QUESTIONS AND ANSWERS ABOUT THE UNINSURED

1. What can the government do to help the uninsured?

The government should take steps to maximize the ability of individuals to take advantage of employer-offered health insurance, allowing flexibility and choice.  It should leverage existing dollars available for health coverage, instead of trying to develop a one-size-fits-all program that must be micromanaged. Specifically, the government’s role in solving the problem of the uninsured should be limited to financing and making overall improvements to the system to reduce costs and improve quality for all.  By committing funds through refundable tax incentives, the government can allow maximum flexibility to help consumers obtain the insurance that best fits their needs.

In addition, the government should level the playing field to further help individuals purchase health coverage and promote individual responsibility. Maintaining viable public programs for low-income individuals who are without access to either employer-sponsored insurance or the private individual market, and emphasizing the responsibility of Americans to exercise health coverage options is critical.  By enabling the development of alternative health coverage systems the problem of the uninsured can be addressed.

2. Why should coverage for the uninsured be expanded through market-based approaches?

Americans are satisfied with the current free-market system. According to a Commonwealth Fund survey, 49 percent of respondents chose employers as their preferred source of coverage, while 23 percent preferred to buy health coverage individually.  Only 18 percent chose the government as their preferred source.  Another survey, commissioned by Harvard University, found similar results: three out of four people would rather have their insurance provided through their employer instead of receiving an equivalent amount in wages so they could buy it for themselves.

The market-based system promotes competition, innovation and research. America has one of the world’s most advanced medical systems with its cutting-edge treatments, medications, and state-of-the-art facilities. A single payer health system and government price controls would severely limit the incentives for research and development.  In fact, countries with health care systems not based on free-market principles lack the level of development of state-of-the-art medical technologies.   

3. Why should expansion of coverage for the uninsured include the option of maintaining insurance through the current employment-based system?

Approximately 60 percent of insured Americans are covered in the employment-based system.  Furthermore, the overwhelming majority of uninsured individuals (80 percent) belong to families where at least one member is employed. Of this group, as many as half declined the health insurance their employers offered. All these groups could be targeted by employment-based approaches such as a combination of individual and employer tax credits. According to the Commonwealth Fund, a majority of Americans believe that employers select good quality plans and two of three prefer an employer selected set of plans over an employer funded account to be used to find their own coverage. 

The employment-based system pools varied risks and spreads risk more broadly throughout the market.  As a result, adverse selection is less likely to occur, and premiums are cheaper for purchasers in the employment-based system.

Finally, employers are the driving force in negotiating fair prices and quality improvement measures.  In the 1990s, employers helped to curb health care costs by offering employees managed care.  Currently, many employers are joining together to push for high-quality preventive and primary care for their employees. Individuals negotiating on their own behalf have far less influence in driving these variables.  Even as health care premiums are on the rise, employers are in a better position than individuals to advocate for changes that contain costs.

4. Is there any one solution that can fully address the issue of the uninsured?

No.  People are uninsured for various reasons and thus there must be a variety of solutions. The key to the solution is flexibility and the ability to leverage dollars to provider coverage. An Employee Benefit Research Institute (EBRI) study shows that employers on average can contribute about one third of an employee’s premium cost and the individual employee can cover an additional one third. In this light, a variety of options can be pursued to cover the final one third gap. However, such a solution, while addressing many of the uninsured, cannot provide access for all.  For this reason, other options are needed as well.

5. How did the employer-based system of health insurance originate? Why does an employee receive health care coverage from his or her employer?

During World War II, the federal government established wage and price controls. As a result, employers needed to find another way, besides salary raises, to attract workers in the tight labor market.  So, they began to offer health insurance as a fringe benefit. Since 1954, health care costs have been tax deductible for employers; as a result, employers have continued over the decades to offer their employees coverage.  To date, the percentage of premiums that workers pay has remained in the range of 14 to 16 percent for employee-only coverage and 26 and 28 percent for family coverage. As a result, employees and their families have an incentive to enroll in a health plan.