive individual insurance plans fueled by greater competition. We will have greater competition when more individuals are buying their own health insurance. Health insurance needs to become as competitive as auto and home owners insurance. We need everyone who is currently using non-governmental health insurance to enter into the same insurance market so we can increase competition and create greater market efficiencies.
Figure 10.2 Adoption Curve
One should not assume this assertion of separation of employment and health insurance is accompanied by one mandating coverage-it is not. Rather, it is a proposal for discussion in conjunction with the CDHC concept-freedom of choice driven by consumer behavior as detailed below.
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