By Thomas P. Miller

The stubborn stickiness of employer-sponsored insurance as the predominant form of private coverage for many decades has been maintained by more than just the structural frictions of our fragmented political system. As noted in part I, employer-sponsored health insurance may be the worst form of coverage within the US health system, except for all the others (to borrow the formulaic Churchill cliché to explain the survival of democracy). Let’s review the enduring ties that bind workers (and their dependents) to getting insurance at the office.

• Keeping up appearances: The political optics of
  routing even more of our health care financing transactions through government
  budgets and bureaucracies are unsightly. Keeping “private” money (from the
  employer sector) on the table remains preferable to raising taxes or borrowing
  even more from the future — particularly when politicians still can influence
  where it flows without taking the primary heat for making ends meet and
  managing disappointments. Outsourcing the blame while claiming the gains
  remains the strategic goal for most officeholders.
• Redistribution only works in limited doses. We
  might be tempted to promise to cross-subsidize almost everyone’s health care
  spending more generously, but it does not work mathematically or politically
  for very long, if at all. Someone has to pay more if others get to pay less. The
  employer-based portion of our health care system helps camouflage the flow of
  funds from one set of pockets to many other ones.
• Most workers may complain periodically about
  their annoying experiences with the health care sector and its relatively high
  costs, but far fewer are eager to take more direct responsibility in managing
  their selection of benefits and providers prospectively and extensively.
  Prescreening partners and agents, negotiating contractual arrangements, and
  monitoring performance is hard work — for someone else.
• Occasional calls for greater transparency and
  cost discipline do not gain much support from the workers who purportedly would
  benefit from it. The temptation to seek marginally better deals, in terms of
  greater benefits seemingly paid for mostly by someone else, usually suffices to
  delay the competing reformist daydreams of armchair economists.
• The employer community is diverse in sizes,
  profitability, administrative capabilities, and negotiating power. However, any
  general preference to pass the headaches of financing health care for workers
  to someone else is outweighed by more well-honed reluctance to invite
  government officials more directly into their firms’ operations, along with
  skepticism that any handoffs would operate smoothly and quickly.
• Structuring transitions to new arrangements and
  overcoming the complexities of implementation were daunting tasks on a much
  smaller scale for the Affordable Care Act’s once-ambitious plans a decade ago.
  Employers and their employees remain justifiably skeptical that attempting a
  much larger, mostly uncharted venture into the unknown, such as a much wider
  reliance on government-regulated and taxpayer-subsidized “marketplaces,” is
  likely to go any better.
• More than 75 years of employer-based health
  coverage arrangements have accrued substantial reliance interests and ingrained
  habits. Changing those arrangements would involve massive rewriting of the thick
  layers of laws and regulations that govern them. Sending in more lawyers would
  only prolong and complicate the process further. Once political advocates and
  their ever-helpful public-sector agents get started “perfecting” imperfect
  health care markets, they just cannot ever stop.

All of the above provide ample reasons to pause, if not
recoil, from another great leap to somewhere else in health care policy. The
current mix of very tight labor markets and heightened pandemic-related health
concerns only places an even higher premium on more generous and attractive
workplace benefits as a recruiting and retention tool for employers.

That does not mean we should expect a ceasefire offered from
the political factions that reflexively maintain “there oughta be a law” to
expand the public sector’s market share of health care spending and decision-making
into the less-occupied territory of private-sector workers. At the same time,
the even smaller band of boosters for reliance on more individualized private
health care markets needs to recall Stalin’s apocryphal admonition regarding
the Pope during World War II: “How many divisions does he have?” Disabling or
at least diminishing the political clout of the employer sector in resisting
regulatory overreach in health care for working-age Americans remains an unwise
form of unilateral disarmament, absent the more gradual expansion first of a
more market-oriented set of individual health insurance options that can
withstand the urge to “protect” them, too.

When the devil remains in the future details, exhausted and overstressed workers remain likely to stick a while longer with the devil they know.

The post Employer-sponsored insurance, part II: If you can’t be with the coverage you love, love the one you’re with appeared first on American Enterprise Institute – AEI.