The paper points out employer-based coverage forms the backbone of the U.S. system of health insurance. More than 160 million people, over 60% of the under-65 population, have health coverage through their own firm or another employer and nearly all companies with 200 or more workers provide coverage to their employees.
In addition, employer contributions to health insurance coverage comprise a substantial share of the overall financing of the U.S. health system. Employer contributions account for 84% of the full premium for single policies and 72% of the full premium for family policies.
The authors list the advantages of employer-based health coverage:
- Employer coverage forms natural risk pools: people enroll in coverage when they take a job rather than when they are sick, reducing the potential for adverse selection – one of the key drawbacks of the individual market.
- In the absence of individual underwriting and other activities designed to protect against health risks, premiums in the employer group market are far more in line with actual medical expenditures than are those in the individual market. The administrative costs of individual market coverage consume from 25% to 40% of each premium dollar, compared with 10% for group coverage.
- The lack of underwriting in the employer group market also ensures that workers are not excluded from coverage on the basis of age or health status.
The paper cited studies that show the value placed on health benefits by employees exceeds the actual costs of those benefits. In the EBRI 2006 Health Confidence Survey, employees who were enrolled in employer-sponsored insurance were asked whether they would prefer to continue receiving health benefits through their job or to receive an increase in taxable income equal to the average premium instead. Three-quarters reported that they preferred to continue receiving employer-sponsored health insurance.
Those that said they would rather have employer health benefits were asked what dollar increase in taxable income would be required for them to be willing to give up those benefits. One quarter said that they would need $10,000 to $14,999; 22% said they would need more than $15,000; and 13% said no increase in taxable income would be large enough to make them willing to give up their health benefits.
The authors noted however, that weaknesses, derived primarily from the system’s voluntary nature and the substantial per-worker costs incurred by small employers, are the primary reasons for the growing number of uninsured Americans. In addition, the weaknesses incur a cost to employers who cover other employers’ workers. Fifty-three percent of workers who are offered coverage through an employer but decline to take it up have coverage through another employer, while 28% are uninsured, the paper said. Thirty-one percent of workers who are not offered coverage through their job gain coverage through another employer, and 45% are uninsured.
The paper noted that proposals to expand coverage and improve quality and efficiency of the U.S. health care system build on the employer-based system but offer new, affordable group options designed to fill the gaps. "Given the importance of employers in participating in and contributing to the current system, it is critical that they be part of new policies to expand and improve coverage, as well as improve the overall performance of the health system," the paper said.
Surveys also show that the public does not believe employers are solely responsible for coverage. The Commonwealth Fund's 2005 survey asked respondents who they thought should pay for health insurance for all Americans: mostly individuals, mostly government, or mostly employers, or shared among all three. More than six of 10 respondents (61%) said costs should be shared.
"Indeed, without a shared financial responsibility and commitment across stakeholders, it will be difficult for the United States to achieve universal coverage," the authors concluded.
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