The Decline of Employer Based Health Insurance

The employer-based health insurance system in the United States has weakened over the past several years. The amount of coverage provided has dropped dramatically, and more of the burden is being shifted to the individual. The average employee under such a belief has seen their premiums go up and their coverage go down. Today such a system is coming under increasing scrutiny. The decline in the effectiveness of the system has caused policy makers to spy into dramatically reforming health insurance in the United States or adopting an alternative health insurance system.

Employer-based health insurance in the United States primarily got its open around the time of World War II. A wage freeze was established as piece of a larger inflation control policy. This led many companies, in order to attract employees, to offer increased benefits including health insurance (Glied 38). The companies had even more incentive because the non-wage allotment of those benefits were not taxed due to a tax code that does not regard non-wage benefits as compensation; therefore, is not subject to income and payroll taxes. This tax provision was officially recognized by the IRS in 1954 (Glied 38). All of these, essentially, indirect policies led employer-based health insurance to become the most favorite get in the United States.

The largest decline in the number of people prescribing to an employer-based system was not seen until the 2000’s. Each year since then, it has been steadily declining. In the year 2000, the percentage of Americans that received their health insurance through an employer was 64.2%. By 2006 that had fallen to 59.7%. This decline is the valuable reason for overall increase in the number of Americans that are uninsured in the past ten years, which in 2006 stood at 47 million Americans (Gould). This figure, however, does not even address how many Americans are underinsured.

Worthy of the reason for the overall decline of employer-based health insurance (both in enrollees and in adequacy) has been in the private sector. The example of General Motor’s health insurance idea for their workers illustrates this. When GM decided to provide health insurance benefits and pension plans, they had assumed that their profits would remain dependable, and the impress of those health benefits would not increase, but they did. The cost of health care rose at a rate three times faster than the rate of inflation, contributing to the broad cost increase for GM to provide health insurance to their employees (Herrick).

In addition to changes in the private sector, there were distinguished policy changes that affected the decline in the viability of the employer-based system. One of these policies that contributed to the decline was superior tax breaks given to companies that provided health benefits. An estimated 190 billion was spent in the build of federal tax breaks for employer-based plans (Hacker 141). There have been several reform attempts on employer-based health insurance in the U.S, but most were unsuccessful, and the ones that were, didn’t provide the sincere reform needed.

One reason the reform attempts were unsuccessful was due to private interest groups blocking legislation. Especially in the realm of employer-based health insurance, there are many who stand to befriend from the system remaining as it is, and are unwilling to serve considerable of the health care reform that has been proposed. The Insurance industry avidly opposed the major push for health care reform in the 1990’s (Wiener, Estes, Goldenson, and Goldberg). This is an example of private vs. public interest groups and the role they play in policymaking. Private interest groups, like pharmaceutical and insurance companies, tend to have far more resources than public interest groups, such as the AARP which would generally favor health insurance reform. Since an increasing amount of legislators are turning to the bureaucracy, and private interest groups have more sway, policy often favors their interest.

This is a spot that reformers of employer-based health insurance have seen throughout their attempts. In the early 1970’s, a goal of President Nixon was to reform the employer based system. He had hoped to pass legislation that would mandate employers to provide health benefits. This reform was not seen, but instead in 1974 the Employee Retirement Income Security Act (ERISA) was passed by Congress (Hacker 147-150). Instead of mandating an employer to offer health benefits, this opinion regulated an employer’s health insurance concept if they chose to have one. A provision of this allowed for employers to run regulations imposed by the space by paying for health benefits directly, this was called self insurance. This undermined tall risk pooling, which was a practice of pooling a gargantuan number of people for health insurance plans which facilitated more inclusive, inexpensive coverage (Hacker 146-147). The provision caused many employers to switch to self insurance, and partially led to the decline of the employer-based health insurance system.

The above example of ERISA shows how the goal of a vast reaching policy can be watered down as it goes through the policy process. The goal of President Nixon may have been to require all employers to provide health benefits, but the only policy that came out of the process simply regulated the employers if they chose to offer health benefits.

One of the largest attempts to completely change the health insurance system in the U.S was in 1993-’94. This attempt came stop to bringing the U.S one step closer to universal coverage, but failed; furthermore, it divided Democrats and Republicans on how to solve the predicament. Looking at the reasons why this attempt failed sheds light on why no major reform of health insurance policy in the U.S has taken root since the inception of Medicare and Medicaid over forty years ago. The Health Security Act proposed by President Clinton in 1993 called for mandates on the employer to provide benefits and primarily stale the theory of “managed competition (Hacker 148) and was extremely complicated, making it harder for the American people to easily understand. Conservatives were able to expend the complexity of the conception as an advantage for them. They outmoded agenda-setting to relate to the public that this thought meant more government intrusion into their lives, and instead presented the alternative of Medical Savings Accounts. This opinion, which today has gained a pretty amount of succor, allowed for employees to have their occupy insurance accounts to manage as they wanted (Hacker 148-150.

This push by conservatives was very effective because it appealed to Americans’ individualism. The American people tend be schizophrenic in what they want out of policy. One aspect of this is referred to as Bourgeois Liberalism, which stresses the role of the individual and negative freedoms (what the government cannot do to its citizens). The other is referred to as Protestant Communitarianism, which stresses the ability of the people united together and sure freedoms (what people can do collectively to control their fill destiny). These two conflicting characteristics played a crucial role in the failure of the Health Security Act. The Clinton Administration belief their health care belief would be able to transcend the conflicting American nature by spicy to both aspects. In many ways they were lawful, but were unsuccessful and instead, conservatives were able to capitalize on Americans’ ideological conservatism in gaining opposition to the Health Security Act.

The ability of conservatives to shape the idea of the American public to oppose such a policy lends assist to an alternative perspective of how policy and idea shuffle from the government to the people. This theory says that public receives its agenda from the government and public offers policy assist, or in this case, policy opposition. Conservatives were not alone in shaping public understanding, private interest groups that stood to relieve from the failure of the Health Security Act, were also crucial (Hacker 149). As mentioned earlier, private interest groups, due to their sizable resources (primarily money) were able to sway politicians and the public to engage their dwelling on a sure policy.

The Clinton administration plan that this bill was so far-reaching that they could even get the help of these interest groups: insurance companies, hospitals, and employers (Hacker 149). Instead of gaining their benefit, they were instrumental in defeating the bill. They were able to expend the media as fragment of shaping public plan to oppose the policy. The media began running stories that centered on questioning whether or not there was a moral health care crisis (The Rise and Descend of the Political Catchphrase). Stories like these and the continuing of conservatives and private interest groups portraying the Health Security Act as more government intrusion, led to its failure.

After this, as previously mentioned, conservatives began pushing for an alternative to the Clinton Administration’s notion called Medical Savings Accounts (now referred to as Heath Savings Accounts) as section of their Personal Responsibility Crusade. At first, these were not well-liked among both employers and employees, but over the past ten years, employers seem to be more accepting of them (Hacker 152). In 2005, the number of employees enrolled in Health Savings Accounts rose from 2.4 million to 4.5 million in 2007 (Hacker 153). Today the health insurance scrape is becoming more prominent than ever before. Modern plans from President Obama and Congress explain possibility for legislation to reform the novel system. The modern conception proposed by President Obama would not be a mandate for all employers to provide health benefits; instead, it is a mandate that would require the companies that don’t offer health benefits to pay a tax that would go toward funding health coverage (Pallarito). This is the most modern step in reforming the employer-based health insurance system. The high numbers of uninsured and underinsured have led the public to be supportive of health care reform. While their opinions on how to reform the system may vary, the relate is viewed as a priority.

While there has been a decline in the viability of an employer-based health insurance system, this does not mean that employer involvement in health care coverage is the quandary. Rather by reforming the employer-based system to where all employees are covered and accounts for the people unexcited left uninsured, the new health insurance crisis can be reversed. Principal policy changes to our health insurance system have not been seen since Medicare and Medicaid in 1965, however by looking at the attempts and where they failed, future plans can have a greater chance for success. In addition, by recognizing the nature of the American people, policies can sage for their sometimes schizophrenic nature and better contemplate the views of the people.

Glied, Sherry. “The Employer-Based Health Insurance System: Mistake or Cornerstone? .” Policy Challenges in Original Health Care 25 May 2005 37-52.10 Apr 2009. http://www.rwjf.org/files/research/037-Part%201-Chapter%203.pdf>.

Gould, Elise. “The Erosion of Employment-based Insurance: More Working Families Left Uninsured.” Economic Policy Institute 31 Oct. 2007. 10 Apr 2009.

Hacker, Jacob. The Astronomical Risk Shift: The Modern Economic Insecurity and the Decline of the American Dream. Unique York: Oxford University Press, 2008.

Herrick, Devon. “Why Employer-Based Health Insurance is Unraveling.” National Center for Policy Analysis. 01 Nov. 2005. National Center for Policy Analysis. 14 Apr 2009 http://cdhc.ncpa.org/commentaries/why-employer-based-health-insurance-is-unraveling>.

Pallarito, Karen. “Obama Backs Health Care Reform.” USA TODAY 23 Jan. 2009. http://www.usatoday.com/news/health/2009-01-23-obama-healthcare_N.htm

“The Rise and Topple of the Political Catchphrase.” Time 14 Feb. 1994. http://www.time.com/time/magazine/article/0,9171,980129,00.html>

Wiener, Joshua, Carol Estes, Susan Goldenson, and Sheryl Goldberg. “What Happened to Long Term Care in the Health Reform Debate of 1993-1994: Lessons for the Future.” Urban Institute 01 June 2001 207-252. 17 Apr. 2009. http://www.urban.org/url.cfm? ID=1000297>.

The employer-based health insurance system in the United States has weakened over the past several years. The amount of coverage provided has dropped dramatically, and more of the burden is being shifted to the individual. The average employee under such a belief has seen their premiums go up and their coverage go down. Today such a system is coming under increasing scrutiny. The decline in the effectiveness of the system has caused policy makers to stare into dramatically reforming health insurance in the United States or adopting an alternative health insurance system.

Employer-based health insurance in the United States primarily got its begin around the time of World War II. A wage freeze was established as fraction of a larger inflation control policy. This led many companies, in order to attract employees, to offer increased benefits including health insurance (Glied 38). The companies had even more incentive because the non-wage fragment of those benefits were not taxed due to a tax code that does not regard non-wage benefits as compensation; therefore, is not subject to income and payroll taxes. This tax provision was officially recognized by the IRS in 1954 (Glied 38). All of these, essentially, indirect policies led employer-based health insurance to become the most approved get in the United States.

The largest decline in the number of people prescribing to an employer-based system was not seen until the 2000’s. Each year since then, it has been steadily declining. In the year 2000, the percentage of Americans that received their health insurance through an employer was 64.2%. By 2006 that had fallen to 59.7%. This decline is the principal reason for overall increase in the number of Americans that are uninsured in the past ten years, which in 2006 stood at 47 million Americans (Gould). This figure, however, does not even address how many Americans are underinsured.

Worthy of the reason for the overall decline of employer-based health insurance (both in enrollees and in adequacy) has been in the private sector. The example of General Motor’s health insurance notion for their workers illustrates this. When GM decided to provide health insurance benefits and pension plans, they had assumed that their profits would remain proper, and the impress of those health benefits would not increase, but they did. The cost of health care rose at a rate three times faster than the rate of inflation, contributing to the vast cost increase for GM to provide health insurance to their employees (Herrick).

In addition to changes in the private sector, there were considerable policy changes that affected the decline in the viability of the employer-based system. One of these policies that contributed to the decline was superb tax breaks given to companies that provided health benefits. An estimated 190 billion was spent in the accomplish of federal tax breaks for employer-based plans (Hacker 141). There have been several reform attempts on employer-based health insurance in the U.S, but most were unsuccessful, and the ones that were, didn’t provide the precise reform needed.

One reason the reform attempts were unsuccessful was due to private interest groups blocking legislation. Especially in the realm of employer-based health insurance, there are many who stand to aid from the system remaining as it is, and are unwilling to relieve grand of the health care reform that has been proposed. The Insurance industry avidly opposed the major push for health care reform in the 1990’s (Wiener, Estes, Goldenson, and Goldberg). This is an example of private vs. public interest groups and the role they play in policymaking. Private interest groups, like pharmaceutical and insurance companies, tend to have far more resources than public interest groups, such as the AARP which would generally favor health insurance reform. Since an increasing amount of legislators are turning to the bureaucracy, and private interest groups have more sway, policy often favors their interest.

This is a pickle that reformers of employer-based health insurance have seen throughout their attempts. In the early 1970’s, a goal of President Nixon was to reform the employer based system. He had hoped to pass legislation that would mandate employers to provide health benefits. This reform was not seen, but instead in 1974 the Employee Retirement Income Security Act (ERISA) was passed by Congress (Hacker 147-150). Instead of mandating an employer to offer health benefits, this opinion regulated an employer’s health insurance opinion if they chose to have one. A provision of this allowed for employers to hurry regulations imposed by the set by paying for health benefits directly, this was called self insurance. This undermined spacious risk pooling, which was a practice of pooling a huge number of people for health insurance plans which facilitated more inclusive, inexpensive coverage (Hacker 146-147). The provision caused many employers to switch to self insurance, and partially led to the decline of the employer-based health insurance system.

The above example of ERISA shows how the goal of a colossal reaching policy can be watered down as it goes through the policy process. The goal of President Nixon may have been to require all employers to provide health benefits, but the only policy that came out of the process simply regulated the employers if they chose to offer health benefits.

One of the largest attempts to completely change the health insurance system in the U.S was in 1993-’94. This attempt came discontinuance to bringing the U.S one step closer to universal coverage, but failed; furthermore, it divided Democrats and Republicans on how to solve the predicament. Looking at the reasons why this attempt failed sheds light on why no major reform of health insurance policy in the U.S has taken root since the inception of Medicare and Medicaid over forty years ago. The Health Security Act proposed by President Clinton in 1993 called for mandates on the employer to provide benefits and primarily outmoded the theory of “managed competition (Hacker 148) and was extremely complicated, making it harder for the American people to easily understand. Conservatives were able to spend the complexity of the thought as an advantage for them. They former agenda-setting to report to the public that this concept meant more government intrusion into their lives, and instead presented the alternative of Medical Savings Accounts. This concept, which today has gained a exquisite amount of attend, allowed for employees to have their maintain insurance accounts to manage as they wanted (Hacker 148-150.

This push by conservatives was very effective because it appealed to Americans’ individualism. The American people tend be schizophrenic in what they want out of policy. One aspect of this is referred to as Bourgeois Liberalism, which stresses the role of the individual and negative freedoms (what the government cannot do to its citizens). The other is referred to as Protestant Communitarianism, which stresses the ability of the people united together and certain freedoms (what people can do collectively to control their contain destiny). These two conflicting characteristics played a crucial role in the failure of the Health Security Act. The Clinton Administration notion their health care thought would be able to transcend the conflicting American nature by animated to both aspects. In many ways they were fair, but were unsuccessful and instead, conservatives were able to capitalize on Americans’ ideological conservatism in gaining opposition to the Health Security Act.

The ability of conservatives to shape the concept of the American public to oppose such a policy lends succor to an alternative perspective of how policy and notion sail from the government to the people. This theory says that public receives its agenda from the government and public offers policy back, or in this case, policy opposition. Conservatives were not alone in shaping public idea, private interest groups that stood to serve from the failure of the Health Security Act, were also crucial (Hacker 149). As mentioned earlier, private interest groups, due to their astronomical resources (primarily money) were able to sway politicians and the public to catch their residence on a sure policy.

The Clinton administration plan that this bill was so far-reaching that they could even regain the back of these interest groups: insurance companies, hospitals, and employers (Hacker 149). Instead of gaining their encourage, they were instrumental in defeating the bill. They were able to employ the media as section of shaping public conception to oppose the policy. The media began running stories that centered on questioning whether or not there was a just health care crisis (The Rise and Drop of the Political Catchphrase). Stories like these and the continuing of conservatives and private interest groups portraying the Health Security Act as more government intrusion, led to its failure.

After this, as previously mentioned, conservatives began pushing for an alternative to the Clinton Administration’s opinion called Medical Savings Accounts (now referred to as Heath Savings Accounts) as section of their Personal Responsibility Crusade. At first, these were not favorite among both employers and employees, but over the past ten years, employers seem to be more accepting of them (Hacker 152). In 2005, the number of employees enrolled in Health Savings Accounts rose from 2.4 million to 4.5 million in 2007 (Hacker 153). Today the health insurance predicament is becoming more prominent than ever before. Modern plans from President Obama and Congress indicate possibility for legislation to reform the fresh system. The original concept proposed by President Obama would not be a mandate for all employers to provide health benefits; instead, it is a mandate that would require the companies that don’t offer health benefits to pay a tax that would go toward funding health coverage (Pallarito). This is the most unusual step in reforming the employer-based health insurance system. The high numbers of uninsured and underinsured have led the public to be supportive of health care reform. While their opinions on how to reform the system may vary, the snort is viewed as a priority.

While there has been a decline in the viability of an employer-based health insurance system, this does not mean that employer involvement in health care coverage is the dilemma. Rather by reforming the employer-based system to where all employees are covered and accounts for the people unruffled left uninsured, the original health insurance crisis can be reversed. Famous policy changes to our health insurance system have not been seen since Medicare and Medicaid in 1965, however by looking at the attempts and where they failed, future plans can have a greater chance for success. In addition, by recognizing the nature of the American people, policies can narrative for their sometimes schizophrenic nature and better consider the views of the people.

Glied, Sherry. “The Employer-Based Health Insurance System: Mistake or Cornerstone? .” Policy Challenges in New Health Care 25 May 2005 37-52.10 Apr 2009. http://www.rwjf.org/files/research/037-Part%201-Chapter%203.pdf>.

Gould, Elise. “The Erosion of Employment-based Insurance: More Working Families Left Uninsured.” Economic Policy Institute 31 Oct. 2007. 10 Apr 2009.

Hacker, Jacob. The Colossal Risk Shift: The Recent Economic Insecurity and the Decline of the American Dream. Current York: Oxford University Press, 2008.

Herrick, Devon. “Why Employer-Based Health Insurance is Unraveling.” National Center for Policy Analysis. 01 Nov. 2005. National Center for Policy Analysis. 14 Apr 2009 http://cdhc.ncpa.org/commentaries/why-employer-based-health-insurance-is-unraveling>.

Pallarito, Karen. “Obama Backs Health Care Reform.” USA TODAY 23 Jan. 2009. http://www.usatoday.com/news/health/2009-01-23-obama-healthcare_N.htm

“The Rise and Descend of the Political Catchphrase.” Time 14 Feb. 1994. http://www.time.com/time/magazine/article/0,9171,980129,00.html>

Wiener, Joshua, Carol Estes, Susan Goldenson, and Sheryl Goldberg. “What Happened to Long Term Care in the Health Reform Debate of 1993-1994: Lessons for the Future.” Urban Institute 01 June 2001 207-252. 17 Apr. 2009. http://www.urban.org/url.cfm? ID=1000297>.

Understanding Short-term Health Insurance

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