# Why is health care still tied to employers? **URL:** \ **Category:** Great Debates\ **Created:** [August 8, 2009, 2:54pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740 "2009-08-08T14:54:57Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![the\_first\_supraliminal](https://avatars.discourse-cdn.com/v4/letter/t/f475e1/32.png) [@the\_first\_supraliminal](https://boards.straightdope.com/u/the_first_supraliminal)\ **Post date:** [August 8, 2009, 2:54pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/1 "2009-08-08T14:54:57Z")
Sure, I know how it started, with 18th century plantations and 19th century logging camps and company towns that had only one doctor, so the owner just paid him. Paternalism. The owner also supplied all the lodgings and meals. But now that the vast majority work in cities, not remote areas, and all those other things are separate from work, why is the medical expense still considered a job perk instead of a personal expense? ---
**Author:** ![athelas](https://avatars.discourse-cdn.com/v4/letter/a/5e9695/32.png) [@athelas](https://boards.straightdope.com/u/athelas)\ **Post date:** [August 8, 2009, 3:02pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/2 "2009-08-08T15:02:43Z")
From [here:](http://www.hoover.org/publications/digest/3459466.html) > [@](#): > > The answer for the United States begins with the fact that medical care expenditures are exempt from the income tax if, and only if, medical care is provided by the employer. If an employee pays directly for medical care, the expenditure comes out of the employee’s after-tax income. If the employer pays for the employee’s medical care, the expenditure is treated as a tax-deductible expense for the employer and is not included as part of the employee’s income subject to income tax. That strong incentive explains why most consumers get their medical care through their employers or their spouses’ or their parents’ employer. In the next place, the enactment of Medicare and Medicaid in 1965 made the government a third-party payer for persons and medical care covered by those measures. > > We are headed toward completely socialized medicine—and, if we take indirect tax subsidies into account, we’re already halfway there. > > The revival of the company store for medicine has less to do with logic than pure chance. It is a wonderful example of how one bad government policy leads to another. During World War II, the government financed much wartime spending by printing money while, at the same time, imposing wage and price controls. The resulting repressed inflation produced shortages of many goods and services, including labor. Firms competing to acquire labor at government-controlled wages started to offer medical care as a fringe benefit. That benefit proved particularly attractive to workers and spread rapidly. > > Initially, employers did not report the value of the fringe benefit to the Internal Revenue Service as part of their workers’ wages. It took some time before the IRS realized what was going on. When it did, it issued regulations requiring employers to include the value of medical care as part of reported employees’ wages. By this time, workers had become accustomed to the tax exemption of that particular fringe benefit and made a big fuss. Congress responded by legislating that medical care provided by employers should be tax-exempt. Note that during the Presidential campaign, John McCain campaigned on removing this tax exemption for employer-based healthcare. Obama attacked that idea as hurting the poor little workers, and why do you hate healthcare anyway? ---
**Author:** ![flickster](https://avatars.discourse-cdn.com/v4/letter/f/7bcc69/32.png) [@flickster](https://boards.straightdope.com/u/flickster)\ **Post date:** [August 8, 2009, 3:12pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/3 "2009-08-08T15:12:04Z")
It’s called an incentive/benefit - the employer provides availability to a group plan in order to attract, and keep, qualified employees. Most employers do this with greatly varying degrees of contribution. Some will provide coverage to the employee for free but family coverage is an is at employees expense, some will make a group plan available and only subsidize the cost to the employee’s coverage. some only make a group plan available - employee pays 100%. Some add options, such as life, ADD, Dental, Vision, etc Employees are free to pursue employment with firms that provide the coverage they wish to have. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [August 8, 2009, 3:19pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/4 "2009-08-08T15:19:54Z")
> [@](#): > > Note that during the Presidential campaign, John McCain campaigned on removing this tax exemption for employer-based healthcare. I must have missed that one. McCain was proposing a change that would increase taxes while raising business expenses for employers and medical expenses for employees? And people wonder why he lost. ---
**Author:** ![Johnny\_L.A](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnny_l.a/32/1084_2.png) [@Johnny\_L.A](https://boards.straightdope.com/u/Johnny_L.A)\ **Post date:** [August 8, 2009, 3:31pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/5 "2009-08-08T15:31:24Z")
> [@flickster](#): > > Employees are free to pursue employment with firms that provide the coverage they wish to have. Unless the employee has a pre-existing condition that would prevent him from obtaining coverage for it. In that case they’re free to continue working for their employer, or to not have any coverage. I believe there are some people here that fall into that category. > [@Little\_Nemo](#): > > I must have missed that one. McCain was proposing a change that would increase taxes while raising business expenses for employers and medical expenses for employees? I didn’t miss that one. I thought it was a dumb idea, as it would have reduced the amount of employees’ paychecks at the same time the economy was tanking. ---
**Author:** ![flickster](https://avatars.discourse-cdn.com/v4/letter/f/7bcc69/32.png) [@flickster](https://boards.straightdope.com/u/flickster)\ **Post date:** [August 8, 2009, 3:33pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/6 "2009-08-08T15:33:17Z")
> [@Little\_Nemo](#): > > And people wonder why he lost. McCain losing is no mystery. Bad candidate with a horribly ran campaign following a totally inept president with the same party name. Both may have been a Republican by name, but conservative - not hardly. The conservatives were pissed off enough at Bush, and saw McCain as a step in the wrong direction. ---
**Author:** ![flickster](https://avatars.discourse-cdn.com/v4/letter/f/7bcc69/32.png) [@flickster](https://boards.straightdope.com/u/flickster)\ **Post date:** [August 8, 2009, 3:35pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/7 "2009-08-08T15:35:46Z")
> [@Johnny\_L.A](#): > > Unless the employee has a pre-existing condition that would prevent him from obtaining coverage for it. In that case they’re free to continue working for their employer, or to not have any coverage. Not True - As long as you are covered by an existing group plan, pre-existing conditions are waved with the new employer’s group as long as there has not been a lapse in coverage ---
**Author:** ![mangeorge](https://avatars.discourse-cdn.com/v4/letter/m/d78d45/32.png) [@mangeorge](https://boards.straightdope.com/u/mangeorge)\ **Post date:** [August 8, 2009, 3:53pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/8 "2009-08-08T15:53:23Z")
> [@the\_first\_supraliminal](#): > > Sure, I know how it started, with 18th century plantations and 19th century logging camps and company towns that had only one doctor, so the owner just paid him. Paternalism. The owner also supplied all the lodgings and meals. > > But now that the vast majority work in cities, not remote areas, and all those other things are separate from work, why is the medical expense still considered a job perk instead of a personal expense? Really? From everybody (it seems) I hear modern health care is a legacy of the unions. This is often cited as another reason to hate unions. Kaiser Permenente did indeed originate when the Old Man established an employee hospital at the shipyards in the San Francisco Bay area. Personally, I consider health care to be part of my compensation package, which means that I obliquely pay for it. This is only important to me on the extremely rare occasion that I need to explain it to a KP employee. Peace, mangeorge ---
**Author:** ![DanBlather](https://avatars.discourse-cdn.com/v4/letter/d/f4b2a3/32.png) [@DanBlather](https://boards.straightdope.com/u/DanBlather)\ **Post date:** [August 8, 2009, 3:58pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/9 "2009-08-08T15:58:54Z")
> [@flickster](#): > > Not True - As long as you are covered by an existing group plan, pre-existing conditions are waved with the new employer’s group as long as there has not been a lapse in coverage If you go to work for another company that has coverage, and if you don’t go into business for yourself, and if you weren’t laid off. ---
**Author:** ![Grumman](https://avatars.discourse-cdn.com/v4/letter/g/43a26b/32.png) [@Grumman](https://boards.straightdope.com/u/Grumman)\ **Post date:** [August 8, 2009, 3:58pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/10 "2009-08-08T15:58:56Z")
> [@Little\_Nemo](#): > > I must have missed that one. McCain was proposing a change that would increase taxes while raising business expenses for employers and medical expenses for employees? No. As I explained at the time, McCain’s plan was to replace the all-or-nothing tax-free employer-provided health insurance with a tax credit that you receive regardless of whether your health insurance is employer-provided or not. It would have kept the bias in favour of getting health insurance while removing the bias in favour of employer-provided health insurance instead of individual health insurance. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [August 8, 2009, 4:17pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/11 "2009-08-08T16:17:37Z")
> [@mangeorge](#): > > Really? From everybody (it seems) I hear modern health care is a legacy of the unions. > This is often cited as another reason to hate unions. > Kaiser Permenente did indeed originate when the Old Man established an employee hospital at the shipyards in the San Francisco Bay area. > Personally, I consider health care to be part of my compensation package, which means that I obliquely pay for it. > This is only important to me on the extremely rare occasion that I need to explain it to a KP employee. > Peace, > mangeorge Health care, 40 hr work week, vacations, safe working conditions, overtime after 8 hrs, protection from indiscriminate firing, child labor laws the list for hating unions just goes on and on., ---
**Author:** ![mangeorge](https://avatars.discourse-cdn.com/v4/letter/m/d78d45/32.png) [@mangeorge](https://boards.straightdope.com/u/mangeorge)\ **Post date:** [August 8, 2009, 4:28pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/12 "2009-08-08T16:28:58Z")
> [@gonzomax](#): > > Health care, 40 hr work week, vacations, safe working conditions, overtime after 8 hrs, protection from indiscriminate firing, child labor laws the list for hating unions just goes on and on., Of course _I_ enjoy all these bennies because I’m so special! ---
**Author:** ![madmonk28](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/madmonk28/32/20811_2.png) [@madmonk28](https://boards.straightdope.com/u/madmonk28)\ **Post date:** [August 8, 2009, 5:00pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/13 "2009-08-08T17:00:56Z")
I think one of the reasons the current system continues is that it makes American workers slaves to their employers. ---
**Author:** ![DanBlather](https://avatars.discourse-cdn.com/v4/letter/d/f4b2a3/32.png) [@DanBlather](https://boards.straightdope.com/u/DanBlather)\ **Post date:** [August 8, 2009, 5:30pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/14 "2009-08-08T17:30:10Z")
> [@Grumman](#): > > No. As I explained at the time, McCain’s plan was to replace the all-or-nothing tax-free employer-provided health insurance with a tax credit that you receive regardless of whether your health insurance is employer-provided or not. It would have kept the bias in favour of getting health insurance while removing the bias in favour of employer-provided health insurance instead of individual health insurance. So he wanted to raise taxes so the gummint could hand out checks? That was one of those “only Nixon could go to China moments”. ---
**Author:** ![MandaJo](https://avatars.discourse-cdn.com/v4/letter/m/ac91a4/32.png) [@MandaJo](https://boards.straightdope.com/u/MandaJo)\ **Post date:** [August 8, 2009, 5:32pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/15 "2009-08-08T17:32:01Z")
Insurance companies sell plans more cheaply to companies because they are able to mandate that everyone in the company carry insurance–either through their company or a spouse’s plan or something. This is a good deal for the insurance companies because the problem with selling insurance on the individual level is that the least expensive people–the ones pretty sure they won’t get sick–don’t sign up, but all of the very expensive people (the ones that know they will get sick) do. By promising complete participation, businesses can negotiate with insurance companies. ---
**Author:** ![DanBlather](https://avatars.discourse-cdn.com/v4/letter/d/f4b2a3/32.png) [@DanBlather](https://boards.straightdope.com/u/DanBlather)\ **Post date:** [August 8, 2009, 5:37pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/16 "2009-08-08T17:37:15Z")
> [@madmonk28](#): > > I think one of the reasons the current system continues is that it makes American workers slaves to their employers. That’s a bit cynical. I think the problem is that the big and/or powerful constituencies either benefit from the current system or are not hurt by it. Old people don’t care because they have Medicare, corporations like it because they can offer a tax-free benefit to workers, workers who already have good insurance don’t care, insurance companies are making money hand over fist, and tort lawers are hoping to hit the lottery. So that leaves people under 65 who don’t already have health insurance; and a goodly slice of them are being riled up by Fox to fear socialism. ---
**Author:** ![tumbleddown](https://avatars.discourse-cdn.com/v4/letter/t/e9bcb4/32.png) [@tumbleddown](https://boards.straightdope.com/u/tumbleddown)\ **Post date:** [August 8, 2009, 5:44pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/17 "2009-08-08T17:44:54Z")
> [@Grumman](#): > > No. As I explained at the time, McCain’s plan was to replace the all-or-nothing tax-free employer-provided health insurance with a tax credit that you receive regardless of whether your health insurance is employer-provided or not. It would have kept the bias in favour of getting health insurance while removing the bias in favour of employer-provided health insurance instead of individual health insurance. Individual health insurance which, because the pool is smaller, is considerably more expensive than similar or even better coverage in a group, like an employer-based group, especially for the people who need affordable access to healthcare the most. ---
**Author:** ![Grumman](https://avatars.discourse-cdn.com/v4/letter/g/43a26b/32.png) [@Grumman](https://boards.straightdope.com/u/Grumman)\ **Post date:** [August 8, 2009, 5:54pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/18 "2009-08-08T17:54:59Z")
> [@tumbleddown](#): > > Individual health insurance which, because the pool is smaller, is considerably more expensive than similar or even better coverage in a group, like an employer-based group, especially for the people who need affordable access to healthcare the most. Everything you have said here is wrong. The pool _isn’t_ smaller unless the individual health insurance provider is a smaller company than the employer-based health insurance provider. Even if it is, a smaller pool means the stabilising effect is smaller, not that the service is more expensive. ---
**Author:** ![athelas](https://avatars.discourse-cdn.com/v4/letter/a/5e9695/32.png) [@athelas](https://boards.straightdope.com/u/athelas)\ **Post date:** [August 8, 2009, 5:55pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/19 "2009-08-08T17:55:04Z")
Well part of the point was to introduce more competition into insurance markets. If you have to pick the healthcare plan your employer offers, insuance companies don’t care that much about you the customer. Instead they’ll worry about winning big corporate contracts. ---
**Author:** ![DanBlather](https://avatars.discourse-cdn.com/v4/letter/d/f4b2a3/32.png) [@DanBlather](https://boards.straightdope.com/u/DanBlather)\ **Post date:** [August 8, 2009, 6:01pm UTC](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740/20 "2009-08-08T18:01:24Z")
> [@Grumman](#): > > Everything you have said here is wrong. > > The pool _isn’t_ smaller unless the individual health insurance provider is a smaller company than the employer-based health insurance provider. Even if it is, a smaller pool means the stabilising effect is smaller, not that the service is more expensive. Your are absolutely 100% incorrect. The risk-pool is not the entire group of customers the insurance company has, it is the group for which the insurance applies when you buy/negotiate coverage. As an individual you are a group of one, so they look at your individual risk. They will also look at the demographics of a company, and the number of employees, when they set the rates for a company’s group plan. [Next page](https://boards.straightdope.com/t/why-is-health-care-still-tied-to-employers/505740.md?page=2)