Employer-Based Coverage Does Not Equalize Access to Health Care
One reason public policy favors employer-based health benefits instead of individually owned health insurance is that policymakers believe it equalizes access to health care among workers of all income levels. Insurers usually demand 75 percent of workers be covered, which leads to benefit design that attracts almost all workers to be covered.
Employers do this by charging the same premium for all workers but having workers pay only a small share of the premium through payroll deductions. Most coverage is paid by the firm. Last year, the average total premium for a single worker in an employer-based plan was $6,435, but the worker paid only $1,129 directly while the employer paid $5,306.
Although this suppresses workers’ wages, workers cannot go to their employers and demand money instead of the employers’ share of premium. The tax code also encourages this practice, by exempting employer-based benefits from taxable income.
Does this equalize access to care? No, according to new research:
When demographics and other characteristics were controlled for, employees in the lowest-wage group had half the usage of preventive care (19 percent versus 38 percent), nearly twice the hospital admission rate (31 individuals per 1,000 versus 17 per 1,000), more than four times the rate of avoidable admissions (4.3 individuals per 1,000 versus 0.9 per 1,000), and more than three times the rate of emergency department visits (370 individuals per 1,000 versus 120 per 1,000) relative to top-wage-group earners.
(Bruce W. Sherman, et al., “Health Care Use and Spending Patterns Vary by Wage Level in Employer-Sponsored Plans,” Health Affairs, vol. 26, no. 2 (February 2017): 250-257.)
The reasons for these differences are not fully explained. Nevertheless, this research suggests employer-based benefits are not a good equalizer of access to health care, and the tax code’s prejudice in favor of those benefits and against individual health insurance should be revisited.
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