Employer Mandates

As we focus in on a plan to reform healthcare, we must ensure that we learn valuable lessons from what works and what doesn't work in other health system. Cross national models of healthcare delivery provide valuable insight into the likelihood that reforms will have meaningful impact. We know that most of the developed world has managed to provide universal coverage for its citizens, but how did they accomplish that? In Brittain and Canada, they turned to a single-payer system managed by the government to provide healthcare to all citizens. As a result, they have faced shortages and rationing as government budgets dictate health delivery with all the incumbent political pressures. But the rest of the developed world has avoided this pitfall. How have they done it? Employer mandates.

Our country already functions largely upon employer provided healthcare. About 60% of Americans receive their healthcare through their employers. When combined with those covered under Medicare and Medicaid, we find that 15% of Americans remain uninsured in the current system. Who are these people? As Medicaid covers the unemployed, most of the uninsured are either at small businesses that cannot afford to provide health coverage for their employees, or they are freelance workers who either choose to go without health coverage or cannot afford the premiums. This number is growing in the economic downturn as more employers drop coverage when the cost becomes untenable.

Looking at other countries can allow us to determine what to do about this 15%. Most of Europe, Japan, Israel, and a host of other countries have utilized employer mandates to cover every citizen. Under these systems, every employer is required to provide healthcare for all workers. Small businesses receive assistance from the government to ensure their ability to pay for health coverage. Freelance workers enroll in insurance pools that greatly reduce the cost of health insurance. Most of these countries require that all citizens carry some type of health insurance either through their employer, through the freelance clearinghouse, or under the government's indigent program (much like Medicaid). To ensure that insurers treat consumers fairly, most of these countries also develop the "benefits basket" which are mandatory services that all insurers must provide. To compete in the marketplace, many insurers will provide additional services not included in the "basket."

So, why can't we do this in America? The simple answer is - we can. In the 90s, the Clinton healthcare plan actually approximated an employer mandate system, but was so complex and unwieldy and designed without stakeholder influence, so it was easily decimated by industries that would have suffered under it (e.g. health insurers who would face greater market competition that would cut into profits). According to a recent survey conducted by the Employee Benefits Research Institute (EBRI), 3 out of 4 Americans support an employer mandate for health care coverage. Clearly there is much interest in such a system, both from the perspective of policymakers and from the public.

What stands in the way of an employer mandate? Business, of course. The U.S. Chamber of Commerce and the National Retail Federation, amongst others, have been very outspoken on this issue which they feel will put an undue burden on business, especially small businesses. The Health Insurance Industry has been straddling this issue, fearful for the increased competition that might drive down profits while excited about the prospect of having an additional 15% of the population as members of an insurance plan.

Looking at so-called "ObamaCare," there are overtures toward an employer mandate system. There are incentives in the various bills for employers to cover their workers, especially for the small businesses that currently opt out of such a system. The President and many of his Democratic colleagues feel that a public option is also necessary, not only to plug the gap which may still remain between Medicaid and the employer system, but also to create even more competition on the insurance market. The fear that the public option would eliminate the private insurers due to better rates and services is largely grandstanding - this would only happen if insurers choose to NOT be competitive in order to maintain high profit margins or do not find internal ways to reduce their administrative costs which are currently well above those required for Medicare.

So, Obama's plan, while not an employer mandate and relying more heavily on government programs, does accomplish many of the goals of the employer based systems of the other developed nation. With an increased buzz about employer mandates and support from big businesses like Walmart and Target, later versions of the bill may find it useful to increase subsidies to small businesses for providing insurance and create insurance pools for freelance workers. Time will tell whether our great nation can learn from the experiences of others.