It's Actually a "Good Thing"

[Welcome Kaiser Network readers!]

At a consumer bulletin board that Bob and I frequent, a commenter posted a recent NYT article on Presidential contender Sen John McCain's health care proposal. A key point made in the column, which was penned by Bob Herbet, was that "the radical changes that John McCain and Sarah Palin are planning for the nation’s health insurance system...set in motion nothing less than the dismantling of the employer-based coverage that protects most American families."

For some unknown reason, Mr Herbert seems to think that this would be a bad thing, and I responded to the poster that this was unfortunate. I'd like to share with our readers an expanded version of that response, including a few points that also seem relevant.

First, it's important to note that such a substantive change is unlikely to occur any time soon. It would, however, be a good thing.

To understand why, it's necessary to understand that employer-based coverage is a relatively recent development. It came about during WWII, when wages were frozen, and employers sought ways to increase workers' compensation through non-cash means.

It is essentially a destructive influence:

Employers do not pay for employees' health insurance. Never have, never will. They simply redirect a portion of their employees' wages directly to the insurance company. They receive a tax benefit for doing so, and the employee is none the wiser.

Employers don't pay for our home or auto insurance, either, but no one complains about that. They don't provide our groceries or house, and again, no one complains. An employer pays one a wage, from which one buys appropriate auto and home insurance, chooses which groceries to buy, and whether to buy a house or rent an apartment.

Why, then, should health insurance be any different?

In point of fact, there are some very good reasons why our employers don't buy our groceries for us: for example, Bob enjoys seafood, whereas I'm enjoined from eating it at all (not that I didn't enjoy it, back in the day). If an employer attempted to satisfy all his employees' food needs and preferences, imagine the accounting mess that would ensue. Likewise with cars: Bill's Porsche Boxster suits him fine, but we really need the mini-van. And while Mike's penthouse condo is spacious enough, I really like sitting out in the backyard, enjoying an adult beverage and the nocturnal symphony provided by the crickets, et al.

For some reason, though, the one-size-fits-all (but, of course, not very well) theory behind group insurance is deemed satisfactory. Yes, large corporations can set up "cafeteria plans," offering a variety of optional benefits. But what if the coverage I need is not among the handful available? Wouldn't it make more sense for me to buy the coverage I need and want, rather than the one "forced upon" me by my employer?

[ed: Of course, no one is "forced" to buy insurance in this fashion; but there are substantial economic costs in failing to do so.]

There are, of course, several challenges to moving away from employer-sponsored, or "group," plans, not least among them being underwriting and coverage of pre-existing conditions. But these are not insurmountable problems, and would have to be addressed in such a transition.

Still, I believe that the basic idea is sound, and attractive.