Unintended Consequences of Health Insurance through Employment.


This is something that we can all agree about.  I am going to describe an unintended consequence of the recently proposed legislation to achieve universal access to health care starting with its prehistory.  In the 1930s there was much controversy about socialized medicine.  A competent attempt at hospital insurance was floated under the name Blue Cross.  Only the name survives.  The actuaries and accountants who devised the original plan emphasized community rating in order to make the premiums affordable for the entire population with special concern for those with chronic diseases.  Community rating was absolutely needed to raise enough revenue from the healthy to cover the sick.  These pioneers thought of many other things, for instance lab and x-ray services were covered only in the hospital.  A patient could be a hospital patient for that purpose only.  This was because at that time, consistent quality control existed only for hospital laboratories and x-ray departments.  Blue Cross wanted to pay only for top quality services.


Along came wage and price controls during World War II.  Employers competed for scarce employees with fringe benefits especially health insurance because these were not included in the wage controls.  Later I heard from a labor executive that some labor leaders regretted pushing for health insurance at work because otherwise the government would have been compelled to provide it.


Health insurance as a fringe benefit at work was the beginning of “cherry picking” by insurance companies looking for the healthiest groups to insure thus enhancing profitability.  Blue Cross still exists in name.  Most if not all Blue Cross plans have gone commercial.


We all applaud the purpose of the Patients’ Bill of Rights, defending the public from arbitrary authority at HMO headquarters.  The unintended consequence is increasing numbers of part-time employees and employers opting out of health insurance entirely.  The percentage of our population without health insurance is rising steadily.  The costs of an effective Patients’ Bill of Rights will accelerate the increasing proportion of our population that is uninsured or inadequately insured.  


Another unintended consequence of fringe benefits at work is compulsory overtime with its health and social consequences.  I am referring not only to more stress and less family time but also to more unemployment.  It is cheaper for an employer to pay overtime to existing employees than to hire new help because of the increased expenditure for the new employees’ fringe benefits.


A rather subtle but important point: insurance through employment, because of employees changing employers every few years, results in inadequate funding of preventive medicine—the insurance companies do not want to pay for a benefit that will ultimately accrue to another insurance company years later.


Unintended consequences creep into the best-laid plans, the main reason for pilot programs for innovations.


John A. Frantz, MD, NASW 

April 28, 2009


Possible bad news.  Due to budgetary constraints the light at the end of the tunnel is being switched off.   Author unknown (Apparently our unknown author didn’t realize that the light is daylight and free).