Increase Innovation and Help Small Business by Separating Health Insurance from Employment
A sane alternative to the shotgun marriage of employer-based insurance.
Our continued dependence on employers for vital services such as health insurance limit individual initiative and hold our economy back. Far from being “fringe” benefits, almost everyone will have a need for the protection that basic insurance coverage provides at one time or another.
The Current Benefits Structure Is Past Its Prime.
The joining of health insurance to employment is an unfortunate side effect of World War 2 salary and price caps. As a result, employers started offering benefits in lieu of increased salary. Today, about half of the U.S. has employer-provided insurance either from being an employee or a dependent of someone with coverage.
Dependence on employers to help pay for decent health insurance, dental, vision, life and other coverage prevents would-be entrepreneurs from stepping out. Especially for those with families, it’s often too risky to lose those services. As a result, we get less innovation, less job creation, and less overall energy in our economy.
Small businesses are the drivers of new ideas and job growth in the U.S, creating about 66% of all net new jobs. We need to do everything we can to encourage entrepreneurship, not hold it back with archaic systems that are well past their prime.
Individual Benefits Markets Are the Way Forward
Alternative idea: employers provide a pool of funds for benefits to be purchased from individual markets and that the employee receives tax credits to help fund. Employers would receive a tax credit based on the amount of money they provide in the fund, but otherwise are out of the “benefits” game. The self-employed would get a higher tax credit for themselves. Every employer, no matter the size, would be able to participate.
The idea behind this is to:
- Free employees from dependence on employer-based health insurance and other benefits
- Spur startups and job growth by removing the fear of loss of family and individual health coverage
- Encourage innovation in benefits by businesses, hopefully expanding and diversifying perks that businesses use to compete for talent
Business Will Adapt to this New Paradigm
Today, big businesses love the fact that health insurance ties employees to the company and creates a system of forced loyalty. In this scenario, employers will have to compete on salary, work environment, culture, and other attributes, instead.
SHRM found that “employers spent an average of $8,669 per employee annually on health care coverage.” They would still be able to offer perks like car leases and the like. In the end, we may get even better work environments and new benefits as employers find new ways to differentiate themselves in the fight for talent.
Let’s Stop Holding Ourselves Back.
The time is now. By shifting necessary insurance and other benefits coverage away from dependence on employers, we can unleash a new wave of entrepreneurs and small business growth to reinvigorate the American economy.
Originally published at sanfordam.com on April 28, 2017.