Among Americans who are covered by health insurance, the overwhelming majority holds employer-offered plans, which come at considerable cost to employers. There remains a chronic lack of coverage for employees of small businesses, part-time workers, and those who change jobs—all of which are areas of particular growth as the country enters an economy more globalized, more service-oriented, and more greatly marked by a transitory workforce. Furthermore, because health insurance is not portable, each change in coverage carries attendant changeover costs assumed by the insured.
Better health insurance options could be provided to all working Americans through a three-pronged approach. First, a system of insurance exchanges would offer portable health plans and facilitate large, diverse insurance pools to lower costs. Second, employers could be transformed from sponsors into facilitators of coverage. And third, the same tax exemptions offered to employer-sponsors today could be offered to the exchanges.
For most working-age families, health insurance coverage is directly connected to the workplace. But because of structural weaknesses in this traditional form of coverage, it is steadily eroding, especially for workers in the small business sector.
The health insurance system needs to evolve along a different path if it is to adapt to the goals and needs of today's workforce. Unfortunately, existing laws and insurance arrangements obstruct that evolution. Three key steps are needed to achieve a gradual transformation without disrupting the successful parts of the system. First, states should establish "insurance exchanges." Exchanges would offer an array of coverage options, and families could retain their chosen plan from workplace to workplace with the same tax benefits as those available for traditional employer-sponsored plans. Second, most employers should become facilitators, rather than sponsors, of coverage. While many large employers would continue to sponsor coverage, most employers would hand over sponsorship to an insurance exchange and focus on providing administrative support for their employees' insurance choices. Third, the federal government should reform the tax treatment of health to focus help on lower-income families.