By a ratio of nearly two-to-one, working Americans would prefer to choose their health insurance company themselves rather than leave that choice to their employers. 40% of survey respondents answered "No, I would prefer to make the decision" when asked "Would you prefer your employer choose your health insurance annually or would you prefer to make the choice yourself?" Only 22% of respondents answered, "Yes, I prefer my employer make the decision." An additional 38% of respondents indicated that they were either unemployed or their employer did not offer health insurance. When excluding this latter group, 65% of respondents would prefer to be the decision maker with respect to health insurance company choice.
Census data from 2010 indicates over 169 million Americans have employer-based health insurance1 representing 66% of all people with health insurance in the U.S.2 Under employer-based health insurance, the employees’ healthcare options are limited to those insurance companies selected by their employer. Multiple health insurance companies may be offered to employees of a large company while in small companies employees may have as few as one option.
World War II-era events contributed to the current dominance of employer-based coverage within the U.S. health insurance market. Before World War II, a small percentage of Americans had health insurance through their employer. However, a series of taxation and benefit considerations altered the health insurance landscape. The Revenue Act of 1939 excluded health insurance compensation from taxation.3 The War Labor Board in 1943 determined that a wage freeze could not be applied against health benefits.4 By the mid-fifties, employers’ contributions to employee health insurance were excluded from taxation and affirmed as a business expense.5 Taken together, these factors contributed to more employers providing health coverage as well as a consumer cost advantage of employer-based health insurance over health insurance purchased by an individual with after-tax dollars.
Another factor contributing to the dominance of employer-based health insurance in the American market concerns medical underwriting, the process by which insurance applications are evaluated based on a review of health status and medical history. In the individual and family health insurance market, most states allow insurance firms to reject applicants due to medical history or current health status.6 Previous research by HealthPocket found that one-out-of-five applicants on average are denied coverage7 in this market.
Employer-based health insurance, in comparison, is group health insurance where employees in companies of 2 to 50 employees cannot be rejected due to medical underwriting thus making the coverage more attractive to those with pre-existing conditions and other health concerns. This provision is known as "guaranteed issue" and was enacted as part of the Health Insurance Portability and Accountability Act.8 Large group insurance for companies over 50 employees is not guaranteed issue. An insurer can reject the large group as a whole but cannot reject eligible individual employees based on medical underwriting if the large group has been accepted for insurance.9
While it is difficult to predict with certainty future developments in the U.S. healthcare market, there are several forces that may result in more working Americans choosing their own health insurance company. Most notably, the elimination of many disparities between the individual and employer-based health insurance markets under Obamacare will result in easier worker migrations from the employer market into the individual market. Subsidies will exist for those workers whose employers fail to provide health coverage or that provide coverage that does not meet Obamacare’s definition of affordability. Essential Health Benefits requirements will bring greater parity among benefits received from health plans in either markets. The risk of insurance denial because of health will also be eliminated in the individual market due to Obamcare’s guaranteed issue provision.
It is not surprising given these and other factors that the employer-based health insurance market will change, resulting in more workers choosing their own health insurance company in the individual market. The Congressional Budget Office (CBO) has projected employer-based coverage to decline by 7 million enrollees by 2023.10 This figure includes several million people that are expected to be offered employer-based coverage but choose to purchase coverage in the individual market.11
For those workers that remain in employer-based coverage, opportunities for health insurance company choice are also expected to increase. According to research by Accenture, millions of workers will eventually use private health insurance marketplaces where employers contribute a fixed amount towards their employees’ health insurance and the employees then select their own insurance company from within the marketplace.12
30% of survey respondents indicated that they were not employed, a percentage that was 6.5% points lower than the Bureau of Labor Statistics (BLS) estimate of Americans who are not employed, though the BLS’ statistics include people starting at age 16 while HealthPocket’s survey respondents began at age 18.13
8% of respondents answered, "My employer does not offer health insurance."
Results are based on 781 responses to an online survey conducted from July 16, 2013 to July 18, 2013. Respondents were asked "Would you prefer your employer choose your health insurance company annually or would you prefer to make the choice yourself?" Respondents had the option of selecting one of the following answers displayed in random order: "Yes, I prefer my employer make the decision," "No, I would prefer to make the decision," "My employer does not offer health insurance," and "I am not employed." The survey was displayed within a network of over 100 different news web sites and other content sites. Demographic inferencing and methodology to acquire survey respondents who approximate national statistics on age, gender, income, and region was performed by Google-administered technology. Race, education, and health insurance status were not examined. Margin of error across survey responses is estimated at + 3.8/-3.7.
This survey analysis was completed by Kev Coleman, Head of Research & Data at HealthPocket.com. Correspondence regarding this study can be directed to Mr. Coleman at firstname.lastname@example.org.
Feedback and questions are welcome but, given the volume of email, personal responses may not be feasible.
1 http://www.census.gov/hhes/www/hlthins/data/incpovhlth/2010/highlights.html Accessed July 18, 2013.
2 Ibid. The United States Census Bureau determined that 256.2 million Americans had health insurance in 2010 with 169.3 million receiving that coverage through an employer-based arrangement.
3 http://www.ebri.org/publications/facts/index.cfm?fa=0302fact. Accessed July 19, 2013.
6 Kaiser Family Foundation “Health Insurance Market Reforms: Guaranteed Issue.” http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8327.pdf. Last accessed July 19, 2013.
7 Coleman, Kev. "Health Insurance Application Rejection Rates Rising?" HealthPocket.com (January 24, 2013). /healthcare-research/infostat/health-insurance-application-rejection-rates/
8 “Health Insurance Market Reforms: Guaranteed Issue.”
9 See the National Association of Health Underwriters’ web page “Consumers Guide to Group Health Insurance.” http://www.nahu.org/consumer/GroupInsurance.cfm. Last accessed July 19, 2013.
10 http://www.cbo.gov/publication/44176. Last accessed July 17, 2013.
11 See footnote “e” in Table 1. http://www.cbo.gov/sites/default/files/cbofiles/attachments/44190_EffectsAffordableCareActHealthInsuranceCoverage_2.pdf
12 "Are You Ready? Private Health Insurance Exchanges Are Looming" https://www.accenture.com/us-en/~/media/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Industries_10/Accenture-Are-You-Ready-Private-Health-Insurance-Exchanges-Are-Looming.pdf. Accessed July 19, 2013.
13 The Bureau of Labor Statistics sets the workforce participation rate at 63.5% as of June 2013. However, this statistics refer to the population starting at age 16 while HealthPocket’s survey targets respondents no younger than 18. See http://data.bls.gov/timeseries/LNS11300000. Last accessed July 17, 2013.
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