Our Accidental Health Care System
Our modern employer based healthcare system was introduced 100 years ago by the American Hospital Association (AHA) and the American Medical Association (AMA) as part of a successful campaign to derail populous attempts by Progressives to create a National Health Care Plan.
Employer-based health insurance began to blossom during World War II, when wage freezes prompted employers to expand other benefits as a way of attracting workers.
In 1954, Congress passed a law making employer paid premiums for employee health plans tax-deductible without making the resulting benefits taxable to employees. Insurers promptly seized upon the profitable opportunity of selling tax-advantaged health insurance products to employer groups at essentially a government subsidized discount. Employer groups, beguiled by the tax-deduction and “cheap” premiums, dived into the group health insurance marketplace, not realizing they were opening up a Pandora ’s Box of regulatory and administrative nightmares. Employees, with no good alternatives available, enthusiastically embraced group health insurance and the tax-free benefit, and unwittingly compromised future earnings. Health care providers captured a steady supply of insured consumers with rich benefits made possible by the 1954 tax windfall. And so it came to pass that generations of health care consumers developed a warped sense of the true cost of health care and health insurance.
The unintended consequence of the 1954 tax breaks was to create a government subsidized health care system (or, the irony of it all, socialized medicine) that fosters an unhealthy co-dependency between health insurers, health care providers and big business.
The results of this bad tax policy, in the absence of any strategic planning, “accidentally” turned employer groups into the distribution system for this country’s health care. According to The Kaiser Family Foundation 2016 Employer Health Benefits Survey Employer-sponsored insurance covers over half of the non-elderly population; approximately 150 million nonelderly people in total, or roughly 56% of eligible consumers, and account for 93% of private health insurance premiums. http://kff.org/report-section/ehbs-2016-summary-of-findings/