How to Escape the Employer Sponsored Health Insurance Trap

A few month ago, I wrote a post explaining why employer sponsored health insurance (ESHI) has been called the original sin of the U.S. health care system. This post now turns to some ideas for escaping the ESHI trap.

Close to half of all Americans receive health insurance coverage through their jobs. In no other major country is health care coverage tied as closely to employment as in the United States. American-style ESHI has three major unintended consequences.

• “Job lock” makes workers afraid to move to a more suitable job, to become self-employed, or to start one’s own business for fear of losing insurance coverage.
• ESHI is severely inequitable. Health insurance benefits are tax-deductible, but the deduction is of greater value to people in higher tax brackets, and higher-paid workers are far more likely to get health benefits to begin with. Those in the top fifth of the wage distribution are estimated to get ESHI benefits that are nine times higher than those of the bottom fifth.
• The existence of thousands of ESHI plans, some of them quite small, adds to the fragmentation of the U.S. health care system and contributes to high administrative costs.

Any worthwhile strategy for health care reform needs a strategy for escaping the ESHI trap.