COVID-19 Exposed the Fragility of Job-Connected Health Insurance For People and Employers

Millions of Americans have lost their jobs during the COVID-19 pandemic. Job loss, of course, takes an emotional toll on people, but because many workers in America get their health insurance benefits from their job, unemployment can hit people on three levels – emotional, financial and health security. According to new research from the Economic Policy Institute, over the past seven pandemic-ridden months, more than six million Americans have lost the health insurance they previously received from their employer. Once spouses and children are taken into account, the real number is closer to 12 million. Other estimates from the Kaiser Family Foundation found that as many as 27 million people could become uninsured following job loss. People want to know their health care coverage is secure when life changes, including when  losing or changing a job.The COVID-19 pandemic, however, has jeopardized health care coverage for millions of people just when the health of each individual is connected to the overall health of each other. People should have the liberty and freedom provided by health coverage security that doesn’t disappear when you lose or change your job.

Unintended Consequences of 7-Decades of Job-Connected Health Insurance 

 Job connected health insurance emerged by accident during World War II when the federal government — to keep price inflation low — blocked companies from boosting wages to attract scarce workers. In exchange, companies began offering non-cash benefits, which led to the government making job connected health insurance exempt from taxation. This decision led us to our current system in which employers use money that otherwise could be paid as wages to provide for their employees’ health care. 

Today, the tax break for job connected health insurance is the nation’s single largest tax expenditure. This structure has saddled American businesses and state and local governments with out-of-control costs and workers with decreased wages while also imposing ever-higher premiums, deductibles, and other out-of-pocket expenses. According to the Kaiser Family Foundation, health premiums have skyrocketed 54 percent over the past decade, while wages have remained flat. The result is an extremely regressive system in which the more income you earn, the greater the government discount to purchase health insurance through your employer. On the flip side, the less one makes, the less of a benefit one receives. That is likely why half of Americans are concerned about health-related bankruptcy, demonstrating perhaps that even those with health coverage face costs out of their reach. According to Gallup, “Those in households earning less than $40,000 per year are more than four times as likely as those in households earning $100,000 or more to be carrying long-term medical debt (28% vs. 6%, respectively).” The system also exacerbates racial inequity and prevents wealth-building as 1/5 of non-white adults carry long-term medical debt.

COVID-19 Raises Questions about Connecting Jobs and Health Care

The COVID-19 pandemic has exposed how tenuous job-connected health coverage can be. As a record number of people lose their jobs, they are also losing health coverage during a pandemic, a time when affordable access to care is more critical than ever. 

The economic and health challenges posed by COVID-19 put both employers and their employees in a nearly impossible position. Dawn Drouillard, the co-owner of a catering company in Minneapolis, explained how she felt when the pandemic forced her to let employees go. 

“It is difficult to know that our employees are losing their jobs as well as their health coverage because we no longer have the funds to cover it. This really adds insult to injury because not only are you deprived of your livelihood, but you’re also, potentially, losing your life. It’s heartbreaking, and I can’t fathom how we got here as a nation. As a business owner, I feel my duty should be to create a fair, equitable, and safe work environment which supports people and gives them valuable skills in the workforce. I don’t understand why the burden of employees’ health insurance and their family’s health and well-being is my obligation without the additional safety nets that protect my and my employees’ well-being in cases like this crisis.”

Our immediate challenge is maintaining insurance protection for the millions of displaced workers and their families and the tens of millions more anxious about losing it. That is why there is short-term urgency for policymakers to provide as much cushion as possible by shoring up state Medicaid programs, making it easier for people to enroll in existing coverage options, and subsidizing COBRA to help people temporarily keep their coverage after a job loss. The overall structure of how we provide health security to millions of people in both good and bad economic times, however, should also be considered. 

Even more so, the pandemic is allowing people and businesses to more clearly see the inefficiencies, challenges, and inequities of our health care system; COVID-19 has magnified the risks that come from tying our health security to our jobs. Connecting this critical security to our jobs — for about half of the US population — leaves as many as 160 million people vulnerable to losing both at the same time. 

The entire concept of insurance is ultimately about financial security — decoupling health coverage from one’s job would allow people to diversify risk and not face the loss of health coverage at the same time they lose their livelihood. It would also free employers — most of whom are not health care benefits experts — from the financial and time-intensive efforts necessary to administer health benefits.

In a paradigm in which access to health care is essential not just to individuals but also to people as-a-whole, relying on structures tieing financial protection from unanticipated health care costs to employment puts individuals, businesses, and our society at risk. That is why employers are a crucial component of how we will bridge the distance between work, economic downturns, pandemic response, and overall well-being.  

But first, critical questions need to be asked about how health care security can become more affordable and durable in good times and in bad. To assist in this effort, US of Care is releasing a brief that examines approaches utilized by several states and leading private companies to control the costs increasingly straining the system. 

COVID-19 is changing both the world and our health care system in ways that seemed unimaginable just months ago. Now is the time to think about how we want to change our system to better meet our needs by asking: 

• What role do we want our employers to play – and what role do they want to play – in how people access health care? 
• How can job connected health insurance systems evolve to ensure greater stability in care for people, especially in times of economic calamity or a public health crisis? 
• What tools and incentives do employers need to use their negotiating clout to demand better prices and quality for their employees?
• How can employers use benefits to attract and retain talented workers, while providing everyone, including those in the gig economy, with health security? 

USofCare wants to be a part of the solution. We are bringing together policy experts, employers, innovators and people experiencing our health care system to understand what currently works and what alternatives could look like. Our current job-based system has been in place for decades, and now it is time to think about a system that can give people the health care coverage security they want no matter what life may bring.