The U.S. Census Bureau recently released a report showing that 59.5% of Americans get their health insurance coverage through an employer, either as an employee or a dependent of an employee. Why is the U.S. health care system skewed so strongly towards job-based coverage? When did employers get involved in the business of providing health benefits to employees?
To understand how our health care system developed in this way, we need to look back to World War II. As the U.S. became involved in the war, with the goal of ensuring that production of weapons and supplies for our soldiers would not be disrupted by labor disputes or cause economic problems such as increased inflation and war profiteering. The Board decided that it is was in our country's best interests to freeze wages and establish price controls, at least for the duration of the war. Unfortunately, the wage freeze made it much more difficult for employers to attract employees from a workforce that diminished as more and more workers were sent overseas for battle.
The National War Labor Board, perhaps realizing that it had created a monster, ruled that the wage freeze and price controls did not apply to fringe benefits like pensions and health insurance coverage. This gave employers the means to attract and retain employees. Back in those days, health insurance was a relatively cheap benefit, and the fact that it was (and still is) tax deductible was an added bonus for the employer. Furthermore, labor unions strongly supported the NWLB ruling and encouraged businesses to offer health insurance benefits to their employees. Thus, employers began offering employee health coverage as part of their fringe benefits as a matter of course.
World War II eventually ended, but job-based health coverage did not. The workforce had grown accustomed to receiving health insurance coverage as an employee benefit, so that even after the wartime labor shortage ended, they continued to demand it - as we continue to do so today.
