America’s Accidental Health Care System

How World War II accidentally created the American health insurance system

June 2021

Script

This video is part of our Kite & Key Shorts series—easy to understand...but hard to forget.

 

For nearly 20% of workers, it’s because they’re afraid to lose their health insurance.i

If relying on your employer for health coverage seems strange, it’s because our insurance system is one big accident.

Before World War II, people with health insurance usually bought it directly.ii

But during the war, the government froze wages in an attempt to prevent inflation.

Because employers couldn’t raise salaries, they began using health insurance to attract workers.

Eventually, the IRS made employer-sponsored insurance tax exempt.

But there’s no similar tax break for people who buy their own insurance…which makes it cheaper to get health insurance from your employer than to buy it yourself.

As employer-sponsored health insurance has grown, wage growth has lagged.iii

A recent Harvard study estimated that if employers gave workers money to buy insurance directly, health care expenses could decline as much as 25% and employee pay could increase as much as 30%.iv

Even worse: Under this system, losing your job also means losing your insurance.

So, if you’ve ever wondered what the people who designed American health care were thinking…the answer is probably: “Whoops!"

 

WHAT YOU NEED TO KNOW:

  1. Nearly 20% of workers stay in jobs they don’t want because they’re afraid to lose their health insurance.
  2. Employer-provided insurance was an accidental effect of World War II price controls.
  3. If employers gave workers money to buy insurance directly, employee pay could increase as much as 30%.

Sources

Shownotes

SOUND: RITMO MATON, DCO

FOOTAGE: BILL OXFORD

CITED SOURCES AND NEWS OUTLETS ARE NOT AFFILIATED WITH THIS PRODUCTION.

Sources

  1. Gallup
    "1 in 6 U.S. Workers Stay in Unwanted Job for Health Benefits" (Dan Witters)
  2. U.S. Census Bureau
    "Vital Statistics and Health and Medical Care" (Page 82)
  3. The Hamilton Project
    "Thirteen Facts about Wage Growth" (Page 4, Jay Shambaugh, Ryan Nunn, Patrick Liu, and Greg Nantz)
  4. Harvard Business Review
    "Give Employees Cash to Purchase Their Own Insurance" (Regina Herzlinger and Barak Richman)

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