Thursday, September 10, 2009

Why Do Employers Pay for Healthcare in the United States?

Throughout the debate about American Healthcare Reform I haven't understood the reason why American's currently enjoy having our employers pay for our healthcare.

When asking friends and co-workers, the most common reason seems to be because employers want healthier and more productive workers but this reasoning seems idealogical and not rational.  It doens't explain why the majority of employees. This reasoning only makes sense for the executive team of irreplaceable leaders in an organization.  Others have mentioned that employers get tax breaks.
Health insurance in the United States - Wikipedia, the free encyclopedia
Employer-sponsored health insurance

Employer-sponsored health insurance is paid for by businesses on behalf of their employees as part of an employee benefit package. Most private health coverage in the US is employment based. According to the Centers for Medicare and Medicaid Services, nearly 100% of large firms offer health insurance to their employees.[17] The employer typically makes a substantial contribution towards the cost of coverage.[18] In 2008 the average employee contribution was 16% of the cost of single coverage and 27% of the cost of family coverage. These percentages have been stable since 1999.[19] Health benefits provided by employers are also tax favored. Employee contributions can be made on a pre-tax basis if the employer offers the benefits through a section 125 cafeteria plan.

Costs for employer-paid health insurance are rising rapidly: since 2001, premiums for family coverage have increased 78%, while wages have risen 19% and inflation has risen 17%, according to a 2007 study by the Kaiser Family Foundation.[20] Employer costs have risen significantly per hour worked, and vary significantly. In particular, average employer costs for health benefits vary by firm size and occupation. The cost per hour of health benefits is generally higher for workers in higher-wage occupations, but represent a smaller percentage of payroll.[21] The percentage of total compensation devoted to health benefits has been rising since the 1960s.[22] Average premiums, including both the employer and employee portions, were $4,704 for single coverage and $12,680 for family coverage in 2008.[19][23]

However, in a 2007 analysis, the Employee Benefit Research Institute concluded that the availability of employment-based health benefits for active workers in the US is stable. The "take-up rate," or percentage of eligible workers participating in employer-sponsored plans, is falling. The percentage of workers actually covered has fallen somewhat, but not sharply. EBRI interviewed employers for the study, and found that others might follow if a major employer discontinued health benefits. Public policy changes could also result in a reduction in employer support for employment-based health benefits.[24]

Although much more likely to offer retiree health benefits than small firms, the percentage of large firms offering these benefits fell from 66% in 1988 to 34% in 2002.[25]

No comments:

Post a Comment