A Health Bargain on the Job

For nearly 70 years, most Americans with health insurance have obtained it through their jobs. It’s an entitlement that workers -- the Southern California supermarket employees now on strike among them -- have come to believe is an inalienable right.

But is this system of employer-based health benefits really the best option? Why should people’s health coverage depend on the whims of their employer -- or even on whether they have an employer or not? Wouldn’t it be better if people bought health insurance on their own, the same way they buy auto insurance?

The short answer is this: The current system may be riddled with flaws but it remains the best available option. And one of the problems it is now experiencing is that health-care costs are rocketing and the economy is weak, a sure recipe for employers to cut back on coverage and for employees to demand that employers stay in the benefits game.

Employer-based insurance is flawed for many reasons. People change jobs and lose coverage. Or they’re getting treated for an illness and their employer changes plans on them, ruining the continuity of their care.

But in the plus column, it’s the only kind of voluntary coverage that has ever worked on a large scale. Back in the 1930s, when health insurance began, selling through employers was the only way to keep a risky business stable. People who bought insurance on their own were apt to take on coverage when they thought they might be getting sick and drop it when they were feeling healthy. Only by insuring an employer’s entire workforce could insurers be certain that they would be covering healthy people as well as those who were ill.

Today, insurers are more sophisticated. They do sell coverage to individuals -- but only to those who can prove that they are healthy. Even a condition as minor as hay fever can make coverage hard to find. If you do qualify for coverage today, the price can skyrocket tomorrow if you, or a covered family member, get sick. That doesn’t usually happen when you get coverage through your job.

Even among healthy people, individual purchasers pay much more for the same coverage than do those who buy through a group. As in purchasing paper towels and napkins, it pays to buy insurance in bulk. Prices for large group coverage are slashed by as much as 30% compared to retail.

Employers don’t just make coverage cheap, they also make it nearly automatic. That makes employer coverage quite different from individual insurance and even from many voluntary public programs, such as Medi-Cal, in which some people who are eligible for coverage never sign up. Finding individual coverage or public programs takes some work. Individuals may lack the tenacity to follow the many steps to coverage. Employers, however, make benefit choices and payroll deductions a routine matter. They offer an express lane for coverage enrollment.

Employer coverage is no panacea. There isn’t much employers can do to control rising health-care costs. And when costs do rise, someone has to pay. Employers won’t let benefit costs affect their profit margins, so workers will ultimately bear the burden. But the bottom line is that workers do get a very good deal for their money with job-based coverage.

The difference between buying insurance in the market and buying it through work is like the difference between shopping at the corner store and at a discount retailer. With the latter, there may be some inconveniences, but you get a bigger selection and your dollar goes a lot further. Still, prices are rising everywhere, including for the employees of California supermarkets.