One problem is that workers are afraid to switch jobs because of a fear they will lose health insurance coverage or that their new employer will not cover preexisting illnesses. A New York Times/CBS poll found that 30 percent of Americans say that they or someone in their household have at some time stayed in a job they wanted to leave in order to keep the health benefits, and 26 percent said that "a household member took one job rather than another mainly for health benefits." A second problem is that choosing a job or staying in a job for health benefits is no guarantee of coverage since an employer can change health benefits and deny coverage even after a person has become sick. In one case, an employee with AIDs saw his maximum health benefits slashed from $1 million to $5,000 because the employer changed health insurance policies.

A third problem is that employers, increasingly will not hire people who engage in activities that increase the probability of high health costs. For example, Turner Broadcasting System, Inc. (parent of Cable News Network) is one of about 6,000 companies that refuses to hire smokers. Multi-Developers won’t hire anyone who engages in high-risk activities such as skydiving, mountain climbing, motorcycling, or piloting a private aircraft. Other companies refuse to hire people who drink or who have high cholesterol levels.

A fourth problem is the increase in strikes and walkouts over health insurance issues. Because employees do not see health insurance benefits as a dollar-for-dollar trade-off against wages, it is not surprising that they resist reductions in those benefits. According to the most recent survey, nearly two-thirds of the major walkouts and 30 percent of the major strikes in 1989 were over medical benefits. They included the largest, most prolonged and most bitter labor-management confrontations, including a 17-week walkout at the Nynex Corporation and a nine-month walkout by miners at the Pittston Coal Company in Virginia, West Virginia, and Kentucky.

In the former category some argue for new restrictions on employers and employees including mandating a basic benefit package and requiring the benefits to be portable, as employees move from employer to employer. Note that this proposal ignores an important source of the problem - the ability of some people to choose unhealthy lifestyles and impose costs on others as a result of their behavior. Others would force everyone into a general system of national health insurance. But under national health insurance, the connection between individual behavior and individual costs would be severed completely.

If health insurance were individualized, policies would automatically be personal and portable. An employee would not have to fear a loss of benefits either because of a change of job or the arbitrary decision of an employer. If people engaged in more risky lifestyles, they would probably face higher premiums to reflect the greater risks. Many private insurers already charge higher premiums for certain lifestyle choices, and, as Table I shows, many employers are currently employing this practice. But as long as individual employees pay their own way, their employability in the labor market should be unaffected. Moreover, if health insurance were individualized, there would be no reason for workers to strike over health care benefits. Employees could choose to spend as much of their compensation on health care as they individually prefer.