Some policymakers are advocating a movement away from employer-sponsored coverage toward a more individually-owned health care system. Though the arguments in favor of this shift have merit, lost in the debate are the advantages of the existing group market for health coverage. These advantages, though subtle, are the foundation of a strong, voluntary health insurance market.
The National Business Coalition on Health urges policymakers to assess how proposed reforms would affect any of the following advantages of group coverage:
- Value-based purchasing. Many employers practice "value-based" purchasing, in which not only price, but quality of care is weighed in the purchasing decision. Nationwide studies indicate that individuals are woefully unprepared to shop for quality when purchasing coverage.
- More individuals covered. Employer groups cover almost two-thirds of all Americans under age 65. Groups make enrollment easy and attractive, resulting in many more insureds than if individuals were expected to apply separately. Many would undoubtedly yield to the temptation of gambling with their health in order to raise their standard of living. If that happened, much of the burden of caring for larger numbers of uninsureds would fall to the remaining insured population.
- Risk spreading. Groups spread risk within the group. For example, an employee with a chronically ill child pays no more for insurance than an employee with a healthy family. Under individual coverage, each person or family would present a different risk profile. Insurers would charge higher premiums or attempt to avoid coverage for families with sick members.
- Economies of scale. Employer groups exercise a degree of leverage in purchasing health coverage, depending on the size of the group. As a result, groups pay significantly less per capita for coverage of similar benefits than do individuals. Individuals have only themselves and their family as the bargaining unit, a weak alternative.
- Reliable payment. Employer groups pay for employee health benefits more reliably than could be expected of individually insured employees. Individuals are more likely to forget to pay, delay payment, or sacrifice payment in favor of other priorities.
- Assures a competitive job market. Competition based on all aspects of compensation, including benefits, historically has been a strong part of the American economy. Employers strive to improve total compensation packages to attract and retain the best qualified and productive work force possible. Individuals strive to improve their own marketability through education, experience, and skill development so they can work for the companies with the best compensation and benefits.
- Enhances wellness. Employer involvement in the selection and provision of health care benefits creates a work environment concerned about employee health and productivity, including prevention and wellness. The National Business Coalition on Health, while supporting individual accountability in choosing and financing health benefits plans, also supports the continuation of the voluntary, employer-sponsored health insurance system. The advantages of this system are exemplified by employers and employer coalitions that practice value-based health care purchasing of health benefits. This approach provides high quality, cost-effective health coverage for millions of Americans.
Finally, the primary advantages of individual coverage can be obtained in large measure by new group coverage arrangements that allow individuals to select among several competing health plans. This approach is being adopted by an increasing number of large employers, as well as emerging coalitions of smaller employers. We believe that any proposed reforms should include thoughtful consideration of the advantages offered by group coverage.