A Second Opinion on Employer Responsibility for Heath Care

As President-elect Obama prepares to take office, the nation’s health care crisis looms ever larger. One popular health care reform proposal, for which Obama has expressed support, is expanded employer responsibility for employee and family medical care.

But this prescription could be worse than the disease. A better solution would be portable or personal health insurance, which would allow people to choose their own plan and keep it — and their doctors — when they change jobs. Under this system, employers would offer wages and salaries that are sufficient for their employees to purchase portable benefits — and attract good people to their workforces.

Today, 60 percent of workers receive health insurance as an employer-provided benefit. Many people see it as an attractive perk. But there is a dark side to this arrangement. What happens when jobs are threatened, an increasingly likely prospect during the current downturn? People may lose their health benefits, face expensive ‘continuation of benefit’ coverage, or lose insurance altogether, in addition to being without a paycheck. Thousands of unemployed Americans can attest to this “double jeopardy” vulnerability.

Some people feel tethered to their employers to maintain benefits for themselves or their families. Many employees suffer in silence in miserable job circumstances. This health insurance serfdom is an affront to human dignity, and denies many workers the opportunity to improve their livelihoods.

The 40 percent of workers who do not receive medical benefits unjustly subsidize those who do. The U.S. government forgoes $250 billion in tax revenue per year for employer provided health care. The tax benefit is regressive: Those in higher tax brackets benefit the most from health insurance provided as an untaxed perquisite. Those who obtain health insurance outside the workplace often cannot deduct their medical expenses. Thus, the latter’s taxes subsidize health care for nearly everyone else.

Employer-provided health care interferes with competitive market forces and affordability. Younger and healthier workers are often over-insured. Employer-paid premiums may be double what is necessary for adequate coverage.

Under our current system, health benefits are often perceived as an entitlement rather than a scarce good, subject to the law of supply and demand. Third-party payment for medical care promotes resource over-utilization. With a portable plan, with more accountability, those financially participating more directly as consumers of health care services and products are likely to be more careful about how they purchase health care services.

Employers usually offer a very limited selection of health care plans. More competition by insurance companies eager to expand their customer base would increase pressure to improve quality and lower cost.

As we have learned in Michigan, employee benefit mandates handicap American firms’ competitive ability in the global marketplace. Auto companies were thriving when their competition was domestic and all manufacturers were equally bearing benefit costs. But the business expense playing field is no longer level with domestic firms competing against overseas firms that are often not required to cover employee health care. Furthermore, struggling to control employee health distracts employers from their primary mission of providing goods and services — and jobs.

In addition, with portable health benefits obtained outside the workplace, the national economy would benefit from a more mobile workforce. Workers would be more likely to pursue satisfactory jobs or better opportunities. Productivity could be enhanced.

If economics argues against employer-provided health coverage, a critical question remains: Can decreasing employee medical benefits be considered moral?

Pope John Paul II in the 1981 encyclical Laborem Exercens indicated, “Besides wages, various social benefits intended to ensure the life and health of workers and their families play a part here. The expenses involved in health care, especially in the case of accidents at work, demand that medical assistance should be easily available for workers, and that as far as possible it should be cheap or even free of charge. ” This appears to obligate employers considerably.

However, the same papal letter also warns that unemployment “in all cases is an evil, and … when it reaches a certain level, can become a real social disaster.” When mandatory benefits jeopardize firm survival, they do not serve the good of employees or society.

Furthermore, John Paul explains that his exhortation “is not a brief treatise on economics or politics. It is a matter of highlighting the deontological and moral aspect. The key problem of social ethics in this case is that of just remuneration for work done.” Since benefits represent foregone wages, it would appear that pay sufficient to obtain medical insurance would fulfill an employer’s duty to workers. This obligation is consistent with income providing for means to food, clothing, and shelter.

We ought to love our neighbor, feed the poor, clothe the naked, and care for the sick. All of us are called to service, with a preferential consideration for the poor and underserved (Mt 25:40). This duty is not confined to the workplace. Communities, churches, trade organizations, and affiliation groups can coordinate health care benefits for members. Corporate human resources departments should not be viewed as the main source of support for Americans’ health care. The iniquitous government subsidy for employer-based health care could be redirected to help those without access to affordable health care, by virtue of poverty or chronic disease.

The prevalent perception of employer responsibility for health care certainly cannot be changed overnight. However, we ought to obtain a second opinion before increasing the role of employers in medical care, a move likely to further sicken our economy and harm the common good.

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  • Claire

    Interesting article. Thank you.

  • guitarmom

    Portable, personal insurance is an absolute necessity, as the author states.

    Real life example:
    -Twenty-six year old daughter takes a job she loves, influenced in part because they offer health insurance. Finds lump in breast, turns out to be cancer.
    -Insurance turns out to be an individual policy, not a group policy.
    -Individual policies are not covered by COBRA or HIPPA laws.
    -Policy is not renewable IF any claims have been made, let alone thousands of dollars of cancer claims.
    -Daughter will soon be uninsured and too sick to get another job.

    What do we do?

  • aurit

    I don’t have an answer, but what the author proposes isn’t a fix. It would critically eliminate any potential for coverage for my children (6, 4, and 2).

    We have group insurance through my employeer which has been a blessing. Their group coverage allows us to go out-of-state for critical treatment for our three children to a national specialist while still being in-network. We didn’t know of the problems fully until last year and faced the probability of expenses for special elemental formula at $2,500/month for all three. Very few insurance companies provide that coverage, and I am employee (thus not poverty) so no other assistance would have been provided. We would have likely lost our home and transportation (in the Midwest you need a car), especially in smaller Cities.

    One of the best ways for medical treatment is to provide reasonable access early for Children in an approach that makes sense. I don’t think national healthcare is the answer either, but there are means to provide services to larger groups of people at contracted rates for basic services. That would be a start…

  • terrygeorge

    i agree that portable private health insurance is a great answer to many of the health care problems we face. we are maintaining such a one now. of course, there would still have to be some separate guarunteed coverage for anyone who cannot obtain or maintain that. there should be some sort of graduated system which allows people to take on more of the cost of their insurance as their income increases, rather than the sudden threshold cutoffs we have

  • jim2025

    I am not sure all employers can afford the current rates nor can the employee for that matter. Not anytime too soon, I hope we have a comprehensive health care plan for all of us when we are in need!