The big question here, of course, is employers. Why they haven't risen up and demanded an end to the employer-based health care market is one of the questions that I've never been able to answer. Why does GM want to build cars and also provide health insurance? Why does Google want to be both a tech company and a medical coverage provider?

maybe because it gives them leverage over their employees who stay in dead-end jobs because they're worried about keeping their health coverage?

Because they don't want their workers to quit en masse in response?

On a very basic level, healthy workers are more productive, so that's part of it. But I'm convinced that many big employers who are competing on the world market would love nothing more than to be able to ditch health coverage. If there were a truly viable alternative that wouldn't cause the unions to go berserk, employer-based health care would be gone.

Because the people who run those companies make their killing whether or not the company survives. That is not their money the company pays. Meanwhile movement towards socialized anything is the bogeyman of the wealthy who run these companies.

Have we not seen enough examples in the recent past of executives who would gladly over leverage their businesses to near extinction for a few more bucks?

I do not pretend to know the answer to your question but according to Dan Ariely and Robin Hanson it creates strong loyalty to the employing organization. To Ariely and Hanson healthcare is not so much about health but about showing that you care. It shows that employees are on the same team building a one for all and all for one mentality. Ariely says that health insurance will achieve more loyalty than higher wages and that if need to call on someone for a difficult task you are in a stronger position if you give health insurance. You listen to Ariely discus this with Will Wilkerson on blogging heads. You listen to Hanson discus this with Russ Roberts on econtalk.

BTW This team idea is why Lester Thurow says that it was a big mistake to exempt part time employees from certain law. In his writing he has said that it is easier to exclude part timers from the team benefits. That company cultures do not like to exclude full time workers from team benefits.

For the Big Guys, perhaps each is waiting for the competition to make the first move. For many of the little guys like Joe the Plumber, to align with the single-payer crowd would, perhaps, be too much of a repudiation of a world view that sets them, the strivers, apart from the rest. (Notwithstanding his comments about the Fair Tax alternative and his objections to the 'spread the wealth' comment, Joe continued to characterize Obama's answer as an evasion even though he, Obama, correctly put Joe in the bracket that would benefit from his tax plan. Joe staked out an ideological position that was aggressively resistant to the basic fact: Obama would serve him better than McCain.)

I think the reason employers are hesitant to move away from an employer based system is that they perceive it will be the worst of both worlds. The average employee does not think of the healthcare as a form of compensation in place of wages. So in the instant that an employer cashes out their employees premiums employees will be disgruntled because employers are no longer "giving" them health insurance.

The big question here, of course, is employers. Why they haven't risen up and demanded an end to the employer-based health care market is one of the questions that I've never been able to answer. Why does GM want to build cars and also provide health insurance? Why does Google want to be both a tech company and a medical coverage provider?

Big companies mostly can afford to buy health insurance -- or they can at least afford the implement strategies to alleviate the onerous cost (offshoring, etc.). This would be especially true for a high margin business like Google or Microsoft. In fact auto executives have questioned the status quo -- but they're in the minority (most large American firms are highly profitable). I think for large US firms the issue is control: if it's not killing your business model, better to stick with something you can control than throw your lot in with a government plan that, in addition to usurping that control, is also likely to focus heavily on business as a funding source.

If you were to survey small business on the other hand, I bet you'd see considerable support for government-mandated reform.

Ezra: what do you think of the prospects for the Wyden plan in 2009? Any chance a president Obama might be convinced to support it over his proposal? FWIW I've grown increasingly comfortable with the Obama plan. It's not perfect, but it's politically very astute, and if it gets passed, it establishes a foundation that can be utilized to ramp up to full UHC (even single-payer style if we want) pretty quickly.

On the one hand, many of the businesses that would be behind the move to get rid of employer-provided health care have already dispensed with employer provided comprehensive health care and provide something that puts most of the burden on the employee.

And since overtime penalty wages do not include benefits, a system that encourages employees to accept a substantial portion of their renumeration in benefits also reduces, or in some cases eliminates, the penalty associated with overtime for hourly employees.

I'd imagine that until the sharp increase in health care costs and premiums, the employers previously came out ahead: the cost of subsidizing health care as a benefit of employment was balanced out by the tax deductions and the employee retention.

Why they haven't risen up and demanded an end to the employer-based health care market is one of the questions that I've never been able to answer. Why does GM want to build cars and also provide health insurance?

Some of the other responses are right to point out that it creates a sense of loyalty to the employer. Also, as much as employers may hate paying for healthcare, they do want a healthy work force. And on some level leaving coverage up to the individual is somewhat risky in the sense that if they decide to forgo insurance and get sick for whatever reason and end up being unproductive or missing work that if bad for the employer (unless you believe that a worker is a worker is a worker, which is increasingly less true in the US economy given that its increasingly services based).

Also, as for why it may be desirable for employers to provide healthcare is simply because as group they have better negotiating power with insurance companies. Try getting an individual policy in NY state and you'll see how unfun that is. The only reasible way to abolish group employer based health insurance system is to have an individual mandate combined with no medical underwriting. Of course, unless you don't mind government providing the whole thing.

But I am admittedly a bit new to your blog to understand which position you're coming from exactly.

And also, regarding the original..

WHO SUPPORTS THE EMPLOYER-BASED MARKET?

.. can't ignore the role of insurance companies and providers. They are set up to resist any structural change. Status quo is king for them.

I also finally read the whole Jacoby article and there are many other problems with it which I may address on my blog but most importantly: blaming the rising costs and premiums on lack of price transparency and consumerism is off because the employers do negotiate those premiums and they are going up for other structural reasons like the prices of new technologies or the above-inflation growth in nurse wages. If you had to negotiate either your premiums or provider charges as an individual you power would be even smaller that of your employer (who has all the incentive to try to keep them down as it is - they are footing the bill for much of it, after all).

So no, getting rid of employer based health care won't stop the skyrocketting costs in healthcare costs. But it could arguably lead to fewer disparities among providers or channeling or care to cheaper sites of care (eg, get the procedure done at a surgery center instead of a hospital).

Sorry for the ramble ;)

I absolutely agree! It is in the long-term best interests of employers to get out of the health care business, unless they are actually hospitals or dental offices. I recall that some CEOs of very large companies are starting to publicly acknowledge that a different system would be better. I know the U.S. automakers have been whining for years about how much benefits add to the price of cars and reduce their competitiveness.
I think Obama has the only practical solution. First, get more people insured. As we get closer to universal, transferable health insurance, the more people will start seeing it as a right, not as luxury. As part of that process, with government-run insurance available to all, some will start to choose (or be forced to elect) that system.
Then, like the trickle through the crack in the dam, more and more people will start signing up for the government program, once they see it work. As the government option continues to grow, employers will start dropping their own plans because it won't be worth their effort, and the trickle will become a gush of people switching. At that point some large corporations or large unions will realize that it is preferable to pay workers more cash, rather than provide health benefits, and at that point the gush becomes a torrent and the dam collapses is inevitable.
The insurance companies and HMO's eventually die of malnutrition rather than by government firing squad, as we evolve to a de facto single-payer country like the rest of the civilized world. In a generation, no one will even spend the time to wonder why the issue was ever even debated. Medicare and Social Security weren't born until 1935. Gas streetlighters used to provide an important service at one point in our history, too.

Well I'm not particularly young and not childless, and scared stiff of losing my insurance. But much more so from my employer dumping it or making it too expensive than from the govt. getting into the business.

Perhaps the short, easy answer is, people who run businesses are no more logical than anyone else, and Americans in general have a seriously warped Puritan mentality about receiving healthcare. Add some anti-government paranoia, several decades of Republican "Wooo! High taxes and 3 mile lines for aspirin!" scare tactics, and you have a big brew of stupidity that is hard to dispel.

Umm, they *don't* want to pay for health care. The big 3 CEO's met with Bush on Nov. 14, 2006, and told him that they wanted help from the government. They can't abrogate their responsibilities, but it doesn't sound like they're happy with them.

http://money.cnn.com/2006/11/14/news/companies/bigthree_bush_meeting/index.htm

"The auto executives stressed that despite huge losses, their companies were not looking for loan guarantees or a federal bailout. But they did want help on health care policy, energy and other areas that could be costly for the federal government."

and

"Health care costs are one area where the automakers say they can't compete with overseas automakers, who have much of their employees' medical costs covered by their governments. By comparison, the Big Three expect to pay more than $12 billion this year to cover medical expenses of more than 2 million employees, retirees and their dependents."

The big question here, of course, is employers. Why they haven't risen up and demanded an end to the employer-based health care market is one of the questions that I've never been able to answer. Why does GM want to build cars and also provide health insurance? Why does Google want to be both a tech company and a medical coverage provider? It's absurd. But employers, for reasons that are beyond me, insist they have a central role to play in this marketplace. That is, for now, true.

There are reasons, but ones that don't convince me either. This would be a great investigative journalism piece. If we could only find someone who's paid to write on health care and has interest in the issue....

I work at a State University in California and we REALLY like our employer paid healthcare. We generally like our jobs and appreciate the health care benefit. The State negotiates with health providers and you have a cafeteria list of choices. Frankly it might be a pretty good national model. Our wages aren't as high for comparable jobs in the private sector but it's a good trade-off.

My guess is that employers don't want to give it up for the same reason as employees, as Ezra describes. A new system is a new system. Creating the parallel insurance exchange is an opportunity to test something out that could later be expanded for both.

When we say that health care fosters a sense of loyalty, that can also be taken in another way: do whatever you have to do to keep this job, because otherwise your next employer won't offer care, or it will be to expensive and you'll be tossed into the individual market and priced right out of your life.

For companies with even mildly risk-averse employees, this means that the value of wages plus insurance to the employee isn't the (tax-deductible) cost to the employer but rather wages plus worst case individual or uninsured-care cost.

In the days before portability was mandated by law, insurance had a very visible effect on employee mobility.

Why do corporations choose to provide health-care for their employees? Well I'll answer that, and give historical context as to why they chose to do so out of purely self-serving motivations. 50 year ago, there was a movement afoot by corporations to give employees health-care because there was, because of union-strength and the sheer size of the industrial economy, a smaller pool of workers for a large number of jobs. Workers had the upper-hand, and could more readily pick and choose the company with which they chose to work for. Consequently, employers needed an enticement beyond the job, with which to attract prospective workers. Over time, and as the concept of automation and off-shoring of manufacturing jobs accelerated, in addition to the acclivity of health-care cost to the employer, the benefit of providing health-care to employees effectively shrank. So here we are in 2008, with the truth of why employers offered healthcare to employees out in the open for all to see, the need to make sure that every citizen has access to health, dental, and vision care has not gone away, but the responsiblity of who provides it (All of us.)to the citizen has shifted.

If an employer had a choice of paying $100 per employee for insruance or seeing their taxes go up $120 for the government to provide it why change? self funded employer plans are considerably more efficient then any government plan out there. The employer also retains control year to year to adjust cost depending on economic factors. IRS doesn't give you that option.

Despite how much most of you don't want to believe it employers care about their employees.

I think it might be a mixture of three main reasons:

1. Ideology Most of the people that manage major companies are not friendly to the idea of univeral health insurance. They probably see it as part and parcel of the regulatory environment they love to hate. Plus, they probably see it as requiring higher taxes.
2. Competitive advantage: large employers who rely on skilled workers use the health care benefit as a way to lure skilled workers who are in demand away from smaller competitors who are competing for workers and might pay more in salary. Workers in fields like the bio-sciences, computer sciences, skilled machine operation, etc. We are in an economy where knowledge is a premium, and workers who have the right skills are in demand.
3. fear of the unknown: Most of the leaders of large companies are not knowledgeable about the advantages of universal insurance for them. They probably would be more enthusiastic if they were educated on it a little better.

Ideology Most of the people that manage major companies are not friendly to the idea of univeral health insurance. They probably see it as part and parcel of the regulatory environment they love to hate. Plus, they probably see it as requiring higher taxes.

That's the big reason. Supporting universal healthcare would require supporting Democrats and higher taxes. This might be good for their companies but it would be bad for their personal bottom lines. It's a classic principal-agent problem.