Employer-Based Health Care System

Should federal policy be revised to encourage a shift from the current employer-based health care system to an individual-based health care system.

 

In the continuing debate over the best way to provide health coverage to pre-retirement Americans, the policy question has arisen regarding whether it is better to have individuals continue to obtain health coverage through their employers or if it would be more desirable to move to an individual based health care system, largely bypassing employers. The current federal tax code provides employers a partial deduction to offset the cost of their group health benefits plans.

 

Specific proposals range from plans which would: (1) create new tax incentives to provide health coverage for the uninsured; (2) retain the employer-based system but allow employees to “opt-out” of employer-sponsored health plans; (3) eliminating the employer based system altogether; of (4) end the tax exclusion for employer-sponsored health plans.

 

The employer-based health care system has been effective in providing health care coverage for the majority of workers and their families. While an uninsured population still exists, it is virtually impossible that any health care system, supported by the majority of Americans, could achieve universal coverage. Critics of this proposal believe that disrupting the current private U.S. health care system would be an imprudent policy action that would jeopardize the health benefits now received by nearly 150 million people. Shifting to an individual-based health system assumes that individuals will act responsibly and take the necessary action to obtain health care coverage. While many would do so, many others, for whatever reasons, are likely to forgo obtaining coverage even if they were empowered to do so.

 

Supporters of the individual-based health care concept include “think tanks” such as Heritage Foundation, and the Cato Institute, as well as several members of the Republican congressional leadership. Opponents of such an approach include the National Association of Manufacturers, ERISA Industry Committee, and SIIA.

 

The SIIA Board of Directors has approved a policy position opposing any changes in the federal tax code or policy that could compromise the employment-based health care system. Preserving the employer-based health care system is a legislative priority for SIIA.

 

While debate is expected to continue over incremental proposals to increase access to health coverage, growing pressure for much more fundamental reform to the health care system is developing both inside and outside Washington and can be expected to accelerate. Current proposals include Senator Wyden’s (D-OR) Health Americans Act, which would sever the connection between employment and insurance altogether and require everyone to buy coverage directly; President Bush’s plan where employer-provided health insurance would be subject to income and payroll tax. As a tradeoff, all taxpayers would receive deductions of 15k for families and 7.5k for individuals; John Edwards’ (D-NC) plan to require employers to provide coverage or pay a tax; Ted Kennedy’s “Medicare for All”; and various state universal healthcare proposals.