NCPA - National Center for Policy Analysis

U.S. HEALTH SYSTEM DISCOURAGES INNOVATION

May 27, 2009

Countless workers in the United States are trapped in jobs they would like to leave because they cannot get health insurance elsewhere.  Economists call this phenomenon "job lock," and studies suggest that it keeps between 20 and 50 percent of workers from leaving their current jobs, says Reuters.

Because health insurance is tied to employment in the United States, workers who leave their jobs can see health bills skyrocket if they strike out on their own or take a position with a company that offers fewer benefits.  However, job lock is difficult to measure because many employees don't like to advertise their unhappiness.

Yet, making insurance more affordable for the self-employed could lead to a wave of new businesses, says Reuters:

  • A study by Ontario's McMaster University, New Jersey saw a 14 to 20 percent rise in entrepreneurial activity due to a 1993 law making it easier for the self-employed to afford health insurance.
  • Roughly 60 percent of the U.S. population now gets its health coverage through work, but the system is increasingly strained due to rising costs.
  • Small-business groups have often complained this unfairly tilts the playing field toward large employers that have the clout to negotiate rates that are 18 percent lower on average.
  • While 99 percent of companies that employ more than 200 employees offer health coverage, only 49 percent of companies that employ between three and nine workers do so.
  • Part-time workers are also less likely to get benefits than full-time employees and self-employed workers face a further disadvantage because they cannot deduct health insurance payments from their income taxes, unlike companies that maintain a payroll.

Congress is working to overhaul the troubled system; however, employer-based care is likely to remain a bedrock of any new approach, says Reuters.

Source: Andy Sullivan, "U.S. health system discourages innovation," Reuters, May 25, 2009.

For text:

http://www.reuters.com/article/healthNews/idUSTRE54O4K120090526

 

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