James Capretta of the American Enterprise Institute explores the future of a critical piece of American health care.
Employer-sponsored insurance (ESI) has been a central part of US health care for the entirety of the postwar era and is valued by working-age Americans for its adaptability and the ready access to medical care it provides to its enrollees. It is not without flaws, however. …
… Most troubling, its rising costs are becoming a heavy financial burden and inhibit wage growth. These problems are systemic. …
… The US is an outlier among high-income nations in its heavy reliance on voluntary enrollment in employer-sponsored insurance (ESI) for the working-age population. ESI has beneficial aspects, including its adaptability to firm-specific circumstances. However, it leaves workers with low job security at risk of becoming uninsured. During an economic downturn, the increase in the number of Americans who are uninsured can be alarming. During a pandemic, with health risks elevated too, the fragility of job-based coverage looks like a flaw requiring a policy solution.
Even before the current pandemic, there was growing dissatisfaction with ESI because of its under-performance. Not only is the coverage less secure than would be preferred, it also fails to control costs. Premiums for employer plans have grown steadily and in excess of wages for many years, as have the costs the plans’ enrollees pay. The increasing financial burden from this coverage has been a source of growing frustration.
Employer coverage needs to improve if it is to remain a valued aspect of US health care. The private sector has an important role to play in improving ESI, but it cannot fix its problems on its own. Congress must change the laws that govern how the ESI market works to make the coverage more secure for workers and their families and to encourage more effective and consistent cost discipline.
