Decoupling Health Insurance & Employment🩺✂️💼
Tying health insurance to employment was never a grand design — just a WWII workaround that stuck. Decoupling health insurance from work is a good policy goal.
A lot of people, myself included, feel that the richest country in the history of the world ought to have basic health insurance coverage for the entire population. No weird gaps, no donuts, no people or families without protection from catastrophic health and financial risk. To be fair, we've gotten much closer in the last decade — the uninsured rate plunged from 15% in 2008 to 8% in 2024 — but reaching those last few percentage points of the population is extra challenging. The patchwork of private and government programs are annoying, inefficient, and overrun with low-value middlemen.
Personally, I think one of the original sins of U.S. healthcare was allowing it to become deeply intertwined with employment (more specifically, with corporate HR). The history behind this is interesting: during World War II, price and wage controls meant that employers weren't able to compensate employees as much as they deserved. In order to fully compensate workers, employers turned towards benefits like paying for health insurance. This trend was supercharged via the U.S. tax code by explicitly leaving employer paid insurance premiums untaxed beginning in 1943.1
The Affordable Care Act, for all of its flaws, insured around 20 million new people. While the uninsured rate was never strongly correlated with the U.S. employment rate, the uninsured rate has been more independent of overall economic conditions in the last 10 years or so.
On a state by state basis, the states with the highest unemployment rates tend to have the highest uninsured rates, but notice the correlation in 2008 was stronger than in the recent data. This suggests that we have been somewhat successful at decoupling insurance from employment.
Fully decoupling healthcare from employment is a really challenging policy goal — it would be disruptive for a lot of people, and most people really like their employer sponsored health plans. Still, I genuinely find it baffling that the corporate world wants to be directly responsible for the picking insurance plans for 150+ million people.
Regardless, now that healthcare coverage is back in the policy spotlight, it sounds like work requirements will be added to Medicaid health insurance. Forget the fact that the vast majority of Medicaid users are working — this policy increases the dependency between U.S. health insurance and employment, which might be a mistake.
Medicare, the other main source of government insurance, provides high quality insurance for everyone over the age of 65. Lots of 65+ year-olds are “able bodied” — should they have to work for Medicare health insurance?
Taxing premiums for health insurance as regular income is something a lot of health economists and some bold politicians have proposed. It would raise a ton of revenue — like $300 billion.