The Future of Employer-Sponsored Health Insurance

Employer-sponsored health insurance, the predominant form of health coverage in the United States, is becoming harder to find.

This pair of reports in the New England Journal of Medicine describes the history of employer-sponsored health insurance (ESHI) in the United States which arose in large part due to the Great Depression and World War II. Coverage with ESHI peaked at 66.8 percent of non-elderly Americans in the year 2000 and has slowly declined in recent years – resulting in approximately five million employees to lose insurance coverage.

Important changes – not always in health policy – have affected the role of ESHI in American Society. For instance, rules imposed by the Financial Accounting Standards Board in 1990 dramatically altered the way in which retirees’ health costs were represented on the balance sheets of corporations. These changes negatively impacted Wall Street’s view of many companies that had not previously carried the future liability of retiree health costs on their balance sheets. Policy changes such as these may account for the decline in retiree health coverage in the past decade.

Although ESHI covers a majority of Americans, fragmentation within this pool has limited the diverse universe of employers from leveraging significant change from the health care delivery system. Certain business groups, such as the Leapfrog Group have had minor successes in improving patient safety and promoting the use of computerized physician order entry. However, recent interventions such as consumer-directed health care have seen little implementation – firms offering HSA’s and HRA’s represent only 2.6 and 1.6 percent of all U.S. firms respectively. Other strategies such as pay for performance and disease-management programs currently lack critical analysis of their effectiveness at reducing medical costs and improving quality of care. Of those interventions imposed by employers, the one that appears most successful is tiered copayment strategies for pharmacy benefits.

Commentary:

The future of ESHI is uncertain. A steady erosion of employer coverage will likely continue as current trends predict. However, the business community – historically and presently – remains philosophically opposed to a government solution for ensuring health care for all Americans.

NEJM 355; 1:82-88.

NEJM 355; 2:195-202.

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