Employment-Based Health Insurance and Universal Coverage: Four Things People Know that Aren't So

Abstract

In 2001, I published an article in this journal titled "Two Cheers For Employment-Based Health Insurance." That article opened with the following sentence: "Employment-based health insurance is the Rodney Dangerfield of health policy: it gets no respect from anyone." The article then cataloged criticisms of employment-based coverage (EBC) from across the political spectrum, offered various reasons why EBC deserves "two cheers," and proposed tax reform, Employee Retirement Income Security Act (ERISA) reform, and greater use of purchasing pools to address shortcomings in the EBC market. EBC may not get much respect, but it does have considerable staying power. Consider four recent developments (and non-developments). First, in the 2008 Democratic presidential primaries, only Representative Dennis Kucinich proposed outright replacement of EBC with a one-payer system - and he was out of the race on January 24, 2008, after receiving no delegates in Iowa, 1.35% of the vote in New Hampshire (fifth place), and 3.65% in Michigan (third place, but second place went to "uncommitted," who got 40% of the vote). Second, the two leading candidates in the Democratic primary (then-Senators Barack Obama and Hillary Clinton) both proposed to build on EBC instead of proposing to replace it. Democratic primary voters are the natural constituency for a one-payer system, but their revealed preferences (or, more likely, their expectations about the electoral appeal of that approach) obviously pointed in a rather different direction. Third, although the American Recovery and Reinvestment Act of 2009 (the "stimulus bill") expands Medicaid, unemployed workers may only participate if they qualify under existing income and wealth criteria. Instead of broadening access to Medicaid, the stimulus bill subsidizes the cost of COBRA premiums for those who wish to maintain their EBC after they have been laid off. Fourth, since taking office, President Obama has stuck to the basic position he took during the Democratic primaries: if an individual is happy with his existing coverage (which for a majority of Americans is EBC), he is free to keep it. These realities suggest that EBC has more staying power than its critics might have hoped-even if the principal explanation for that staying power is nothing more compelling than inertia, or a status-quo bias if you prefer the language of behavioral economics. To be sure, the past does not necessarily predict the future in politics, policy, or finance, and health insurance falls within all three of those categories. There are also plenty of reasons to worry about how long employers will want to remain the fiscal intermediaries for their employees to obtain health coverage. But, for the moment, EBC is here to stay-and there is (as yet) no evidence we are approaching a tipping point. Given the likely prevalence of EBC for the foreseeable future, it is worth emphasizing four important points about EBC and universal coverage. What these points have in common is that they are myths - most people believe they are true, even though they are not. The four "myths" are these: 1) Employers pay for EBC; 2) There are 45.7 million uninsured Americans; 3) Universal coverage means everyone will have access to high-quality care; and 4) Universal coverage will solve the cost problems of American health care.