Employer Health-Care Mandates: The Wrong Answer to the Wrong Question

Source: David S. Caroline, University of Pennsylvania Journal of Business Law, Winter, 2009
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A great paradox lies beneath the health-care debate in this country, one that reflects both the greatness and the shortcomings of our capitalist democracy. The United States has long been a leader in developing ever-better surgical, medical, and diagnostic procedures. Yet critics are quick to point out that, despite the seemingly wide range of available treatments, millions of Americans remain uninsured. In widely-quoted studies, the United States falls far behind other developed countries in measures of the overall quality of the health care system. How can these seemingly contradictory situations be reconciled?

As is often the case, the explanation for one paradox may lie buried within another. For most U.S. citizens, health care is either an employment benefit that their employers provide in the form of a tax-free health plan, or a subsidy in the form of Medicare or Medicaid. Many Americans take for granted that they will never have to spend more than a fixed amount of money for coverage, regardless of the amount of care they receive. What we refer to as “health insurance” is in many ways a pre-paid health plan, as most beneficiaries are certain to use the services of the insurance at some point.

Employers provide the majority of these plans. Although the nation has become comfortable with this arrangement, this setup significantly contributes to the perceived problem of inadequate access to health care in the United States. Still, while the problem is significant, it is not quite as drastic as the quoted statistics indicate. Consequently, proposals for laws that mandate employers to provide health insurance to their employees are misguided and based on mistaken premises.

Part II of this Comment explores the origins of the system in which employers pay for employees’ health care, and covers the more recent phenomenon of state mandates. It concludes with an analysis of some of the economics literature on employer-based health care. Part III discusses in greater depth some of the problems with, and critiques of, the employer-based system’s ability to provide broad coverage. Part III also considers the relatively recent efforts in Massachusetts to ensure that all of its citizens have insurance, and specifically focuses on the provisions that function as weak mandates on employers to provide insurance. Part IV presents an alternative to employer-based health care and is followed by concluding remarks in Part V.

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