Employer-Based Health Care – All Cons, No Pros

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Since the beginning of the debates around the Affordable Care Act (ACA), there’s been a relatively muted on-going conversation about the value of the employer based health insurance model. It has, however, never really come to the fore as the ACA never seriously engaged with the idea of canning the whole system and starting fresh under a new model. The history of the employer based health care system has been well canvassed elsewhere (This American Life, New York Times, LMGTFY) and I have no intention to rehash that material here. The question I want to discuss is, “Why is there any fidelity to this system at all?” It’s a system that is bad for consumers, bad for employers, and bad policy. No one wins in this system.

Below is a table of pros and cons to the employer based model. As my bias is clear that the employer based model is fundamentally flawed, I’ve taken the pros from the National Business Coalition on Health (NBCH) who put together a small post on the advantages of an employer based health insurance scheme

Pros Cons
Value-based purchasing Arbitrary risk pools
More Individuals Covered Lack of portability
Risk spreading Restriction of consumer choice
Economies of scale Ethical/Religious concerns re: complying with regulations
Reliable payment Unequal tax implications
Assures a competitive job market Inefficient administration
Enhances wellness Wrong consumer targeting
  Inefficient tax expenditure


While the list would appear to be equal, on closer inspection, the pros are actually quite illusory.

  • Value based purchasing is based on the premise that consumers are unprepared to determine health insurance needs and differences in plans, but that companies (apparently) are able to do this effectively. While there’s some evidence that people have misunderstood the health insurance products they previously purchased, the minimum benefits package requirements in the ACA effectively resolve the issue of under-purchasing.
  • More individuals being covered is an argument built solely on the legacy that most people currently have insurance through their employer and that they would be more inclined to “gamble” with health care coverage if they were in the individual market. There’s little evidence to support this proposition – and again – the health insurance mandate within the ACA, as well as easily established incentive schemes, could resolve these concerns.
  • Risk spreading argues that risk is lowered within a group insurance system, but this takes a micro view of a macro issue. At the health insurance company level, the risk is across all plans and policies insured, not at the individual employer level. There’s little societal value to enabling healthy people to gather together to insure themselves to the exclusion on sicker individuals. Risk spreading is good – it’s what the entire health insurance system is meant to accomplish – but a broader risk profile spread across the entire population of insured individuals is more egalitarian and less arbitrary.
  • Economies of scale argues that employers are able to extract discounts from insurance companies based on the size of the group being insured. Thus, an employer of 1,000 workers will get a lower premium package then an employer of only 10 workers for the same benefits package. This is obviously correct, but it’s also bad policy. It essentially establishes a system by which small employers are subsidizing the lower premiums of the larger employers. Why an employee’s risk pool should be arbitrarily determined by the size of their employer and the employer’s skill at negotiation is nonsensical and puts small businesses at a disadvantage with no justification.
  • Reliable payment argues that individuals are more likely to pay when money is deducted directly from their paycheck. This is, of course, true, but automatic deductions for all sorts of on-going costs (gym memberships, car insurance, student loans, rent/mortgages, podcasts, credit card payments, etc, etc) have been around for some time. 
  • Assures a competitive job market is also nonsensical. In fact, employer-based health insurance schemes are more likely to reduce competition within the job market if there’s anxiety in the workforce about changing insurance when changing jobs. Additionally, the health benefits package is a valuable portion of an overall compensation package, but – as noted above – consumers may not be particularly good at determining the value of these products. Greater transparency is introduced to the job market by reducing the complexity of the compensation package and reducing it to mere dollar figures.
  • Finally, enhances wellness is purely an assertion that having employers choose health insurance options for their employees fosters an environment in which employers are more likely to care about the health of their employees. There’s no evidence that employer involvement in choosing health insurance improves health outcomes. Companies would still be in a position to establish voluntary health programs (running clubs, etc.) and there is evidence that these sorts of associations are beneficial to employee satisfaction and worker productivity.

 The cons to the system are much clearer. 

  • Arbitrary risk pools - The employer based model pools population health risks based on an individual’s employer rather than on the general population. There’s no cognizant rationale that employers are an optimal place to group risk. 
  • Lack of portability - There’s little rationale that health insurance should have to change when one’s employer changes.
  • Restriction of consumer choice – Having employers make the selection of health insurance restricts employee’s choice.
  • Ethical/Religious concerns re: complying with regulations – This is essentially the Hobby Lobby problem. If the employer based health insurance system were deconstructed, health insurance would belong to the individual and employers’ objections could be removed from the equation entirely.
  • Unequal tax implications - Currently, employers get a tax exemption for contributing to employee health insurance and employee contributions to employer sponsored health care is paid pre-tax. However, individuals purchasing through the individual market are paying entirely with post-tax money. If the goal is to encourage access to health insurance, there’s no reason to treat these groups of individuals differently.
  • Inefficient administration - Having every employer privately negotiate premium rates with health insurance companies with little transparency in the negotiation process is wasteful of employer’s time.
  • Wrong consumer targeting - Right now, the bulk of the health insurance market is targeted at employers rather than the actual beneficiaries of the health insurance. The hope is that employers have the best interest of their employees at heart, but employers’ interests are unique from those of their employees. 
  • Inefficient tax expenditure - Using tax breaks to create incentives for employers to provide health insurance to employees is backward. It’s better to directly target the tax breaks at the actual consumer rather than the employer.

Even Governor Bobby Jindal’s Freedom and Empowerment Plan seems to recognize the issues with maintaining the current employer based model. Many of the ideas in that plan (Tax Equity, Pro-Life Protections, Better Access for Individuals Changing Employers, Pooling Mechanisms) are attempts to maintain the employer based model while finding ways to undo it’s flaws. Some of the ideas within the plan – Cross-state Insurance Purchasing in particular – would substantially worsen the issue of consumer choice within the employer based model.

So, what’s a better way forward? Clearly, there’s a transition process necessary given the entrenched nature of the employer based health insurance. Relatively simple fixes, however, could be developed that would enable employed individuals to purchase employer subsidized plans on the individual market. This could be done by changing health insurance benefits into a monetary contribution to the premium cost of insurance purchased by the employee in the individual market. As Jindal proposes, the idea of moving the tax exemption from the employer to the employee is a valid approach for improving the targeting and efficiency of tax expenditures. This would also undermine the concerns of Hobby Lobby that will be decided by the Supreme Court soon.

Posted in Health reform, National Healthcare; Tagged: .


Innovative Solutions for Complex Health Challenges: Our Past, Present, and Future – The O’Neill Institute Retrospective

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CoverWe are delighted to present the Retrospective for the O’Neill Institute for National and Global Health Law at Georgetown University, Innovative Solutions for Complex Health Challenges: Our Past, Present, and Future.


Posted in FCTC, FDA, Global Health, Health reform, Human Rights, National Healthcare, Resources, Tobacco, Trade, WHO; Tagged: , , , , , , , , , , , , , .


US FDA Commissioner Margaret Hamburg to Keynote O’Neill Institute Summer Program on Emerging Issues in Food and Drug Law

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Pegg_Hamburg The Commissioner of the United States Food and Drug Administration, Margaret Hamburg will provide the keynote address to the O’Neill Institute for National and Global Health Law’s Summer Program on Emerging Issues in Food and Drug Law.

Margaret A. Hamburg became the 21st commissioner of food and drugs on May 18, 2009. The second woman to be nominated for this position, she is an experienced medical doctor, scientist, and public health executive.

As the top official of the Food and Drug Administration (FDA), Dr. Hamburg is committed to strengthening programs and policies that enable the agency to carry out its mission to protect and promote the public health. “Strengthening FDA’s programs and policies will help us protect the safety of the food supply, give the public access to safe and effective medical products, find novel ways to prevent illness and promote health, and be transparent in explaining our decision-making,” says Dr. Hamburg. “A strong FDA is an agency that the American public can count on.”  Read More

Posted in FDA, Global Health, National Healthcare, Tobacco, Trade, Uncategorized; Tagged: , , , , , .


Planetary health, Lesson 2: What do March’s two transportation tragedies say about us?

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You have no doubt heard about MH 370, the Malaysian Airlines plane lost in the Southern Indian Ocean, with its 239 passengers and crew almost surely killed in a crash into the ocean For several days after the plane disappeared last month this was a lead story in major news media outlets. Even now, whenever there is what may be a significant development in the search, the story returns to the headlines.

Fair enough. This was, after all, a tragedy, hundreds dead, along with the genuine mystery of what happened to the flight, and anguish of family members waiting for news, grasping for any reason to hope, even when by all logic, hope of the passengers’ survival would seem lost.

Also last month there was another transportation tragedy. It killed even more people; 251 may be the final toll. An overcrowded boat of refugees in Uganda, who had fled the violence across the border in the Democratic Republic of Congo, were returning home on March 22. Their boat capsized in Lake Albert, which spans the border of the two countries. Some of those onboard were rescued. Most drowned.

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Planetary health, Lesson 1: What does evolving evidence on saturated fat say about the state of our species and our planet?

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I grew up quite sure about what was the greatest food threat to my health: fat. Not at first – I remember in elementary school the snacks my mother would prepare when my brother and I got home from school, with plenty of grapes, apples, peanut butter – and cheese. We had whole milk in the house. 

But then began the age of evil fat, of fat free ice cream and delicious sugary yet fat free Entenmann’s cakes (did I say sugar)? Sugar was an issue, of course – brush well, not good for your teeth – but otherwise, well, glucose was the brain nourishment. We switched to something called Skim Plus milk – you can still find it in some supermarkets. Peach yogurt was a favorite snack. Who gave a thought to the sugar content?  It was calcium, protein, low-fat, and tasted so good, too. My favorite snack food, cereal, was safe. And years later, when work took me abroad, there was always safety and comfort for my vegetarian and culinary conservative self in bread roll upon bread roll. Read More

Posted in Global Health, Uncategorized;


July 21-25 – US Health Reform – The Affordable Care Act (O’Neill Institute Summer Program with Confirmed Speakers)

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US Health Reform Summer ProgramThe American healthcare system has undergone enormous change in the last few years. At both the federal and state levels, understanding the new landscape introduced by the Affordable Care Act, with its legal intricacies and policy nuance, is paramount to anyone working in this field.

This summer, join Georgetown scholars and DC health policy wonks for a one-week intensive look at American health care and coverage. The program will focus on the framework of the Affordable Care Act and the legal and policy implications of its implementation.

Additional information about the program, including application details, can be found here.

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Posted in Health reform, National Healthcare, Uncategorized; Tagged: , , , , .


Georgetown Celebrates the Launch of Global Health Law Book with Distinguished Panel

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GH Law Cover

On Monday evening, Georgetown Law celebrated the launch of O’Neill Institute Faculty Director, Lawrence Gostin’s new book Global Health Law. At the event, Ezekiel Emanuel, Laurie Garrett, and Edith Brown Weiss joined a panel, moderated by Gostin, to discuss the book and broader themes of global health and justice. This post provides a brief recap of the event.

A video of Gostin’s introductory remarks and the panel discussion can be viewed here. Global Health Law is now available for purchase worldwide.

The event began with Gostin discussing two competing narratives in global health. First is the narrative put forward by global health “heavyweights” such as Margaret Chan and Bill Gates, which lauds the considerable achievements over the past decades (e.g. greater access to basic health services, huge expansion of access antiretroviral therapy, etc.). The other narrative is advanced largely by civil society groups and focuses on the continued misery and ill health in which many still live. He illustrated this second theme by reading a selection of “global health narratives” from his book—stories of marginalized youth around the world. Read More

Posted in Global Health, Updates; Tagged: , , , , , .


July 14-18 – Emerging Issues in Food and Drug Law (O’Neill Institute Summer Program with Confirmed Speakers)

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ONeillSavetheDateEmail_wk1FINALPlease join the O’Neill Institute for National and Global Health Law at Georgetown University for a one-week intensive summer institute exploring the domestic and international legal, regulatory, and policy framework shaping the safety and availability of foods and medicines worldwide.

The program will cover U.S. domestic law including recent laws and regulations; international regulatory harmonization and mutual recognition efforts now under way between major exporting and importing countries; and the increasing influence of trade and investment rules.  The program will convene leading academics, practitioners, and regulators to inform participants not only what the law is now, but which forces will shape its future.  Additional information can be found here. Read More

Posted in FDA, Global Health, Health reform, National Healthcare, Tobacco, Trade, Uncategorized; Tagged: , , , , .


The use of law as an instrument in prevention: A short report from the EU Summit on Chronic Diseases

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Screen Shot 2014-04-03 at 9.18.11 pm


Today I attended the first day of the EU Summit on Chronic Diseases. The Summit brings together policymakers, stakeholders and interest groups involved in chronic disease prevention, with the aim of developing a set of recommendations for policy action to reduce the medical, social and economic burden of chronic diseases in the EU. This post gives a brief overview of the key themes from the first day of the Summit, and provides a written version of my presentation on the role of law in chronic disease prevention.

The first day of the Summit involved a series of workshops that explored the specific areas in which the EU could take action to prevent chronic disease. It generated a series of recommendations that will be developed on Day 2 of the Summit by representatives from national health ministries and global health organizations, in addition to the attendees from Day 1. Read More

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Five Things About the Affordable Care Act Post Open Enrollment

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This post was co-authored by Michael Templeman, Director, New Initiatives at the O’Neill Institute for National and Global Health Law.

Irfan Khan / Los Angeles Times

Irfan Khan / Los Angeles Times

The first open enrollment period for the Affordable Care Act (ACA), or “Obamacare” officially closed on March 31.  Here are five things to know about the ACA post-open enrollment.

1. Number of Enrollees Has Exceeded All Expectations . . . but Debate Rages On.  In spite of the technical glitches, political grandstanding, and generally embarrassing initial rollout of the ACA, the number of initial enrollees has exceeded all expectations.  On Tuesday, the White House announced that 7.1 million previously uninsured Americans have enrolled in private health coverage under the ACA, beating the Congressional Budget Office’s February estimate of 6 million enrollees.  The numbers are comprised of those who enrolled through the federal insurance marketplace (HealthCare.gov) and state-run exchanges. 

The numbers do not include those previously uninsured who purchased plans directly from insurance companies (~9 million), are newly covered by state expansions of Medicaid (~4.5 million), or are young adults covered through their parents’ insurance plans (~3 million). Read More

Posted in Health reform, National Healthcare, Uncategorized; Tagged: , , , .

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The views reflected in this blog are those of the individual authors and do not necessarily represent those of the O’Neill Institute for National and Global Health Law or Georgetown University. This blog is solely informational in nature, and not intended as a substitute for competent legal advice from a licensed and retained attorney in your state or country.

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