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THE FUTURE of AMERICA’S HEALTH INSURANCE
ALLISON K. HOFFMAN, Professor of Law and Deputy Dean
Hoffman’s “How A Pandemic Plus Recession Foretell the Post-JobBased Horizon of Health Insurance,” published in the DePaul Law Review, describes problems that arise with a U.S. health insurance system overwhelmingly comprised of job-based coverage. The COVID-19 pandemic highlighted these problems, when hundreds of thousands of people lost their jobs — and, in turn, health insurance — during a health emergency. Hoffman predicts that recent events could herald in significant shifts in the way the U.S. organizes and regulates health insurance.
The History and Present State of Job-Based Health Insurance
About half of all Americans are covered by employer-sponsored health insurance (ESI), which has been the dominant source of U.S. health care coverage since the twentieth century.
Even prior to the COVID-19 pandemic, job-based health insurance accessibility and affordability were declining. Not only were fewer employers offering health insurance to their employees, but among those that did, the cost to both employers and employees continued to rise.
First, the number of people working in non-traditional arrangements, such as 1099 or “gig” work, has increased in recent years. Though measuring this data poses challenges, much of this work tends to be structured in ways that does not obligate the employer to provide benefits, such as health benefits.
More critically, many employers, including large corporations, increasingly express frustration at healthcare’s rising costs and their diminishing power to negotiate for prices. Recent data from a survey conducted by a nonprofit organization that represents some of the largest employers and the Kaiser Family Foundation show that employers heavily favor greater healthcare regulation, such as stronger antitrust measures, more price transparency, government price caps, and even perhaps Medicare expansion.
What COVID Revealed About Having Health Insurance Tied to Work
“Because of the high costs and stakes of COVID-19 care, the federal government and states scrambled to try to keep people insured even as they lost jobs and to provide access to testing and some medical care even if not insured,” Hoffman writes. “The patchwork of policies enacted to pursue these goals perfectly captures the overly complicated healthcare financing system in the United States.”
While several pieces of legislation focused on ensuring that COVID-19 testing and vaccinations remained free regardless of insurance coverage status, COVID-19 treatment was less regulated.
About two to three million people became uninsured between March and September 2020. Though this is a high number, it is only a fraction of the number of people who became unemployed during this timeframe, in part because of efforts by policymakers and companies to keep people insured. For example, legislation and voluntary efforts by employers allowed some employees to retain their health insurance during a temporary or permanent job loss. Others who lost jobs were able to enroll in Medicaid or plans through the Affordable Care Act marketplaces. For those who remained uninsured, the costs of COVID could be overwhelming (the average charge for someone hospitalized with COVID-19 was by one estimate $43,986 and for ICU patients using mechanical ventilators, $198,394).
The initial policy response included the Trump Administration’s extension of the use of COBRA, which enables people to retain health benefits after losing a job, and Congress’s passage of the Families First Act, which discouraged States from restricting Medicaid enrollment requirements and provided $64 million to the Indian Health Service. The Biden Administration added to these efforts by making it easier for people to sign up for ACA marketplace plans, though a special enrollment period increased subsidies to buy coverage.
The Future Horizon of Health Insurance
These pre-pandemic and pandemic experiences have illuminated the benefits of moving away from job-based health insurance. Even more, employees may prefer to disentangle work from healthcare to prevent their employer from accessing private healthcare information, and employers may prefer to divorce healthcare from work to avoid tension with employees regarding what types of claims plans cover. Additionally, separating healthcare from employment may also grant individuals greater flexibility in pursuing entrepreneurial and other non-traditional career paths.
Admittedly, the transition away from job-based health insurance will be challenging in large part because of the lack of political support for any one solution.
Proposals for the Post-Job-Based Horizon of Health Insurance
1. Remove the ACA Firewall Between Group and Nongroup Coverage
One solution experts suggest is removing the ACA “firewall” that encourages people to enroll in their employer’s plan rather than an individual plan under the ACA. Hoffman writes that this solution would especially assist low-income people who qualify for higher subsidies.
2. Voucherization of Health Insurance
Individual Coverage Health Reimbursement Accounts (ICHRAs), which allow employers to make pre-tax contributions to individual coverage plans for employees, offer another alternative. Small companies and companies with sicker workforces can use ICHRAs to avoid shouldering too much risk; however, plans individuals obtain using ICHRAs may not be as good as job-based health plans.
3. Medicare for All
A Medicare for All (MFA) plan would involve moving everyone to public Medicare coverage, creating one streamlined, single-payer system. Hoffman writes that “many experts have estimated that this plan, which would leave no one uninsured or underinsured, would result in little or no growth in national healthcare spending.” To combat risks associated with the inevitable disruption to America’s finance systems, advocates have suggested longer “phase-in” transition periods. Yet, this option is politically the most challenging.
4. A Public Option for Employer Health Plans
Finally, Hoffman worked with scholars Howell Jackson and Amy Monahan to develop a new proposal for an “employer public option” that would allow employers to enroll all members of their health plans to a Medicare-based public option.
“[T]he goal is a policy that simultaneously offers an alternative to employer plans in the short term and builds a foundation for a more equitable and efficient health insurance system in the long term,” Hoffman writes.
Not only would this solution lessen employers’ stressful involvement in the healthcare business while still providing their employees with health benefits, but it could also save employers money. The co-authors describe that such a plan would be voluntary — employers could elect whether it was beneficial to participate. Moreover, it would be possible to integrate employer contributions and ACA-style subsidies in a way that might expand coverage to people who could not previously afford their share of the cost of their employer plans or who are less often offered coverage through such plans, such as part-time or gig workers.
Importantly, premiums paid by employers and employees would help finance the employer public option, rendering it more broadly politically palatable than MFA. Further, this proposal may even fit into Byrd Rule limitations, meaning it could pass the Senate in a budget reconciliation bill.
Overall, COVID-19 did not create, but did expose, a myriad of flaws intrinsic within America’s current health care financing system. Hoffman urges policymakers to think deeply about the need for reform.
“This system no longer serves many people well during the best of times, and even less so during a public health crisis,” Hoffman writes. “With these shortcomings in such clear relief, it is an ideal time to begin to invest in policies that can foster a more secure, less complicated, and more equitable post-pandemic horizon of health insurance.”
