Employer Provided Health Insurance: Why should the employee’s rights count?
It’s always exasperating to read health insurance related discussions, but I think the employer contraception mandate has been one of the worst. It’s important that we begin with the most basic fact about health insurance in the US: Employers provide it as a benefit because it was good business for them to do so. The reason for it is quite simple, as David Blumenthal put it so succinctly (emphasis added):
This opportunity arose because, to control inflation in the overheated wartime economy, the federal government in 1942 limited employers’ freedom to raise wages and thus to compete on the basis of pay for scarce workers. However, the federal government allowed employers to expand benefits for workers, such as health insurance, which resulted in a rapid increase in employer sponsored insurance.
Several additional federal rulings followed that increased the attractiveness of the provision of employer-sponsored insurance to workers and their unions. In 1945, the government said that employers could not unilaterally change benefits programs until the expiration of a labor contract, and in 1949, it ruled that benefits should be considered part of the wage package of employees so that unions could negotiate health insurance as part of contract talks. Finally, in 1954, the Internal Revenue Service decided that the contributions that employers made to the purchase of health insurance for their employees were not taxable as income to workers. By 2004, the tax benefit for employees had grown to $188.5 billion annually,8 or about $1,180 for each American with employer-sponsored insurance.
This historical accident, more than any other is why so many Americans view health insurance as something to be provided by the employer (and why it was codified as practice in PPACA). Essentially, employers were using health insurance as part of compensation to their employees.
Part of the intention of the employer mandate provision was to encourage employers to provide insurance as part of compensation. In addition to the tax benefit for employees, they added the proviso that unless you purchased insurance for your employees as part of their compensation, you would pay a penalty in the form of an additional tax burden. An employer under this system has a substantial interest in continuing to provide employee health insurance, if only because there’s a competitive disadvantage to them in hiring new workers if they’re viewed as not having the same benefits package. This disadvantage is doubly so when you consider that they’d then have to make sure they’re paying employees an acceptably higher wage (which doesn’t fall under tax exemptions) to make up for the lack of insurance.
What we’re really talking about when we bring up the mandatory requirements under PPACA for actually qualifying as health insurance, is whether or not the employer can skirt those requirements to provide a form of compensation to the employee in question. Because it’s a compensation issue for the employee receiving the compensation, I tend to fall here on the side that thinks this should be something the employee’s rights are more valuable than that of the employer. The employer has a choice. They can choose not to provide health insurance as a benefit. In doing so they forego certain tax incentives both for themselves and their employees. If the employer is that concerned about what health insurance coverage can be used for, then that should be a choice they should make, instead of forcing the employee to shoulder the cost of that employer’s belief.
This isn’t a conscience issue. It’s one of religious employers asking to be allowed to stiff their employees and still get the benefits of offering “health insurance” as a benefit.
Let’s say that during the war, companies had found that it made more sense to offer employees grocery store vouchers in lieu of additional pay due to wage restrictions. But then let’s also posit that this became the norm because employees preferred the vouchers that couldn’t be taxed, and the employers found it gave them an economic advantage to offer the vouchers for competitive reasons. At some point, however, religious Hindu employers decided they’d only provide vouchers that could purchase pork as meat. In turn, the employees who were being paid in those vouchers said that this didn’t meet their needs, and that the Jewish and Muslim workers felt their compensation was being denied to them (in the form of meat) because of the refusal of the employers to provide vouchers that could be used to purchase beef. In that case, I think they shouldn’t be allowed to advertise vouchers as part of their benefits, and pay the necessary taxes of not being able to claim that, because their vouchers don’t meet the needs of all potential employees.
I know of very few liberals who think that employer provided coverage should continue to be the norm. I, myself, supported Ron Wyden’s proposal to allow employers to pay employees an equivalent to their premium to use on the exchange in lieu of providing insurance while providing it on the same basis as health insurance: That is non-taxable. The employee could then buy whatever plan they wanted so long as it met the standards for being on the national or state level exchange. If it cost less than what the employer had been providing, they’d be allowed to keep the difference, all without taxation. This seems perfectly reasonable to me and there’s no reason they shouldn’t be able to pass this as an amendment to the law now if folks are so up in arms about the mandate.
Additional note – The way the current tax credit/employer mandate situation works, is that if your employer provides the option of health insurance coverage, you are no longer eligible for tax credits/subsidies on the exchanges. That means that if Hobby Lobby offers half-assed insurance that doesn’t cover contraceptive/reproductive health coverage, then employees who want to get to that coverage are not eligible for getting tax credits/subsidies for help in paying their premiums regardless of their level of income. Basically, this means that in addition to the fact that Hobby Lobby would be using a “religious exemption” for a compensation package that they use as part of their relative hiring power, they also effectively prevent employees from purchasing affordable health insurance that does cover said services. So it’s a double whammy if they win: Not only does Hobby Lobby bilk the employees out of health insurance that covers all their needs (while being allowed to claim they’re providing it), but they also help substantially increase the cost/burden to the employee if they wanted to choose a different, better plan. Again, I think this places an undue burden on the employee. Now, the law actually states that if the employer doesn’t provide insurance that meets certain minimum standards (e.g. reproductive health coverage), then the employee is free to get credits. Basically, if Hobby Lobby can get a religious exemption they double screw their employees, while if they don’t, the employees are also able to have the option of purchasing better insurance if they choose to do so.