Last Monday, the Supreme Court issued one of its most controversial rulings in recent memory in the case of Burwell v. Hobby Lobby. In a 5-4 decision written by Justice Samuel Alito, the Court ruled that the craft store chain Hobby Lobby and other “closely held” for-profit corporations cannot be forced to provide no-cost contraception coverage to their employees, as the Affordable Care Act mandates, if doing so conflicts with the company owners’ religious beliefs. Approximately 90 percent of U.S. companies are closely held, and these corporations employ more than half of the entire American workforce.
The ruling has already been slammed by the country’s largest medical groups, including the American Medical Association (AMA), American Nurses Association (ANA), American Academy of Family Physicians (AAFP), and the American College of Obstetricians and Gynecologists (ACOG). According to Modern Healthcare, AMA president Dr. Robert Wah stated that the ruling “intrudes on the patient-physician relationship and will make it more difficult for many women to make their own personal medical decisions,” and urged the Obama administration to “provide alternative pathways to secure coverage for patients unable to obtain these services as a result of the court's ruling.”
The debate over whether or not these companies should be able to exercise their religious rights when it affects workers’ health care – and the questionable claim by Hobby Lobby that contraceptive methods such as Plan B and IUDs are abortifacients – will likely rage on for the foreseeable future. But the Hobby Lobby case actually raises a far more fundamental question: should employers even be the main sponsors of health insurance in America, especially considering that this paradigm leads to headaches such as the Hobby Lobby ruling?
It’s worth exploring just how employers came to be the primary health insurance providers in this country. In 2009, NPR delved into this issue in a special report that concluded that the current system of employer sponsored insurance (ESI) was largely caused by “accidents of history.” In the early 1900s, there was little need for health insurance because medical services were, by and large, affordable. In fact, the average American only spent about $100 (in 2009 dollars) annually on care; many patients even bartered with their doctors for treatment.
But with the rapid development of medical technology, health care became increasingly expensive and unaffordable for the average person. As such, Americans began denying themselves essential health services and only pursued treatment during emergencies. Worried by this emerging trend, Baylor University Hospital developed the first-ever form of medical insurance – a pilot program for Dallas-area teachers that would eventually be dubbed “BlueCross.”
Employers took note of this novel coverage system – and in the late 1930s and early 1940s, when World War II-related defense spending spurred an unprecedented demand for labor, companies began offering health benefits on top of wages in order to attract good workers. The government took note of this increasingly popular trend and, through a series of laws and regulations in 1943 and 1954, created the employer health coverage tax exclusion.
That fateful policy decision ensured that employers would become the main providers of Americans’ health insurance. Less than ten percent of Americans received health coverage through employers in 1940. By 1953, that number had swollen to a staggering 63 percent. And today, approximately 149 million non-elderly adults – just under 70 percent of all insured people – have ESI.
What policy makers in the mid-1900s could not have anticipated is just how expensive health care would eventually become, or the development of potentially controversial medical technologies such as emergency contraception. So it isn’t surprising that employers have increasingly pushed off health care costs onto workers by adopting high-deductible health plans (HDHPs), and that some companies object to certain forms of medicine. These problems – and others, such as “job lock,” wherein workers remain in a company simply for the health benefits – will persist as long as ESI remains the dominant avenue of coverage.
Lawmakers could solve this issue by finally ending the employer tax exclusion. In fact, several health care reform plans proposed by liberals and conservatives alike would do this. For instance, the Healthy Americans Act, proposed in 2007 and 2009 by staunch conservative former Sen. Bob Bennett (R-UT) and liberal Sen. Ron Wyden (D-OR), would have ended the tax exclusion for companies and used the savings (approximately $300 billion per year), alongside several other revenue sources, to establish a robust income tax deduction for individuals. Americans could then buy a plan fitting their personal financial, medical, and moral needs on statewide competitive marketplaces. Medicaid and CHIP beneficiaries would also have been rolled over into the new system.
In many ways, this bill was the purest iteration of the Affordable Care Act, and it would have extended insurance to 99 percent of all Americans as opposed to the 92 percent expected to be covered under the ACA by 2024. Unfortunately, it was deemed far too radical and disruptive to the U.S. insurance landscape. And many companies may actually prefer to keep the current ESI system since, otherwise, they may feel pressure to boost wages. Dollar for dollar, it’s cheaper for companies to pay insurance premiums under the exclusion than it would be to give workers a raise. But as the Hobby Lobby case underscores, this sort of radical change may be exactly what we need to ensure that Americans, and not corporations, retain agency over their medical care.
By: Sy Mukherjee