America’s current system of employer-sponsored health insurance is an accident of history that emerged from the Great Depression and the Second World War. But that doesn’t mean it’s going away in this era of rebuilding, or at least rethinking, health care. In fact, I believe that employer-sponsored health insurance offers a model for the future.
No other industrialized nation’s health care system is dominated by employers. Then again, no other industrialized country lacks a public health insurance system that covers almost all of its citizens.
As a doctor who has seen patients harmed by a lack of insurance or uncertain coverage, I support the idea that government-sponsored health insurance for all could be a promising alternative to our current system. But as a practicing physician and researcher who looks at the politics and economics of changing our health care systems, I’m not going to put my eggs in the government’s basket and wait for change to happen.
We’ve obsessed for years over the Affordable Care Act which — mainly through Medicaid expansion — has made public insurance available to more than 10 million Americans who had previously lacked coverage. Despite this impact, the act hasn’t meaningfully changed how most Americans are covered: employers are paying for and designing health care plans for more than 150 million Americans.
Whatever your sociopolitical leaning, it’s difficult to ignore the power that employers have in our health care system. When three of the most respected CEOs in the world declared they wanted greater transparency and value from their investments in employee health care, it got people talking about how employers can change health care for the better.
I believe that employers represent the only viable opportunity to shepherd real change into a system plagued by high costs and low health outcomes. Here’s why:
A check on private insurance. Over the last few decades, employers have kept our health insurance coverage and costs from spiraling out of control by leveraging their buying power. Today, 65 percent of employers self-insure, eliminating insurer profits and maintaining coverage stability for individuals. They do this without the uncertainty associated with whether the government could, as it did in July, suddenly withdraw billions of dollars in risk-transfer payments from private, individually purchased plans.
Aligned incentives. Everywhere you look across health care, incentives seem to be misaligned. Health care providers mostly get paid per service, so they want to provide more services. Insurers make profits of 15 percent to 20 percent of premium dollars, so they want premiums to go up. Employers are the exception. They have an incentive to achieve sustainable cost control since they pay directly for most health care costs. They aim to keep their employees for years, so they take a longer-term view than private insurers. And they know that providing better coverage is good for them in two keys ways: it gives them a competitive advantage and it gives them healthy employees, who are more productive.
Appetite for rapid change. Unlike the relatively slow process of pushing change through regulation, employers have demonstrated the capacity to rapidly adopt innovation. Technology and new approaches to care are giving employers greater control over their health care investments than ever before. Unfortunately, the data-driven decision making that defines medicine has been alarmingly absent in decisions about health care services offered or the design of health care coverage, though that is changing. Employers now have a host of new solutions available to them, from delivering care digitally to measuring how programs are working. Over $3.4 billion was invested in digital health in the first half of 2018 alone. The vast majority of companies working in this space are focused first on improving employer health care. And employers tend to be the first adopters of new financial arrangements with health care providers that move them away from the fee-for-service structural misalignments toward paying for value in health care.
Controlling the conversation. The vast majority of health care policy decisions that affect working Americans are not made by health policy wonks. Instead, they’re made by employers’ human resources and finance teams who are turning to each other (and not to academics, to the dismay of many of my colleagues) to find better strategies for taking care of their people and managing their health care costs. The fact that this has now become a CEO-level conversation, thanks to the prompt from Bezos, Buffett, and Dimon, is a good thing for improving the U.S. health care system as a whole.
Employers represent thousands of opportunities to get health care working better and to spread those improvements: better experiences, better cost outcomes, better clinical outcomes. Success stories on costs and outcomes in the employer-sponsored market offer examples to emulate. The fact that Atul Gawande, an exceptional diagnostician of what ails our health care system, was chosen to lead the Amazon, Berkshire Hathaway, JPMorgan health care company is a signal that employers are in a powerful position.
After more than 60 years of an employer-sponsored health care system in the U.S., it seems the country is finally ready to transition to an employer-driven health care system.
Rajaie Batniji, M.D., is a clinical assistant professor of medicine at Stanford University and co-founder and chief health officer at Collective Health, a California-based company that provides a self-insurance platform that businesses can use to design and administer their employee health benefits.