News

Origins of Employment-Based Health Benefits

By March 19, 2022 No Comments

Employment-Based Health Benefits – The History

Origins and Evolution of Employment-Based Health Benefits: Article Series from Employment and Health Benefits: A Connection at Risk, Institute of Medicine.

The United States is unique among economically advanced nations in its reliance on employers to provide health benefits voluntarily for workers and their families. Although it is well known that this system fails to reach millions of these individuals as well as others who have no connection to the work place, the system has other weaknesses. It also has many advantages.

The current U.S. system of voluntary employment-based health benefits is not the consequence of an overarching and deliberate plan or policy. Rather, it reflects a gradual accumulation of factors: innovations in health care finance and organization, conflicting political and social principles, coincidences of timing, market dynamics, programs stimulated by the findings of health services research, and spillover effects of tax and other policies aimed at different targets.

The major innovation was the creation of alliances and mechanisms that made the employee group a workable vehicle for insuring a large proportion of workers and their families. That the employee group existed for purposes other than the provision of insurance (that is, to produce a product or service) was an important although not sufficient condition for dealing with biased risk selection and some of the other problems that will be described later in this series.

Many of the values, pressures, and conflicts that have shaped the evolution of employment-based health benefits persist and should be factored into evaluations of this system and proposals for restructuring it.

Moreover, it is important to recognize the forces that have led people in this country and elsewhere to expect both more medical care and more protection against its rising cost. These forces, which affect both public and private provision of health coverage, include:

  • An ever-accelerating pace of scientific and technological discovery that has offered new relief from pain and suffering and heightened expectations about the value of new medical technologies, products, and practices;
  • A century’s worth of professional and institutional development in health care that has made possible the delivery of biomedicine’s new achievements;
  • An increase in medical care costs that has been fueled both by economic growth and by advances in clinical capabilities and organizational resources; and
  • A system of private and public health coverage that has for most of the last 50 years increased financial access to these advances but placed few controls on medical price inflation or overuse of medical services.

On almost every front, the thrust in the United States is still expansionist—the uninsured want basic protection, the insured want restrictions on coverage eased, and researchers, providers, and entrepreneurs devise new technologies and services that further stimulate demand for care. Hence, health care consumes a greater share of national resources each year.

The expansionary thrust has, however, stalled in some areas. In particular, the proportion of the U.S. population covered by private health benefits has leveled off and even shown signs of decline in the employment-based sector. Furthermore, many now question whether current medical practices and technological advances produce improvements in health and well-being commensurate with their cost. These questions reinforce policymakers’ wariness about new initiatives to improve equity and access given two decades of unsuccessful efforts to moderate the flow of resources to the health sector.

This was the first article in our series Origins and Evolution of Employment-Based Health Benefits. Stay tuned for Part 2: The Birth of Insurance for Medical Care Expenses.

Source: Institute of Medicine.  Employment and Health Benefits: A Connection at Risk.

About CMR & Associates | PolicySmart®

CMR & Associates’ risk management consultants provide independent retirement and insurance advice by reviewing your current plans to improve coverage and reduce cost. Through CMR’s proprietary database – The CMR Database® (comprised of some 13,000 brokers and specialists globally), we maximize access to the insurance and retirement industry for greater options that will translate to better coverage and lower cost.

Please email CMR & Associates or call 877-447-4301 or 212-447-4300 for more information.