Reform is coming to the health insurance industry. If we’re not careful, the reforms may make matters worse instead of better.
The pressure for reform is building because the skyrocketing cost of providing health insurance for their employees is becoming too much of a burden for businesses. Large firms find themselves at a competitive disadvantage in the global economy. Small businesses simply can’t afford the cost. The percentage of workers with health insurance provided by employers is declining.
The practice of providing health insurance as a fringe benefit began during World War II as a means of circumventing wage controls. It has endured because it benefits everyone involved. Employers can deduct the full cost of providing insurance as a business expense. Workers pay less in taxes since they are not taxed on the value of the premiums paid on their behalf. Insurance companies get more business than they otherwise would.
Since increases in premiums don’t show up as a reduction in take-home pay, workers have been insulated from the impact of dramatic increases in the cost of health insurance. Now costs have reached the point where employers are reducing their contributions toward premiums and co-pays are rising.
As more and more workers are left to fend for themselves, even those who can afford health insurance experience a great deal of “sticker shock” when the cost of premiums is no longer hidden among their fringe benefits. Individuals with incomes just above the limits for Medicaid simply can’t afford to purchase a policy on their own. Many young and healthy members of our society who could afford coverage, elect to forego having health insurance if it’s not provided through their employer. The people who need insurance the most - those with serious health issues and/or chronic conditions - are the most likely to be priced out of the market or simply excluded by insurance companies.
Health care spending in the United States has been spiraling out of control for some time now. A report by the World Health Organization paints a very clear picture:
- The percentage of our gross domestic product devoted to health care more than tripled during the period from 1960 to 2005, growing from 5.2% to 16%.
- Overall, the World Health Organization ranked our health care system as 37th best in the world.
- In 2004 we spent $6102 per person on health care, compared to $3165 for Canada, $3150 for France, $3043 for Germany, and $2508 for Britain.
Although we outspend them by a wide margin, life expectancy in the U. S. is lower than it is in any of these other nations. All of these other nations have universal health care.