Health insurance — must it be a fringe benefit?

Posted by marykeating on July 22, 2009 under Employment benefit issues | Be the First to Comment

The Baltimore Sun reported this morning on a non-scientific poll of small businesses conducted by the Public Interest Research Group.  Small businesses often find themselves unable for financial reasons to offer health insurance as a benefit, even where employees pay a portion of the costs of coverage.  Local businesses are similarly hamstrung.  Those that offer insurance do so as a way of attracting the caliber of employees they need, but apparently are not doing so happily.

The cost of health insurance has risen steadily over the past few decades, faster than inflation; perhaps only college tuition prices have shown a similar independence of the inflation rate.  According to the National Coalition of Health Care, premium costs for a family of four topped $12,000 per year.  It’s no wonder that many employers do not offer insurance coverage, or require employees to pay an increasing share of it.  In an era when wages are not rising, this hurts, though not as much as not having insurance at all.  Then, when an employee becomes unemployed, COBRA or its state equivalent requires the employee to pay the entire cost, plus a 2% administrative fee. (But see the limited period of relief that Congress has granted.)  Still, COBRA ends after 18 months, after which the employee’s options are often limited to a state health pool, or a private plan.

When did health insurance become a common fringe benefit?  It is somewhat arbitrary that the American worker or her family is dependent on a certain type of job (full-time, with a larger company) to enjoy health insurance coverage.  Apparently during World War II, the government had to approve wage increases.  In order to attract workers some companies added attractive fringe benefits.  Unions, likewise, bargained for generous health insurance coverage.  Sixty years later, the climate has changed dramatically.  Perhaps the time is right for a centrally provided health insurance agency.  Then we’ll see how the large companies use the savings.