Should Job-Based Insurance Retire?

Rising health-care costs in the United States are the result of many factors, including more expensive prescription drugs and climbing rates of chronic diseases such as Type 2 diabetes. But most experts and policymakers agree that the structure of the health insurance system plays a significant role in driving up costs, even if they disagree wildly about how to change the current system. Some have pointed to the high administrative costs and profits of private insurance and proposed replacing it with “Medicare for all.” Others have proposed tweaking the current system by covering the uninsured and requiring insurance plans to cover preventive health measures — an approach that prevailed when Congress passed the Affordable Care Act last year.

Still others, however, have proposed radically decentralizing the health-care system by encouraging people to buy health insurance on the individual market rather than receiving it through their jobs. One of these is Representative Paul Ryan of Wisconsin, chairman of the House Budget Committee. In a speech last week at Stanford University, Ryan proposed getting rid of the federal income tax exemption for employer-sponsored health insurance and replacing it with an individual tax credit that everyone could receive, whether or not their workplace offers health insurance. According to a Reuters article on the speech, eliminating the tax advantage of job-sponsored health care would encourage individuals to scrutinize health insurance plans for the one that offers them the best deal, “forc[ing] health care providers to compete for our business.” Faced with increased competition for consumers, Ryan maintains, health insurance companies would find ways to aggressively control costs by changing the way they reimburse for health care, thus lowering or limiting the growth of health-care costs.

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As the article notes, most Americans — about 170 million — currently have employer-sponsored health insurance, so Ryan’s proposal would dramatically change the insurance market. Its effectiveness in controlling costs would depend, logically, on the ability of insurance companies to extract concessions from both health-care providers and consumers, who might be unwilling to accept restrictions on treatments, lower reimbursements for services, or higher co-pays and deductibles. Lowering costs for consumers would also depend on health insurance companies passing the savings they receive on to consumers. Since consumers buying individual plans would no longer be pooling risk with their coworkers, insurance companies might be more aggressive in screening applicants to the extent that is legally possible, leading to even higher administrative costs.

This proposal comes just as a survey, published last week in the Archives of Internal Medicine, shows that many doctors believe their patients get too much medical care — almost half, according to a Reuters article, compared with just 6% who thought their patients didn’t get enough care. Reasons doctors gave for providing too much care included fear of lawsuits, measures of performance that take results but not cost into account, and too little time to listen to patients. While only 3% admitted that financial considerations affected their medical decisions, it is easy to see how a different reimbursement system for doctors — to replace the current fee-for-service system — could encourage more judicious use of tests and procedures. Whether an individual insurance market would encourage such a change, however, is unclear.

What do you think — do you like the system of job-based insurance, or would you rather see the tax incentives for that system disappear? Do you believe an individual insurance market would lead to lower health-care costs? Do you believe you have been subjected to unnecessary tests, procedures, or drugs? Is there simply too much medical care — as some suggest — or are you more concerned with you and others getting the necessary care they need? Leave a comment below!

  • Deb

    I think this is a very bad idea given the current health insurance system. One of the best benefits my husband and I have had over the years is our job-based health insurance. I do not believe I could get comparable insurance in the marketplace. I have been told by doctors and dentists that our insurance is better than any other insurance they have seen. That is a direct result of the education system being able to negotiate for good insurance for many people. On our own in the marketplace, we could not do this.
    Working in education instead of industry brings smaller paychecks; the health benefit makes up for a lot of money than we could get elsewhere, and allows us to serve the people of our community while being able to afford a house.

  • Cindy Morrison

    I think the government needs to leave people alone who get medical insurance through the work place. I don’t think it is right to “make people shop around for medical insurance”. The government is going too far taking over our choices and not just medical insurance.

  • Rebecca

    This plan sounds great for all those people with no health concerns who do not believe they ever will have health concerns. For the rest of us that pooling risk with our coworkers is the only way we can afford health insurance. I’m sure for the general population this may be a good thing (assuming they actually don’t mind doing their homework to research and select plans) but for anyone with a medical condition this would almost surely guarantee skyrocketing prices for minimal coverage. Thanks anyway but I’ll suffer through the poor insurance choices my employer makes in order to at least have some insurance!

  • River Curtis-Stanley

    Doing away with the current job-based system would mean that my husband and I – both Type 2s – would no longer be able to buy insurance at any cost, especially since I have alreafy been through three years of dialysis and a kidney transplant. We would no longer be able to afford medical care at all, unless we gave up having a roof over our heads and food to eat. For anyone with any chronic disease, this proposal is a recipe for disaster and, for many if us, a death sentence.

  • Gary

    I have always wondered why employers are the gatekeepers for health insurance. Personally, I don’t want my boss making an economic decision to purchase the cheapest health insurance so they can put that money into something else, like plant & equipment or research. Those are noble enough places for an employer to put money, just don’t compromise the cost of employees’ health insurance to do that. It doesn’t seem that my boss has the proper skills to choose the health insurance program I feel is best for my family.
    Why not have my employer pay for my auto insurance instead? Or homeowner’s insurance?
    Since my health is my most precious possession, I don’t want some third party employer making a budgetary decision with some fourth party insurance salesman with my kids and family as the afterthought. My health decisions should be between me and my doctor.
    Tax incentives after WWII encouraged employer based health care and I believe tax incentives today will provide individuals and families with the impetus to make wise health insurance choices. We seem to find just what suits us when we shop for a new sofa or shoes or a new car. I think we have the skills to make the best choice for our family’s health insurance program.