Why do Americans (US) want to keep their employee-based healthcare insurance?

Question

The generalized argument against some sort of Medicare for All (M4A) is that Americans really like the employer based health insurance (EBHI). That approximately 150 million workers are enrolled in EBHI is no small matter, however, the proposition is that these 150 million really like to obtain healthcare insurance in that manner.

The PPACA (aka ACA or Obamacare) included a provision known as the employer mandate that required employers to provide healthcare insurance and subsidize the premiums. According to Kaiser Family Foundation in 2018:

Annual premiums for employer-sponsored family health coverage reached $19,616 this year, up 5% from last year, with workers on average paying $5,547 toward the cost of their coverage.

Said another way, employers (on average) absorbed 72% of the cost of family HC premiums.

Obviously that is something for the worker to "like" and would not be pleased to see eliminated by ending or curtailing EBHI.

So the question I pose is: Is there something beyond the employer subsidy that the 150 million American workers really like about their health insurance?

Answer 1

The way health insurance is payed for by employers creates a massive tax loophole, the employee does not pay tax on the employer portion of their insurance, and the employer can deduct it as an expense rather than pay payroll taxes on it. Switching to Medicare for all is an effective pay cut for anyone with employer provided insurance, because there would have to be additional taxes for Medicare, and their overall pay wouldn't see an equivalent increase to what an employer was previously paying (if any of that money goes to them as a raise at all).

Medicare currently reimburses at a lower rate than private insurance to the point where it's nearly a net loss or actually is a loss for the hospital or private practice. In a medicare for all scheme it's likely that many places may even refuse to take patients without additional coverage outside of emergency service where they are required to serve everyone. This would mean many people may lose access to their preferred providers.

Some employers offer several choices for health insurance, so its possible to pick from several policies which one currently meets your needs, or manages an appropriate amount of risk for your preferences. Medicare is more restrictive in this sense, there are different plans, but they all have to comply with medicare standards.

Medicare for all would be a nearly unprecedented expansion in government control. Many people are against expansion of government to begin with. This would also require or effectively give the government a national registry with very detailed information for every citizen. Building anything resembling such a registry has historically been met with a lot of resistance.

Answer 2

Americans with health insurance are not so much in love with their coverage, as relieved that they have coverage at all. Inequality is so internalized that the public expects some sectors to have much better outcomes than others. Those with job-linked health insurance relish their superiority over the more disadvantaged people without. The very fact that employer-based health care is exclusive creates a preference for it.

Answer 3

In general, the problem is that most employees are accustomed to how their employer-based insurance works and want it to keep working exactly that way. Because they know how to navigate that particular set of challenges.

Employers may also customize their insurance and offer benefits that might not be available in a one-size-fits-all government insurance. In particular, some large employers allow their employees a choice of different forms of insurance. For example, my employer in 2005 offered options with

• No premium from me; a health savings account.
• $50 monthly from me; a Health Maintenance Organization.
• $50 monthly from me; a Preferred Provider Organization.

There were other differences as well, the copays were different, the provider (doctors) lists were different, and the deductibles were different. The HMO was more aggressive about insisting on its own doctors than the PPO. Note that I was paying much less than 28% of the premiums. So averages may be hiding individual differences.

There may have also been differences in coverage. Perhaps one plan covered insulin shots better than another did. I wouldn't know, as I'm not diabetic. Which is another problem. We don't know what challenges individuals are having with their health plans. People may have moved around several times until they found jobs with just the right set of coverage for their situations. They may know that getting insulin, methadone, whatever coverage is difficult. But they have it in their current insurance. Any change and they may not.

I think that we can safely set aside the arguments of something like the Cato Institute in considering what the typical American thinks. The Cato Institute does indeed recommend breaking the employer/healthcare relationship. But they don't make any pretense of that being a popular position.

Most Americans who currently have employer-based health insurance are happy with that insurance. As such, they don't want to give it up for some new form of insurance.

One of the great ironies of the healthcare debate is that most people are happy with their personal options. When you hear people worrying about health insurance, it is either a small minority with problems, or a larger group worrying about the problems of the small minority. Of course, part of this is the nature of insurance. Most people pay premiums and get little benefit.

Here is a Politifact analysis of people's satisfaction with their healthcare. While they found that the 95% approval was at the high end, the surveys were consistently finding 80% satisfaction with at least 42% very satisfied. This should put aside the possibility that people were picking employer-based health insurance as the least bad option. Newer polls show a drop in healthcare satisfaction since the passage of the Patient Protection and Affordable Care Act (PPACA; colloquially known as Obamacare).

One might argue that Medicare-for-all could duplicate these options. It could certainly put 72% of the premium (tax) costs on employers. It could allow participants to choose among multiple plans. But of course if it did that, it would lose the purported benefits of Medicare-for-all. In particular, Bernie Sanders is going around telling people that Medicare-for-all will eliminate billing. That of course is an exaggeration. But what it does do is eliminate the question of who should be billed. Unless of course you put that back into it by allowing for different programs that can be billed differently.

The Kamala Harris plan tries to have it both ways. It will still allow private insurance, so it won't get the billing benefits that Sanders promises. But it will bind those plans with new regulations, so it will still cause people happy with their current health insurance to lose their current insurance, just as PPACA/Obamacare did. It has most of the downsides of both the status quo and Sanders' proposed change.

Answer 4

For many employees, they prefer the option afforded by an Employer-supported healthcare system.

Most employers in the US allow their employees to pick and choose from different insurance companies when signing up for employer-based health insurance. They still cover part of the cost, but allow the employee to pick a company that offers the type of coverage they want - which can range from basic to fairly comprehensive.

Insurance companies are able to do this because they can reach a wide range of customers by cooperating with multiple employers, and in turn (in theory) this reduces the cost for the employee overall.

Public health care undercuts this option by creating a limited, low-cost provider that most health insurance companies cannot compete with price-wise. This creates a large gap between the bottom-cost provider and the next available provider.

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In short, when the majority of health insurance customers sign on to a low-cost provider that isn't in a network of Employer-supported insurance companies, it pushes the cost up for those companies in order to compete, which pushes the cost up for the employee as well.

Answer 5

Effectively, for the same reason that they like to be able to negotiate their wages. Many people don't want to negotiate their wages and would prefer that they would increase due to an increase in the minimal wage. So this is not universal. But private employer-provided insurances used to be better than government-provided insurance.

It costs Medicaid substantially less than private insurance to cover people of similar health status … due primarily to Medicaid’s lower payment rates to providers and lower administrative costs. In other words, it only allows access to the medical providers willing to accept the lowest compensation. It's not too much of a stretch of imagination to presume that these are the least desirable medical providers.

This is likely to change with time, by the way.

The ability to sue insurance companies for "bad faith" is diminished because of "ERISA preemption". Which effectively disallows "bad faith" Federal lawsuits of insurers who provide employer insurance. That is, because of Aetna Health v Davila (2004), the only relief which can be sued for, by a patient, is the payment for treatment. Patients, whose plans are employer-provided, can no longer sue for pain and suffering due to delayed or denied treatments, nor can they sue for punitive damages.

The importance of ERISA preemption has grown significantly in the last 10 years.

First, it has grown because of the employee mandate in ACA, which effectively required most employers to provide health insurance (forcing most individuals into insurance plans to which ERISA preemption applies).

And second, the significance of the ERISA preemption has grown because, at least in 11th Circuit, any state claims against insurers, which would be ERISA claims if they were made in a Federal court, automatically become claims in a Federal court. If this decision is adopted nationally, state laws allowing lawsuits against insurers for "bad faith" in employer-provided insurance would become moot. Which would give insurers near immunity for most health insurance plans they provide.

So what would that mean for patients? There would be little incentive for insurance companies to not delay care or to pay for extra medical tests. Tests can only discover conditions which may require costly treatments. Not doing tests can lead to severe health consequences, or even death. Both of those would lead to loss of employment (which usually, but not always, leads to loss of insurance).

So under this regime, the insurance companies have financial incentive to deny treatment and no real financial consequences for it. In the long run, it is almost certain that there will be a mind-set disconnect between the lack of liability and the sub-par care. The employer-provided insurance is only likely to be seen as inherently worse as it gets worse.