Employees, who reflect a diverse set of economic priorities and various preferences, would choose for themselves between pretax dollars for health insurance and after-tax take-home pay. (Photo: Shutterstock)
The $962 billion that large corporations spend annually for employee health insurance could hold the key to expanding access to quality, affordable care, according to a Health Affairs blog.
"Because they offer their employees only a modest number of insurance options, their dollars are not impacting the market — to control costs, improve quality and enable access — as they should," the writers of the blog said. "If employers instead gave their employees pretax employer-sponsored insurance cash to purchase their own Affordable Care Act-compliant insurance and save any residual as after-tax income, the market would respond vigorously to these employees' preferences by offering more innovative, cost-effective plans, along with improved transparency and the navigational aids needed to choose them."
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This change could be achieved by expanding a little-known rule that allows using health reimbursement accounts to purchase insurance. Modest regulatory changes to how HRAs can be used would put control of ESI dollars directly into the hands of workers. Because health insurance premiums generally are not tied to income, the benefits of these changes would accrue especially to those with lower incomes.
Employees, who reflect a diverse set of economic priorities and various preferences, would choose for themselves between pretax dollars for health insurance and after-tax take-home pay. With the addition of hundreds of millions of new purchasers of health insurance, many of whom exhibit a range of greater price sensitivity and cost-consciousness than most HR managers who currently purchase plans in bulk can reflect, insurance markets would respond to meet those preferences. In short, this modest change to how ESI is purchased would unleash the consumer choice and insurer competition that currently does not exist.
Employers who choose to add this lower-cost public option to the plans available would put downward price pressure on other commercial insurance in the Marketplace and help cover many of those currently uninsured, including the many uninsured employed in small- and medium-sized enterprises.
"Although we are not politicians, we think that our plan would meet today's political demands," the blog concluded. "It enables informed workers to purchase their own insurance, relies on market mechanisms, imparts no additional entitlements and requires no legislative action. Perhaps most of all, it injects significant competition into a somnolent insurance market.
"We are now confronting perhaps the gravest costs of linking health insurance to employment. Among people who said they or a spouse or partner lost a job or were furloughed because of the COVID-19 pandemic, two in five had health coverage through the affected job. Among those who previously had coverage through an affected job, one in five said they or a spouse or partner were now uninsured. Although any kind of health reform is hard, it will be harder to emerge from a pandemic if more people are uninsured because of job loss."
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
