7 ms·

Why is health insurance tied to employer, again? Is there a reason that should continue?

• lkxijlewlf 5y ago
  Right? I believe that practice should be banned. There's really NO reason for it now.
  • briffle 5y ago
    Or at least made optional. Do you want our health insurance plan, or an extra $1500/month to find your own on the open market would be an interesting way of looking at it. But either way, both your employer and your cost for health insurance should show up on everyone's pay statements. Most have no idea what their employer pays for insurance.
• fennecfoxen 5y ago
  Historical and tax reasons. It started back in the era of WWII wage controls. It continued to be an okay way to do group insurance without facing major problems with adverse selection. Being able to pay for it with a pre-tax payrolld eduction is the other big reason it thrived. Given the mandates on insurance there are some reasons it should continue, but they are not really good reasons.
  • zamalek 5y ago
    > some reasons it should continue, but they are not really good reasons. Many of those reasons are legislature that allows insurance companies to do/demand things that they really shouldn't be able to. Even if the goal isn't public healthcare, America still needs a major healthcare insurance restructuring.
    • rhacker 5y ago
      I think that should look like this: HMO style access for all - automatically. Rebate if you decide to up it with PPO style insurance (or beyond). So you get 200 per month off taxes to pay towards your own insurance. Also, get it out of the employers hands - as in make it illegal to offer any benefits and let the employee get paid 100% of their salary instead. Also make it so that employers can't legally collect taxes without consent.
      • snotrockets 5y ago
        You'll then create two systems – PPOs for the healthy that can afford it, underfunded HMO for those who can't. Just drop the rebates, and make any secondary insurance be primary. That would make sure the insured group for the public system includes the healthy rich (which makes the pool for those that actually need and can't afford their health).
  • RC_ITR 5y ago
    > It continued to be an okay way to do group insurance without facing major problems with adverse selection. This is sort of a hot take, but there are plenty of examples of things like this in the US that have the unstated parenthetical "(because poor and minority populations were ignored by the system completely)"
    • fennecfoxen 5y ago
      Well yes, it was functioning as a health care plan featuring actual bona fide insurance, which means you paid for yourself, and you paid an amount commensurate with the risk that your health care needs might prove to be expensive. It was not designed as a wealth transfer to the needy any more than the auto insurance market. We may need more wealth transfers to the needy so that they can pay for healthcare! You will note, however, that the recent approach to reforms, which tried to turn the vehicle of “insurance” itself into such a wealth transfer, has not exactly solved the problem!! Nor has it achieved its stated goal of making healthcare and health insurance more affordable to the general population, a mission always contradictory to its goal of being a wealth transfer!
  • bogomipz 5y ago
    >"Given the mandates on insurance there are some reasons it should continue, but they are not really good reasons." Besides the fact that there doesn't seem to be any better or viable alternative available in the marketplace what are the other reasons?
• lettergram 5y ago
  Why is health insurance legal? Serious question, right now it’s legally mandated to have. What would happen to medical prices if that requirement was reversed? Just food for thought. If you model it you’ll find interesting results.
  • alex_young 5y ago
    A bunch of rare events would bankrupt anyone who encounters them?
    • deleted 5y ago
      [deleted]
  • munk-a 5y ago
    Lets look back to the 90s when it wasn't legally mandated: some people did just fine (those with a lot of cash sitting around), most people suffered worse than they do today and some people were completely screwed by the system. If it was illegal to pool health prices via insurance (instead of just not legally mandated for everyone to be insured) then the effect would be that those who went bankrupt under the old system would instead be dead.
    • jtbayly 5y ago
      Why would those people die? I don't follow.
      • munk-a 5y ago
        You'd make it illegal to pool costs by barring insurance - meaning that healthcare providers would either need to provide service gratis for the majority of the population (which is, really, just another form of insurance so that's out) or they'd need to secure a personal loan with their bank some time between getting hit by a truck and the operating table. And for pre-existing conditions and long term health disabilities - the individual would need to somehow justify the profitability of their existence to a private underwriter who was willing to bear the cost - in most cases those people "aren't worth the cost of keeping them alive" (assuming you're looking strictly at numbers). Hence - a lot of people would end up dead.
• notch656a 5y ago
  You're free to buy privately and cancel your employer insurance. I have never heard of an employer that won't let you cancel your insurance.
  • etchalon 5y ago
    When we were a smaller group, we had to forbid it, because otherwise our group wasn't large enough to qualify for a group plan.
    • deleted 5y ago
      [deleted]
    • phil21 5y ago
      This is very strange, it's not even remotely rare to decline employer coverage - probably half my team either has their spouse on our company coverage, or no company coverage since they are covered by their spouse.
      • notch656a 5y ago
        In my jurisdiction this practice (forced insurance) would almost certainly be illegal if any unauthorized payroll deduction were included.
      • etchalon 5y ago
        It's not rare. About 1/3 of my team has declined coverage now. But when were six people, and the minimum for BCBS to cover us was six people, we asked everyone to commit to the coverage so we could do it.
  • munk-a 5y ago
    Negotiating as an individual in a market made up by large blocks makes you very easy to ignore. If everyone moved off employer insurance and into the market then, assuming we didn't have massive market corruption (which I think is a pretty big assumption), we'd all be on an even playing field. Asking individuals to do this independently is just a recipe for them to fail.
• lvl102 5y ago
  Because that’s the way US stays competitive. /s
• pessimizer 5y ago
  Unions started offering it, so employers were granted a tax break to provide it instead in order to weaken the unions.
  • Domenic_S 5y ago
    This is super incorrect; if anything, employer-based health insurance strengthened the unions' ability to negotiate for their workers. As a sibling comment mentioned, the major catalyst was WWII wage controls: > During World War II, wage and price controls prevented employers from using wages to compete for scarce labor. Under the 1942 Stabilization Act, Congress limited the wage increases that could be offered by firms, but permitted the adoption of employee insurance plans. In this way, health benefit packages offered one means of securing workers. > In the 1940s, two major rulings also reinforced the foundation of the employer-provided health insurance system. First, in 1945 the War Labor Board ruled that employers could not modify or cancel group insurance plans during the contract period. Then, in 1949, the National Labor Relations Board ruled in a dispute between the Inland Steel Co. and the United Steelworkers Union that the term "wages" included pension and insurance benefits. Therefore, when negotiating for wages, the union was allowed to negotiate benefit packages on behalf of workers as well. This ruling, affirmed later by the U.S. Supreme Court, further reinforced the employment-based system. - Health Insurance in the United States, Melissa Thomasson, Miami University (https://web.archive.org/web/20110903053358/http://eh.net/encyclopedia/article/thomasson.insurance.health.us https://web.archive.org/web/20110903053358/http://eh.net/enc...)
    • pessimizer 5y ago
      None of what you quoted here offers a different origin of employer-linked health insurance, and it avoids even mentioning that they were excluded from taxation. The fact that they weren't included in wage caps is just another benefit granted to employers. > if anything, employer-based health insurance strengthened the unions' ability to negotiate for their workers. In what way does having more that needs to be negotiated strengthen unions? You've heard the punchline without hearing the joke: why were unions prevented from negotiating pension and insurance benefits before 1949? If you reversed the original sin of sheltering wages paid in the form of health insurance from taxes, you'd see stronger unions the next day. The biggest battle fought during the ACA war was about the possible taxation of "Cadillac" health plans, and ACA lost. edit: Strike wave of 1945–1946 https://en.wikipedia.org/wiki/Strike_wave_of_1945%E2%80%931946 https://en.wikipedia.org/wiki/Strike_wave_of_1945%E2%80%9319... Taft-Hartley Act https://en.wikipedia.org/wiki/Taft%E2%80%93Hartley_Act https://en.wikipedia.org/wiki/Taft%E2%80%93Hartley_Act Exclusive Union Control of Pension Funds: Taft-Hartley's Ill-Considered Prohibition [PDF] https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1104&context=jbl https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?articl...
• candiddevmike 5y ago
  So health insurance companies only have to convince your HR department to use them through some kind of grift instead of competing for your individual business on things like cost and in-network providers. Because the health insurance industry is focused on metrics like "number of lives we brought in this quarter" from massive deals that abstract your individual agency as one of a thousand+ lives covered under your employers plan. Who cares if you need to speak to a supervisor because your claim was denied, you're not going to get your company to switch plans. Before someone says "but the healthcare marketplace", it's a joke. The individual plans we have today are ridiculously expensive because: A) the government will pay for folks who can't pay for them, so easy money for the insurance companies and B) the folks who can pay really need it (healthcare is inelastic), they're so few though so there really is no downward price pressure to compete for them.
  • mrtranscendence 5y ago
    > the government will pay for folks who can't pay for them This depends on your state. Some states, like Wisconsin, won't offer medicaid for income reasons alone. I'm unaware of health insurance policies being cheaper in Wisconsin, though perhaps it's the case.
• auxym 5y ago
  Good NPR Throughline episode on the subject: https://www.npr.org/2020/09/28/917747287/the-everlasting-problem https://www.npr.org/2020/09/28/917747287/the-everlasting-pro...
• CodeWriter23 5y ago
  > Why is health insurance tied to employer, again? Because Democrats’ plans for universal healthcare rely on forcing employers to pay for it.
• ryanSrich 5y ago
  I’m not sure of the underlying reasons, but I know most employers make it slightly cheap enough to be more affordable than Obamacare. But it’s still insanely expensive (ex: I pay $1920/m + $22k deductible for a family of four).
• pyuser583 5y ago
  Yes. If I recall, it goes back to the Great Depression when there were cash shortages (and other issues). It incentivized employers to compensate with benefits, not cash. Around the same time, unionization became much more popular, and with it negotiated compensation (more benefits). These were big issues in the North. In the South, the economy has was still largely rural, and many states provided publicly funded hospitals - so the dynamics were different. There was a move for employers in to provide health insurance pre Great Depression. That was because larger employers could use their size to negotiate deals with hospitals. So health coverage was worth $individualPrice to an employer, but $negotiatedPrice to the employer. In general, insurance providers preferred going through employers because employed people are healthier and file fewer claims. Geico was an acronym for “Government Employees Insurance Corporation” which was a thing because government employees were a pretty safe bunch to insure. So even back then, many of the dynamics we see now existed: negotiated prices, grouping, etc.
• andrei_says_ 5y ago
  Ultimately because it drives down the cost of labor by locking employees in. Employer’s cost per employee is much much lower than an employee’s cost directly from insurer. The employer “sells” the benefit to the employee at a higher perceived cost because of this. Without an employer’s discount, an employee simply cannot get the same insurance coverage. Thus, the employee agrees to working pay and conditions which would not be agreeable without the pressure to get health coverage. Hence, lower cost of labor to the employer and pressure to keep the current structure in place.