More than 80 percent of Americans in the private sector receive their health insurance from their employer. As the cost of health care grows and as competition among health maintenance organizations and insurance companies intensifies, employer-based health care has become increasingly unable to control escalating costs and has failed to provide coverage for millions of the working poor.
Federal officials say at least 31 million Americans have no health insurance and that tens of millions more are severely underinsured. Nearly 68 million Americans have significant gaps in coverage at least part of each year. I think it is time to do away with employer-based health insurance, because it simply is not working.
There are several signs of failure of the current employer-based system. Many small employers don't offer health insurance to employees because it can cost more than $3,000 per worker. This creates a cost disadvantage for larger firms, which, in turn, have also begun to re-examine the scope of their health coverage. And many are concerned that the added costs of health insurance may reduce their competitive position at home and abroad.
People who are unemployed, self-employed, between jobs or unable to work are seen as poor risks. They are able to get insurance, if at all, only at prohibitive rates, high out-of-pocket expense or without coverage of any pre-existing conditions.
Employers who would like to offer health insurance are sometimes denied that opportunity by insurers. Many companies are refusing to cover entire professions: dance companies, florists, advocates for AIDS-related causes -- because of their fear of enrolling individuals infected with the AIDS virus.
Even within employer groups, insurers are erecting barriers to high-risk individuals by offering skimpy benefit packages, such as paying no more than $2,000 a year for medications or hospitalization.
America's employer-based system is complemented by the federal Medicare program, financed by regressive taxes and regulated by unworkable hospital and physician price controls. What's more, the haphazard federal-state Medicaid program, though targeted to the poor, covers only about 40 percent of Americans in poverty.
Although some policy makers have viewed the Canadian system as a panacea for our health care problems, an individual-based health insurance system will be more efficient and more equitable. The Dutch government, unhappy with its current employer-based system and influenced by Alain Enthoven, professor of health care economics at Stanford University, intends to implement such a system in the early 1990s.
Under the Dutch system, each person must select a health plan from competing organizations during an open-enrollment period. The government will require insurers to offer a basic minimum package so that skimpy benefit offerings are not used as a device to attract only the healthiest people. Individuals must pay a premium into a central fund based on their income but also pay an additional premium to the plan of their choice. Individuals who are unemployed need pay only a modest premium but will still be covered by the basic package.
It is expected that plans that can deliver services efficiently and with consistently high quality will enroll a larger number of people. Those who want supplemental coverage for items such as discretionary cosmetic surgery could purchase this extra coverage from insurers as well. Competing plans would be expected to enter into contracts with hospitals and physicians for efficiency-improving measures such as pre-admission screening.
Insurers would also be allowed to contract with hospitals and physicians. Insurers would not be allowed to deny coverage, but those who enrolled a disproportionate number of high-risk individuals would be compensated from the central fund.
Costs would be controlled by competition among health insurers as well as by limits on the use of the most expensive technology.By eliminating employer-based health insurance and compensating insurers who take on added risks, one would expect to find insurers competing on controlling costs rather than competing to avoid high-risk individuals.
This may be the dose of efficiency and equity that the current health care system in the United States so desperately needs.Warren Greenberg is a professor in the department of health services, management and policy at George Washington University. Second Opinion is a forum for points of view on health policy issues.