Healthcare Cost and Employer Responsibility


Employment based health benefit programs have existed in the United States for over one hundred years.  Railroad and mining industries provided the first known programs in the 1870s.  Companies provided doctors to the workers who were normally at a work site and away from home.  A few other large industries would adopt this strategy over time but prior to World War II, few Americans had health insurance and the coverage that did exist was specific to hospital-administered care. During World War II, a shortage of workers occurred due to the high percentage of able-bodied men enlisted in the Armed Services.   At this time, the National War Labor Board froze wages restricting what employers could pay in what was a very competitive labor market.  For this reason, employers looked to alternative ways of attracting workers.  Health insurance became one option for providing a value-based incentive to available employees in effort to gain their services.  In 1940, less than ten percent of Americans had some form of health insurance coverage, but by 1950, more than fifty percent were covered. This growth was clearly due to employers looking for a benefit to attract the highest quality employees.

The landscape of health insurance and the health care industry has changed dramatically since 1950.  In 1950, healthcare spending accounted for four and one half percent of the Gross Domestic Product.  In 2010, it accounted seventeen percent of the GDP, with an expectation that this would rise to over twenty percent by 2021.  With the escalating rise in the costs of healthcare, the cost to employers who provide coverage has increased dramatically.  Insurance premiums have increased one hundred thirty one percent in the last ten years.  With this in mind, it makes sense that many employers have found it cost prohibitive to provide insurance to employees.

The role of business in society is to provide a service or good in exchange for money.   Employers have historically provided Health Insurance in an effort to attract the highest quality employees, which in turn would allow them to provide the best service or goods in effort to maximize their profits.  Businesses are not only measured by the returns they provide their shareholders, but also the social and environmental impact they have in their communities.  A growing challenge for any business is how to balance the expectations set by government in creating societal cohesion while still maintaining the core purpose of sustaining profitability.  This brings us to the current expectation put forth by the government that the business community is almost entirely responsible for providing health insurance to the whole country.

Universal Healthcare is a noble goal, one that is reasonable if achieved, and is certainly for the betterment of society as a whole.  However, the route we choose to meet this goal will have long reaching consequences.  By putting the major financial burden on the Business community, government has forced private business into the role of social welfare.  This flies in the face of their primary profit motive.  In an ever-growing global economy the question that must be asked is, how sustainable is this system?  Can American business continue to compete and grow in the face of a uneven playing field?