The idea of health care insurance has been around since the early 1900′s. It was not immediately a popular alternative to paying the full costs for health care treatments out of pocket. That was mainly due to the fact that medical treatments were relatively inexpensive in comparison to today’s astronomical medical costs. In fact, in the early days of health care, being sick or injured was four times more expensive for the patient in terms of lost wages from not being able to work than it was to treat the actual ailment.
In the beginning, the idea of medical insurance was born because of the devastating financial losses that could be sustained from not being able to work. However, insurance providers were not immediately taken by the idea and did not see providing health insurance as a viable business opportunity. Unlike an automobile or other tangible good, the health of a policyholder was not seen as a quantifiable commodity. The idea of insuring someone’s health was met with skepticism. Of primary concern was that a seriously ill or injured person could conceal or choose not to disclose his or her medical condition and then obtain a health insurance policy. After obtaining the policy, early insurance providers feared that such a person would then exercise the policy by seeking medical treatment at great expense to the provider. That scenario was not seen as a money maker for providers and the risk/reward aspect was deemed high risk and low reward.
As advancements in medical technology and procedures were continually developed, the costs for treatments quickly began to increase. Those rising costs were passed onto the patient and outpaced any lost wages due to being ill or injured. The importance of health, the need to be able to work and the increasing costs associated with medical procedures eventually opened up a market for health insurance coverage that slowly became a product for laborers and became a risk that insurance providers were willing to take.
It wasn’t until World War II and the war effort, that congress became involved and affected health care insurance to this very day. Congress enacted wage control laws in an act of “fairness” to those soldiers who were off and engaged in war. Men who were not enlisted in the military and remained in the United States had their wages controlled or restricted throughout the country so that their incomes would not be greater than those of soldiers.
However, fringe benefits were not included within those wage controls. Employer-based or paid health insurance were born out of that act of congress. Employers began to offer employer-based or employer-paid insurance coverages as fringe benefits and as a means to attract and retain better employees. Since owning a health care insurance policy was an expense to the average worker, having an employer willing to provide health care or pay most of the fees associated with health care, was a huge motivator to go to work for such an employer.
As the health care fringe benefit spread and became a popular employee recruiting tool, congress further intervened by establishing incentives for employers by allowing them tax exemptions for providing health care to employees. Those exemptions, like today, are only extended to employers. Individuals who own private health insurance policies receive no tax incentives for fully insuring their own health.
As time passed, many employers continued to utilize health insurance coverage as both a recruiting and employee retention tool all while realizing significant tax write-offs by doing so. Employers were able to compete in markets by offering better fringe benefit packages than that of their competitors to attract the best potential employees.
Nowadays, the widespread utilization of employer-based or employer-paid health insurance plans have become an automatic expectation for the average American worker. The link between employment and health insurance is now a firmly assumed “right” of employment. Any large business or corporation that chooses not to extend the health care fringe benefit coverage is often vilified, labeled as greedy or deemed uncaring of its workers. Those issues have often led to employee/employer stand-offs with employees vying for “acceptable” health care coverage.
Despite the rising and often crippling costs of employer-based/paid health care in 21st century, it is still a benefit that is widely used. Mostly, because the working class have become accustomed to it. Health care insurance provided by employers has caused the costs of employing a single employee to become more and more expensive in spite of tax incentives. That extra cost is often passed onto the consumer which drives the costs of products and services up. In addition, employers try to demand more contributions from employees towards their own health plans which often leaves employees bitter and unsatisfied with what actual medical procedures are covered. Generally, employees demand less responsibility towards paying into the their health plans and desire greater treatment coverage.
With rising health care costs and premiums, many employers have questioned whether or not it should be the responsibility of the employer to bear the bulk of the costs to medically insure employees and their families. Those costs to employers are often seen as a hindrance to doing business. On the flip side of that coin, employees and employee unions put forth an argument that they should receive respectable benefits for the work that they perform. As such, instead of a fringe benefit once willingly offered by employers of the past, today, the health insurance benefit is a point of negotiation or an inferred requirement.
As the costs of health care has spiraled out of control, so have the costs of insurance policies. The government has intervened with federal laws such as Obamacare, which compel certain employers to provide health care insurance to its employees. Federally mandated health care insurance is seen as government interference into business affairs and many questions and objections have been raised with the constitutionality of the law. Although well-intentioned, many economists have predicted that the micromanaging of health care insurance on the part of the federal government will only result in even higher health care costs for everyone.
Employment-based health care insurance started out as a “perk” or fringe benefit that was offered on the part of employers. Perhaps that perk should have never began. There are many problems associated with that type of system. Many of the problems are overlooked by both the employer and employee alike and perhaps if health care insurance wasn’t so often linked to one’s employment, many of the problems of today related to health care insurance would not exist.
It’s true that employment-based health insurance has served many working Americans reasonably well over many decades. At the same time, salaries and wages have been harnessed to accommodate the expenses for employers who provide the insurance. That fact often goes unnoticed by employees and employees experience less take home pay that they could otherwise realize in return for health care benefits.
Since employers are paying the bulk of or all of the premium costs in a group plan, employers must always be leery of rising premiums due to the physical condition of its employees and the medical procedures and treatments used. Since employees tend to view employer provided health insurance as a right or an absolute benefit, employees have little care of the overall costs of health care and are more prone to overuse or even abuse their insurance plans. The more that employees utilize a policy, the more expensive it may become for the insurance provider. That translates into even higher premiums to the employer which further stagnate wage increases and may limit additional hiring and expansion.
To compensate for high cost insurance premiums, in addition to limiting wages, employers are often forced to raise the prices of goods and services that are offered to its customers. Depending on the business, higher prices may affect its ability to effectively compete in a given market.
One of the main downfalls to employer-based insurance plans is that those plans often lack portability. For an employee who relies on their employer for health care insurance, it is often overlooked that the employer owns the insurance policy and not the employee. The employee is just apart of the group while gainfully employed. If an employee resigns or is terminated, for whatever variety of reasons, the employee is then without health insurance. Employees who once enjoyed the benefit of full coverage can quickly find themselves in a position to bear the full brunt of the health care system.
If economist could travel back in time, they almost certainly would not have advocated for employer-based insurance plans as a fringe benefit. Instead, robust personal health insurance plans that were owned by individuals and that could be tailored to serve each individual as needed would have been recommended. Employees could have realized increased working wages to offset the costs associated with owning personal health plans and overall health care costs would likely be drastically lower due to more responsible use as individuals would diligently control costs by making wiser health care use choices. That concept is not unlike that of owning an automobile insurance policy where a policyholder would likely see higher premiums if the holder has a high number of accidents and claims.
Employer-based health care plans have provided adequate insurance for countless American families for decades despite the numerous problems associated with it. However, one means of addressing the expensive health care problem is to begin to ween workers away from the idea that health care should be linked to employment and the responsibility of the employer. That is not to say that employer-based health care plans should completely be done away with, just that more emphasis should be placed on individual ownership of insurance policies where the consumer is responsible for his or her own health related issues.