Historical and tax reasons. It started back in the era of WWII wage controls. It continued to be an okay way to do group insurance without facing major problems with adverse selection. Being able to pay for it with a pre-tax payrolld eduction is the other big reason it thrived.
Given the mandates on insurance there are some reasons it should continue, but they are not really good reasons.
> some reasons it should continue, but they are not really good reasons.
Many of those reasons are legislature that allows insurance companies to do/demand things that they really shouldn't be able to. Even if the goal isn't public healthcare, America still needs a major healthcare insurance restructuring.
I think that should look like this: HMO style access for all - automatically. Rebate if you decide to up it with PPO style insurance (or beyond). So you get 200 per month off taxes to pay towards your own insurance.
Also, get it out of the employers hands - as in make it illegal to offer any benefits and let the employee get paid 100% of their salary instead. Also make it so that employers can't legally collect taxes without consent.
You'll then create two systems – PPOs for the healthy that can afford it, underfunded HMO for those who can't.
Just drop the rebates, and make any secondary insurance be primary. That would make sure the insured group for the public system includes the healthy rich (which makes the pool for those that actually need and can't afford their health).
> It continued to be an okay way to do group insurance without facing major problems with adverse selection.
This is sort of a hot take, but there are plenty of examples of things like this in the US that have the unstated parenthetical "(because poor and minority populations were ignored by the system completely)"
Well yes, it was functioning as a health care plan featuring actual bona fide insurance, which means you paid for yourself, and you paid an amount commensurate with the risk that your health care needs might prove to be expensive. It was not designed as a wealth transfer to the needy any more than the auto insurance market.
We may need more wealth transfers to the needy so that they can pay for healthcare! You will note, however, that the recent approach to reforms, which tried to turn the vehicle of “insurance” itself into such a wealth transfer, has not exactly solved the problem!! Nor has it achieved its stated goal of making healthcare and health insurance more affordable to the general population, a mission always contradictory to its goal of being a wealth transfer!
So health insurance companies only have to convince your HR department to use them through some kind of grift instead of competing for your individual business on things like cost and in-network providers. Because the health insurance industry is focused on metrics like "number of lives we brought in this quarter" from massive deals that abstract your individual agency as one of a thousand+ lives covered under your employers plan. Who cares if you need to speak to a supervisor because your claim was denied, you're not going to get your company to switch plans.
Before someone says "but the healthcare marketplace", it's a joke. The individual plans we have today are ridiculously expensive because: A) the government will pay for folks who can't pay for them, so easy money for the insurance companies and B) the folks who can pay really need it (healthcare is inelastic), they're so few though so there really is no downward price pressure to compete for them.
> the government will pay for folks who can't pay for them
This depends on your state. Some states, like Wisconsin, won't offer medicaid for income reasons alone. I'm unaware of health insurance policies being cheaper in Wisconsin, though perhaps it's the case.
Ultimately because it drives down the cost of labor by locking employees in.
Employer’s cost per employee is much much lower than an employee’s cost directly from insurer. The employer “sells” the benefit to the employee at a higher perceived cost because of this.
Without an employer’s discount, an employee simply cannot get the same insurance coverage.
Thus, the employee agrees to working pay and conditions which would not be agreeable without the pressure to get health coverage.
Hence, lower cost of labor to the employer and pressure to keep the current structure in place.
Lets look back to the 90s when it wasn't legally mandated: some people did just fine (those with a lot of cash sitting around), most people suffered worse than they do today and some people were completely screwed by the system.
If it was illegal to pool health prices via insurance (instead of just not legally mandated for everyone to be insured) then the effect would be that those who went bankrupt under the old system would instead be dead.
I was very much alive, working, and insured in the 90s.
It wasn’t great. HMOs were being introduced (top down) and a lot of people had no idea how to use them.
The prices were nowhere near as high. The huge jump happened in the 2000s. It was nuts.
Regarding the bit about “health insurance companies could reject preexisting conditions” - most people got insurance through employers whose contracts required pre existing conditions be covered.
There were absolutely some places you could get totally stuck and screwed.
But things didn’t get bad until the 2000s, and it was mostly price that was the issue.
Michael Crichton, MD, and author of Jurassic Park (any many others) wrote a book about the state of the art of medicine in the 1960's called "Five Patients". Each patient was a case study for some particular aspect of modern medicine. Through that lends, Crichton examined the costs of the hospital and noted that they were growing well beyond inflation 50 years ago and assumed that the obvious fix was a single payer system to manage costs.
You'd make it illegal to pool costs by barring insurance - meaning that healthcare providers would either need to provide service gratis for the majority of the population (which is, really, just another form of insurance so that's out) or they'd need to secure a personal loan with their bank some time between getting hit by a truck and the operating table.
And for pre-existing conditions and long term health disabilities - the individual would need to somehow justify the profitability of their existence to a private underwriter who was willing to bear the cost - in most cases those people "aren't worth the cost of keeping them alive" (assuming you're looking strictly at numbers).
> meaning that healthcare providers would either need to provide service gratis for the majority of the population (which is, really, just another form of insurance so that's out) or they'd need to secure a personal loan with their bank some time between getting hit by a truck and the operating table
There's also the Chinese model, where you or your family are expected to have substantial cash savings on hand for any medical emergencies.
I don't have any direct experience with the Chinese health care system, but there's a lot that is not covered by insurance, and bribing doctors or hospital administrators to receive better or quicker care is supposedly widespread (and therefore is or is perceived to be necessary). https://www.newyorker.com/magazine/2014/08/25/under-the-knif... is a good overview.
Can you really call it 'insurance' when it's a pre-existing condition? I realize we can call insurance whatever we want, but when I think of insurance I think of it a way to pool for mitigating risk of the unknown.
No one would sell insurance that would fix your already destroyed roof.
> No one would sell insurance that would fix your already destroyed roof.
But they will sell you homeowners insurance in areas prone to wildfires or hurricanes. The difference is that you are expected to know the amortized cost of disasters for your property and either insure against it or simply accept the risk. Either way, you as a homeowner are supposed to make an informed decision. If disaster is too likely to occur in a certain area, you can either move or not purchase a property in the first place.
Science still hasn't figured out how to let us move into healthier bodies or choose our bodies prior to birth, so, alas, we are forced to seek fairness through other means.
Most of the building code is written with the blood of victims who died in a horrific accident.
If you want to know why doors in public places have to open toward the outside in modern countries and why "panic bars" are often mandatory, the answer is large piles of dead children (literally). Depending on who you ask and the country they live in, they will refer to a different disaster, but the common element in all of them is 70 - 600 people stuck in hallways unable to escape due to bad exit designs (eg. people piling up against doors that open towards the inside).
The unseen deaths are those who are unhoused or unsheltered due to building codes causing elevated building prices. Secondary effects (for those who can afford up-to-code) include less money to spend on healthy foods, good health insurance, quality child education, and other victimized children at the hand of building codes and other regulation.
You can virtually ramp up building codes ad-infinitum, until the house is as safe as can humanly be built, if your expense is to hurt a lot of children by bankrupting families of expenses to take care of other necessities in life.
Well, whatever we call it we as a society need to choose whether we want to keep people with expensive preexisting conditions alive. I don't think it's really necessary to debate the point since almost every western country has decided that their ethics fall in the camp of "Yes, we support those people and give them the best life possible" whenever they're actually pressed on the matter. For a while the US skated by on budgetary excuses but all the while I think society still idealistically held on to that standard - I think this point is fairly debatable though.
I think it's more a question of whether we'd be willing to install and maintain a roof on a building that had been designed without a roof in mind or whether we'd tear down the building to make room for a new one. You'd probably rationally lean in the second direction for a house - but when we're talking about a human life the math changes for a lot of people.
Either way, a return to an insurance-less situation would leave people with preexisting situations out in the cold, unless your definition of insuranceless involves government subsidies for all preexisting conditions and at that point you're basically talking about medicare for all.
I think as a society if we can't discuss this in an honest manner without deceptive terminology, we're doomed to be stuck in a bad spot. Perhaps phrasing it as charity of the healthy towards the less healthy would lead towards a more productive and honest starting point. It's something many, including myself, would be much more supportive of than feeling like I'm deceived by misrepresentation of a product. I'd feel like I'm taking part of a noble charity rather than this sort of deceptive 'insurance' product.
I don't see it as a charity so much as we, as a group, are pooling our money so that those that need health care get health care. That can be people with pre-existing conditions, people with a new condition, people that are in an accident, preventative maintenance, or even just normal life situations (pregnancy, etc).
In my mind, it's not charity because it's
- For everyone. Maybe not for you today, but maybe tomorrow
- For the benefit of society as a whole. If we let everyone who got sick just die, our society would be worse for it.
Characterizing insurance products in the US as a 'benefit of society as a whole' is a charity in and of itself. A large component of the insane costs billed for procedures has to do with an unhealthy symbiosis of the medical industry with 'insurance' companies. This massive black hole, much a result of poorly designed regulation, leads to reduced benefit to society as a whole and a system that is not for everyone not today nor tomorrow.
If you are thinking of something that is for literally anyone, you are most likely thinking of universal healthcare or some other like system.
I personally would avoid characterizing it as charity since charity tends to be an inherently voluntary action and charitable givers have some expectations on the usages of their charity. US charitable giving in a lot of areas of Africa continues to contribute to the illegality of abortions in many countries since the church groups offering aid condition their aid on moral stances they hold.
We've seen how the judgement of those receiving aid has affected US policy in the past - a handful of people are marked out as undeserving of the aid (maybe someone with a long term physical disability commits murder or something else) and then the full category of people are painted with suspicion (ala "welfare queens") and that suspicion is used as a justification to cut spending drastically under the guise of oversight. There are a fair number of people clamoring today for UBI for the reason, in my view at least, that it's the only way to undo all the complicated conditions on various forms of governmental aid.
I'd personally be quite in favor of keeping it dry, cold and governmental - healthcare is, IMO, an important enough topic that we can't let emotions override treatment. If we're going to put a bunch of money into a big pot we should have some very deliberate rules about how that money comes out and what it gets used for and posing it as a charity is going to get all sorts of rules applied to it (i.e. it can't be used for anything Planned Parenthood related, it can't be used for contraception, it can't be used by trans identifying individuals, you need to have a full time job to access it, it is unavailable to felons, etc...) - some of those rules might make sense, others might not. At the end of the day I think posing it as a charity will make it a lot harder to come up with a fair set of restrictions on it.
"those who went bankrupt under the old system would instead be dead."
The people who went bankrupt before were generally those without insurance. You've not said anything that explains to me why they wouldn't do the same under this supposed new system.
Well, in this current system everyone (excepting those who choose to opt out and pay a fine instead) receives a basic level of coverage - it's definitely not perfect and it has issues, I'm not going to argue against that. In the 90s and early 2000s it was much easier to bankrupt yourself due to extremely unlucky life events - but if insurance was prohibited you'd be unable to access care so instead of losing your house you'd lose your life.
I think I laid that out pretty clearly in the prior comment, is there some part of it that's unclear?
People without insurance used to get care and then go bankrupt. Today people without insurance still get care and then go bankrupt. What I’m not understanding is why people in this theoretical future without insurance wouldn’t do the same thing?
I feel like we’re talking past each other. Sorry if I’m being dense.
The blanket statement "people without insurance used to get care and then go bankrupt" does not apply to every single instance. Sometimes people were (and are) already so close to bankruptcy that they simply cannot afford the care that they need, so "I'll get health care and then go bankrupt" is not a live option for them.
Yes, emergency care has been essentially free in the US for those who can never pay for it, but that doesn't cover, say, chemotherapy. If you don't have insurance and don't have any way to generate significant cash (no house to sell and no wealthy generous friends) it's not that you're going to get chemo and it'll bankrupt you; you just won't get chemo at all (and you'll probably die). This is a little better now with the medicaid expansion, but not perfect, and not all states expanded medicaid.
Even today we have people dying of complications related to diabetes -- a serious but very treatable affliction -- because they can't afford supplies. In the US! The world's richest country!
I'd also clarify that emergency room services being treat first, bill later is itself a form of insurance. A decent chunk of emergency room costs are never paid by patients and end up being paid by... actually I'm not certain, but either private hospital corporations or the government. However, that is only for the initial triaging treatment. If, for instance, you are stabbed in the belly and some emergency patch work is done to stop the majority of internal bleeding and some antibiotics are issued with a scheduled regimen over the next few months to prevent sepsis then there is a limited supply you've gotten by the grace of emergency treatment but if your supply runs and you're unable to afford more at the pharmacy out you'll need to return to the emergency room to secure more meds. Emergency rooms regularly serve as extremely expensive pharmacies, but they're pretty busy places and the care you're seeking could be delayed and that delay can result in a perfectly treatable infection developing to the point of a mortal wound.
While everyone in America can receive emergency treatment no questions asked it isn't necessarily going to happen very quickly and can result in more health issues than being able to pursue medical care through more standard means.
I'm not following your first question do you mean to say why is mandating coverage legal?
My understanding of the mandate was that(theoretically) by more people being insured the population be healthier and that would someone how drive prices down. Obviously that's a farce as prices go up year over year. It would be interesting to see how much more basic procedures would be now after being adjusted for inflation compared to what they were in say the 90's.
Why have health insurance at all? It's just a middle-man for profit scheme between patient and health care.
Just have mandated health CARE for all and do away with health insurance altogether. Lots of companies would lose billions, but average people on the street would be the ones not spending that money.
If you made it illegal, people would start creating risk pools in ways that are technically legal. Such as membership clinics, special-purpose clubs, etc.
This is super incorrect; if anything, employer-based health insurance strengthened the unions' ability to negotiate for their workers. As a sibling comment mentioned, the major catalyst was WWII wage controls:
> During World War II, wage and price controls prevented employers from using wages to compete for scarce labor. Under the 1942 Stabilization Act, Congress limited the wage increases that could be offered by firms, but permitted the adoption of employee insurance plans. In this way, health benefit packages offered one means of securing workers.
> In the 1940s, two major rulings also reinforced the foundation of the employer-provided health insurance system. First, in 1945 the War Labor Board ruled that employers could not modify or cancel group insurance plans during the contract period. Then, in 1949, the National Labor Relations Board ruled in a dispute between the Inland Steel Co. and the United Steelworkers Union that the term "wages" included pension and insurance benefits. Therefore, when negotiating for wages, the union was allowed to negotiate benefit packages on behalf of workers as well. This ruling, affirmed later by the U.S. Supreme Court, further reinforced the employment-based system.
None of what you quoted here offers a different origin of employer-linked health insurance, and it avoids even mentioning that they were excluded from taxation. The fact that they weren't included in wage caps is just another benefit granted to employers.
> if anything, employer-based health insurance strengthened the unions' ability to negotiate for their workers.
In what way does having more that needs to be negotiated strengthen unions? You've heard the punchline without hearing the joke: why were unions prevented from negotiating pension and insurance benefits before 1949?
If you reversed the original sin of sheltering wages paid in the form of health insurance from taxes, you'd see stronger unions the next day. The biggest battle fought during the ACA war was about the possible taxation of "Cadillac" health plans, and ACA lost.
Yes. If I recall, it goes back to the Great Depression when there were cash shortages (and other issues).
It incentivized employers to compensate with benefits, not cash.
Around the same time, unionization became much more popular, and with it negotiated compensation (more benefits).
These were big issues in the North. In the South, the economy has was still largely rural, and many states provided publicly funded hospitals - so the dynamics were different.
There was a move for employers in to provide health insurance pre Great Depression. That was because larger employers could use their size to negotiate deals with hospitals. So health coverage was worth $individualPrice to an employer, but $negotiatedPrice to the employer.
In general, insurance providers preferred going through employers because employed people are healthier and file fewer claims.
Geico was an acronym for “Government Employees Insurance Corporation” which was a thing because government employees were a pretty safe bunch to insure.
So even back then, many of the dynamics we see now existed: negotiated prices, grouping, etc.
Do you want our health insurance plan, or an extra $1500/month to find your own on the open market would be an interesting way of looking at it.
But either way, both your employer and your cost for health insurance should show up on everyone's pay statements. Most have no idea what their employer pays for insurance.
I’m not sure of the underlying reasons, but I know most employers make it slightly cheap enough to be more affordable than Obamacare. But it’s still insanely expensive (ex: I pay $1920/m + $22k deductible for a family of four).
Negotiating as an individual in a market made up by large blocks makes you very easy to ignore. If everyone moved off employer insurance and into the market then, assuming we didn't have massive market corruption (which I think is a pretty big assumption), we'd all be on an even playing field. Asking individuals to do this independently is just a recipe for them to fail.
I think auto insurance is a good indicator of how it would play out if you made everyone do individual insurance. Insurance would still likely need to be legally mandated, like auto insurance, so that the insurance market would be solvent.
From there, insurance would likely break down into high cost / high coverage, mid cost / mid coverage, low cost / legally mandated minimum coverage.
The poor would end up with the low cost / minimum coverage plans as cost would likely end up being the main motivating factor. Given that 6-in-10 Americans can not afford an unexpected $500 bill (https://www.cbs19news.com/story/34248451/6-in-10-americans-d...), this would likely be the coverage level chosen by about half of Americans. These policies would be affordable, but I expect the deductibles and co-pays would be high enough to make it prohibitively expensive for policy holders to actually get much utility from them.
The other half would end up with the better plans, unless they were more comfortable with risk and elected for the cheaper plans. Their lot is probably pretty similar to today.
That article says that 60% of Americans don't have $500 in a savings account, not that they don't have $500. Savings accounts are an anachronism, it is like saying Americans don't have phones if they don't have a landline. By that standard, I'm flat broke.
Americans can afford a $500 expense just fine. The median American household has ~$1000/month left over after all ordinary living expenses, per the US Bureau of Labor and Statistics.
That infamous bankrate.com "study" is misleading in similar ways; they define terms in a way no reasonable person would to support a desired conclusion. Same for "retirement savings" and a bunch of other financial topics where the terms are misleadingly defined to create a dramatic headline. These are all clickbait articles that have been debunked countless times, and any careful reading of the studies indicates why.
Start from the well-sourced fact that median American households have ~$1000 per month to spend without sacrificing anything, and work from there. This can't be true at the same time all of those breathless headlines about broke Americans is also true. Without fail, if you dig into the details, the headlines are grossly misleading. The percentage of Americans that truly have no capacity to deal with significant unplanned expenses -- per Federal Reserve studies -- is 10-15%. A not inconsiderable number of people but far less than implied by the clickbait.
Average Americans have extraordinary amounts of discretionary income compared to almost anywhere else in the world. Americans both have a low savings rate and they have large amounts of money available to save.
Most employers don't offer to pay the premium out instead of the coverage, so they usually offer a much better deal than the alternatives.
Like if your contribution to your insurance is a few hundred a paycheck there is a pretty good chance that the employer is paying in quite a bit more than that.
Most companies (and employees) consider this part of the compensation package.
In most cases there is not an avenue to recover any lost compensation if you opt out of health insurance. If an employer offered a higher base pay for those not on their insurance plan, you probably WOULD see a much higher rate of those securing their own plans in the open market.
Complaining about benefits would be a weird flex though. The alternative of not having employer tied is still available.
A more rational phrasing may be: "I can buy insurance isolated from my employment, but I am priveleged to have the benefit and OPTION of taking advantage of employer benefits."
Maybe. But with employer provided benefits that comes at a cost to the employer. Thats why its a benefit and a part of a compensation package. (IE: you work for us and we pay you x, give you x in retirement and subrogate x on these healthcare initiatives).
If i am freeing the employer of that burden....should that not reflect back on my compensation? Surely you dont mean the employer should then be able to save more and basically lower their compensation for employees and expect the same return?
There are plenty of packages on the open market that are generally better than what an employer offers. But you are essentially making extra sacrifices by opting out with no benefit to you and all the benefit of the company.
It would make more sense for a company to even offer a HSA where they contribute as much as they would to a plan to a savings account and allow the employee to also contribute their share pre-tax. And apply that to plans available on the open market.
Inflexibly benefit offerings are why I generally prefer structuring my employment as 'contractor' / B2B, but I realize many people are unable to structure their employment that way. You're right that it would be advantageous if total compensation were better understood so that employees and employer could negotiate what works for them.
>It would make more sense for a company to even offer a HSA where they contribute as much as they would to a plan to a savings account and allow the employee to also contribute their share pre-tax. And apply that to plans available on the open market.
This is very strange, it's not even remotely rare to decline employer coverage - probably half my team either has their spouse on our company coverage, or no company coverage since they are covered by their spouse.
It's not rare. About 1/3 of my team has declined coverage now. But when were six people, and the minimum for BCBS to cover us was six people, we asked everyone to commit to the coverage so we could do it.
