Abstract

American policymakers and health policy analysts have a love-hate relationship with job-based health insurance. The policy press routinely runs articles about the demise of the current system of voluntary employer-sponsored health insurance coverage. Conservatives argue that it ought to be replaced with individually purchased insurance, such as tax-favored spending accounts. Liberals assert that government insurance ought to supplant it. Meanwhile, as the debate rages on about the future of employer coverage, states and the federal government pass legislation buttressing and building on the existing employment-based system. Congress, in its recent Medicare reform legislation, not only extended publicly-financed prescription drug benefits to elderly Americans but also offered employers tax incentives to keep providing the prescription drug benefits they offer to their retirees. There is nothing new about this debate, nor the conflict in views it represents. Since its origins in the 1930s, employment-based coverage has been viewed with skepticism. Nonetheless, nearly three-quarters of a century later, the vast majority of Americans under 65 who have health insurance, and about 38 percent of those 65 and older who continue to hold private health insurance coverage supplemental to Medicare, obtain it through their current jobs (or in the case of retired workers, former jobs). The model of privately-sponsored and voluntary employment-based coverage is hardly anyone’s ideal of health system design, but it is a nearly unanimous second choice.