The Rationality of Unlinking Health Insurance from Employers

Health insurance is a fundamental component of both personal and societal well-being, yet its association with employment presents a significant challenge. Unlike in some countries, the United States often ties health insurance to employment, potentially creating an unintended link that can have detrimental consequences for individuals and the broader economy.

Why the Current System Fails

One of the most obvious reasons to consider unlinking health insurance from employers is the inherent risk it poses. When you fall ill, your ability to work can be severely affected, leading to a loss of coverage. This situation, although acceptable in some systems, lacks the robustness needed in a modern healthcare environment.

The Realities of the Employer-Employee Relationship

From a corporate perspective, linking health insurance to employment makes sense. It ties employees more closely to their jobs, discouraging them from leaving. For employers, health insurance fosters a sense of dependency, creating a stable workforce.

Corporations vs. Real People

It is essential to recognize the difference between corporate interests and those of actual people. While corporations prioritize stability and predictability, real individuals prioritize flexibility and choice. This disconnect is a significant issue, especially when considering the rising cost of living and healthcare.

Employer-Provided Benefits

Employer-provided benefits can include retirement funds, life insurance, stock purchase plans, and more. These arrangements can be convenient and cost-effective, but they may not always align with individual needs or preferences. For instance, employees might prefer to manage their own health insurance or invest in other ways to protect their financial future.

Disadvantages of Tying Insurance to Employment

Linking health insurance to employment can have several negative consequences. One of the most significant is the potential for a vicious cycle:

Step 1: Illness – When an employee falls ill, they may need to take time off work for medical care, reducing their productivity.

Step 2: Job Loss – After taking time off, the employee may lose their job, leading to the loss of health insurance coverage.

Step 3: Unaffordable Care – Without health insurance, the employee may struggle to afford the necessary medical treatments.

This sequence can create a significant burden for individuals and may even lead to health deterioration, resulting in higher costs for society in the long term.

Homeowners Insurance Analogy

Consider the analogy with homeowners insurance. If your homeowner's insurance were tied to your employment, and you took time off to board up your windows before a hurricane, your job might be compromised, leading to the cancellation of your insurance. Such a system would be widely considered irrational.

Similarly, linking health insurance to employment can lead to untenable situations where employees are penalized for taking necessary time off for medical care.

Time Wasted on Insurance

Another issue is the time employers spend managing insurance companies. Instead of focusing on business growth and employee satisfaction, employers must negotiate and manage insurance plans. This diversion of resources can have a detrimental impact on the company's overall success and growth.

For example, an employer would need to frequently update mortgage lenders, manage changes to insurance providers, and ensure that all employees have the appropriate coverage. This administrative burden reduces the time and resources available for strategic business planning and investment.

Better Alternatives

The world has seen various successful models for handling health insurance. Examples include government-sponsored systems, single-payer systems, and private health insurance markets with more direct government oversight. These systems offer flexibility, predictability, and better protection for individual health and financial well-being.

For instance, countries like Canada, the United Kingdom, and Germany have national health insurance systems that separate insurance from employment. This separation ensures that individuals retain their healthcare access even when they are unemployed or unable to work due to illness.

Conclusion

Tying health insurance to employment may provide some short-term benefits, but the long-term consequences are severe. It can lead to instability, financial hardship, and reduced productivity. By separating health insurance from employment, we can create a more flexible, responsive, and equitable healthcare system that benefits both individuals and the broader economy.