Something good for employers in the American Health Care Act

Employers are not in the business of health insurance and, to some, having to offer health insurance coverage hinders their ability to continue business operations, thereby negatively impacting the ability to offer employment to the detriment of the economy.  Before the ACA was passed in March 2010, employers were not required to offer health insurance coverage as an employment benefit. The U.S. Supreme Court has held, “employers had large leeway to design disability and other welfare plans as they see fit.”[1]  Employers voluntarily began offering health insurance coverage as a benefit to their employees after the Stabilization Act of 1942 was enacted to cap wages and salaries.[2]  Employers began offering health insurance when employers were prohibited by the 1942 Act from increasing wages in order to attract prospective employees.

Fast forward to the current day and employers are now the primary provider of health insurance coverage to the American population.  “Employment-based insurance covered the most people (55.7 percent of the population), followed by Medicaid (19.6 percent), Medicare (16.3 percent), direct-purchase (16.3 percent) and military health care (4.7 percent), according to the most current 2016 Census gathering 2015 information.”[3]  However, the cost of healthcare for the employer has increased by 1,106% since 1977.[4]

Many supporters of repealing the ACA believe that it will help reduce their health insurance costs, forgetting that those were well on the rise long before the ACA was passed in 2010.  The Organization for Economic Co-operation and Development (OECD) gathers healthcare costs data from 35 countries, including the United States.  The OECD’s data established that the United States was spending “two and a half times more than the OECD average health expenditure per person” by 2011, long before the more costly requirements of the ACA were implemented and well before the ACA could be blamed for increased healthcare costs.[5]

At the time the OECD data was gathered, there were no mandates enacted in the United States for either employers or individuals to purchase health insurance.  Thus, presumably any Act which returns America to the same system in place before the ACA will not remedy the rising cost of healthcare and healthcare coverage since those costs were well on the rise before the ACA was promulgated. Currently, employers bear the largest brunt of providing healthcare coverage to the American citizens.  This is not a burden that was originally intended for employers.  The impact is most strongly felt by small businesses which are the majority of businesses in the U.S.  48.4% of American private sector employers employ less than 500 or less employees, 34.3% employ less than 100 workers and 17.6% employ less than 20 workers.[6] The individual mandate, first proposed by conservatives and the Heritage Foundation in 1984, is a more viable alternative for healthcare insurance in that the majority of Americans bear the cost of healthcare insurance, thereby reducing the cost overall.[7]

Although many employers will continue to offer healthcare coverage to their employees, many other businesses may choose more appropriate solutions tailored for their businesses, such as internal health clinics, stipends towards health insurance payments, or other innovative ideas tailored to compliment the specific business of the employer. Thus, employers and their advocates should all be supporting the repeal of the employer mandate.

[1] Black & Decker v. Nord, 538 U.S. 822 (2003).

[2] http://www.legisworks.org/congress/77/publaw-729.pdf

[3] https://www.census.gov/newsroom/press-releases/2016/cb16-158.html

[4] See Chart appendixed to blog and courtesy of Rick Gantt, South Carolina Area President, Benefits and HR Consulting, Arthur J. Gallagher & Co.

[5] https://www.oecd.org/unitedstates/49084355.pdf

[6] http://sbecouncil.org/about-us/facts-and-data/

[7] http://www.heritage.org/research/lecture/assuring-affordable-health-care-for-all-americans