How COVID-19 Exposed the Flaws of America’s Private Health Insurance System
By Dev Ahuja, Solon High School, Solon, Ohio, USA
Around the world, America is renowned for the quality of its healthcare system. In fact, America has one of the BEST health insurance systems in the world - for the rich. As John Oliver, host of Last Week Tonight on HBO puts it, “...too many of us are born with a pre-existing condition called ‘not being Beyoncé’” (Last Week Tonight, 2020).
In short, America’s health insurance system is broken.
That is a bold statement, one which many proponents of Medicare for All (a single-payer healthcare system that would generally replace private insurance) champion. Despite this, those opposed to eliminating private insurance consistently claim that the majority of nearly 160 million Americans that use it are “generally satisfied” (Luthra, 2019).
But why should Americans settle for just “generally satisfied”?
To understand the fatal flaws in America’s health insurance system, the nation’s history must first be examined. In the middle of World War II, the United States was mired with claims that inflation would be unleashed, which would jeopardize America’s recovery from the Great Depression. To mitigate this issue, Congress passed the 1942 Stabilization Act to curb employers' abilities to raise wages (Kennedy, et al., 2010). Since employers could not use wages as a means of competing for scarce workers, they turned to compete with incentives - offering health benefits instead. As a result, the government allowed employer subsidies to health insurance premiums to be tax-exempt - the perfect recipe for employers to take advantage of a system. Thus, America was introduced to a healthcare system that would continue to dominate for the next 80 years and counting. Fast forward to 2021 and employer-based health coverage is still the dominating private insurance for Americans, with 160 million people relying on their employers in life or death situations.
Before COVID-19 even became a token on the board, the past few years have already exposed several major flaws in the system. Most insurance is never free, or at least, is never fully subsidized - employer-based health insurance being primarily guilty of this. Premiums and deductibles - the amount a consumer must pay on top of their insurance - have become increasingly expensive for the average American worker. Between 2008 and 2018, premiums increased nearly 55%, which is over double the number of worker’s earnings in the same period (Hamel, et al., 2019). Not to mention, the price of deductibles have increased by an astonishing 212%. Consequently, the average American has struggled to pay for their insurance for years.
So, how has COVID-19 exacerbated and exposed the flaws of the system?
When constituents are tied to their employer's plans, the system can be extremely volatile. If you lose your job, you are also likely to lose your health insurance. Depending on your plan, this can also include dental, vision, hearing, and insurance for your entire family. That can be horrific to hear. At the beginning of the pandemic, 27 million Americans were at risk of losing their healthcare coverage (Garfield, et al., 2020). This is not “general satisfaction." No country as developed as the United States should allow this to be acceptable. At the beginning of the pandemic, employers laid off millions of workers. While 38% of white Americans experienced job or wage loss, this percentage was disproportionately higher for minority Americans: 44% for Black adults and 61% for Hispanics (Parker, et al., 2020). Again, considering that when these workers lose their job they also lose their healthcare, problems start to arise. It is evident that America’s segregated roots have had an everlasting effect. To some, the solution may seem obvious. If Black Americans were to lose their job, they could realistically enroll in federally-subsidized Medicaid, right? Not exactly. The coverage gap is something that affects Black Americans the most. On average, their wages are too high to be eligible for Medicaid yet too low for subsidization under marketplace plans, which prevents Black Americans from having this fallback (Bittker, 2020). The disproportionate job or wage loss is directly reflected in the analyses of how many fewer Americans are expected to be enrolled in employer-sponsored health insurance due to the pandemic - 10% fewer Asians, 13% fewer Blacks, and 13% fewer Hispanics (Bunis, 2020). This is comparable to just 6% less white Americans. At a time when a deadly pandemic has ravaged the globe, limiting healthcare access to a few demographics is extremely dangerous for the wellbeing of millions of citizens.
One other major problem, relating specifically to Black Americans, is the inability of minority groups to even secure insurance in the first place. When employers have more employees, they have a stronger ability to negotiate for fair plans with insurance companies. In turn, their employees will have safer and cost-efficient plans, since the insurance company will benefit more from a “bulk purchase." However, this has not been seen among Black Americans. Although many Black Americans work in companies with 500 or more employees, which should give their employers major leverage when negotiating plans, they are still 10% less likely to have employer-sponsored health insurance compared to their white counterparts (Bunis, 2020). How does this relate to COVID-19? If a patient is affected by COVID-19, the fragile system of employer-based health insurance should not be the deciding factor in determining whether a patient receives life-saving care. Patients have to gauge whether or not their health is worth more than the price of care.
A final issue that COVID-19 has exposed is the neglect of lower-income workers. Industries that took the hardest hits from COVID-19 (retail and leisure among others) saw record-high unemployment rates, with 17.1% in retail and 39.3% in leisure from April 2020 (Falk, et al., 2021). Additionally, the Bureau of Labour Statistics (2021) highlights that these industries pay lower wages than others. Simply, these jobs were more dispensable than other industries. Since fewer Americans were out shopping in public areas, employers in these fields let their employees go. These Americans who need health insurance the most, considering they are less likely to have the funds saved to cover health insurance costs due to their low wages, were placed in a precarious situation. They lost their employer-based healthcare coverage and struggled to find another stable system. Yet, the issue grows deeper. Who gets the most benefits from employer-based health insurance systems? Those with high-paying jobs. Over the last decade, this group saw the value of their benefits increase, while those with lower-paying jobs saw the value of their benefits decrease (Bittker, 2020). COVID-19 has only amplified the problem. Low-income workers are less likely to be able to work from home due to inequities in broadband and technology access, causing them to lose employer-based health insurance. Many of these workers need to physically be at work - think restaurants, movie theaters, and malls. Alternatively, those with high-paying jobs can work not only due to financial eligibility but because their jobs are less demanding in-person - think finance, consulting, business - the NYSE simply isn’t bustling with brokers around the trading floor as it used to.
This all leads back to employer-based health insurance. When nearly half of all Americans in the workforce rely on this one system so deeply, any small problem can cause a ripple effect. COVID-19 has truly exposed these flaws, and they will only be exacerbated unless the public takes action to amend them as soon as possible. After all, the healthcare system should work for everyone, not just Beyoncé.
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"Hospital Unit Shifts Gears to Care for COVID-19 Patients." by Fort Belvoir Community Hospital is licensed under CC BY-NC 2.0