Today, the Supreme Court ruled in the Hobby Lobby case that if a “closely held” corporation (a private one with a small number of owners) doesn’t want to abide by the requirement in the Affordable Care Act that all insurance plans offer preventive care including contraception at no cost, then it doesn’t have to. There are many ways to look at this decision and many implications, but for the moment, I want to focus on just one: This is yet more evidence that our system of employer-based health insurance has got to go.
The fact that most Americans get their health coverage through their employers is something that we all take for granted but has no logical purpose behind it whatsoever. No other industrialized country in the world does it this way, and the system didn’t develop in the United States because it made sense from any standard of efficiency, cost or providing superior benefits to citizens. It was an accident of history — one that would take some time and work to undo, but which is worth undoing. Not only that, both conservatives and liberals would have reason to support such a shift.
The system has its real roots in World War II, when the government imposed wage and price controls. Although there had been some health insurance plans sold through employers before, when companies couldn’t offer increased wages during the war, they began offering health benefits instead. When the IRS ruled that those benefits didn’t count as income and so were tax-free, the momentum toward employer-sponsored insurance was all but unstoppable (the deduction for employer-provided coverage is now the largest tax expenditure in the federal budget, dwarfing even the mortgage interest deduction).
But that system was fundamentally dysfunctional from the start. Why should you have to pay for insurance with post-tax dollars if you work for yourself or for a small company that doesn’t offer insurance, but with pre-tax dollars if you work for a larger company? Why should your employer’s preferences — including, as they do now, their preferences on what kind of birth control you should use — be more important than your own? And why should your insurance have to change if you get a new job? Of course, before the Affordable Care Act went into effect, leaving your job often meant losing coverage altogether.
I’ve never seen anyone argue that employer-based insurance is a good idea, or that if we had it to do all over again then that’s how we’d design our system. And even though liberals have been the ones most concerned with addressing its shortcomings, conservatives should have no particular interest in maintaining it, either. I’m sure the owners of Hobby Lobby would rather if they never had to deal with any questions about their employees’ contraception in the first place. Administering health benefits costs employers money and time. When he was running for president in 2008, John McCain proposed a plan that would have eliminated the tax deduction for health benefits and replaced it with a tax credit to individuals, which would have encouraged people to leave their employer-provided coverage.
It’s true that transitioning away from the employer-based system wouldn’t be easy; the reason the Obama administration didn’t propose doing so when it devised the Affordable Care Act was that it was terrified of anything that would cause lots of disruption and make people fearful that they’d lose what they had. But now we have a structure in place through which it could be accomplished. The ACA exchanges allow people who don’t get employer coverage to compare plans and buy insurance. With some changes in tax laws and the ACA itself, you could encourage people to leave their employer plans and find something as good or better on their state’s exchange (and the first step would be to make coverage bought by individuals tax-deductible in the same way coverage bought by employers is).
If you made it worth everyone’s while — both employers and individuals — we could eventually have an insurance system that was a little more sane, and wasn’t held captive by decisions made 70 years ago. By eliminating a layer of bureaucracy, we’d almost certainly save money. And your boss wouldn’t be able to dictate the terms of your reproductive health.