Aug
25

The Origin of Employment Based Health Insurance in America

By

I recently got into a discussion with a liberal guy, who among other things, was complaining that it’s not good that health insurance is tied to a job. And if he looses his job, then he looses his health insurance as well, and that shouldn’t be so.

This brings up two important points. One specific and one more general. The general point is that it is so typical of liberals to invoke the necessity of government intervention to fix things that were caused by government intervention to begin with. And this brings me to the second more specific point:

Government intervention with the free markets is the reason why we have this distortion where health insurance is dependent on one’s job.

Government Control

The beginning of employment based health insurance dates back to World War II. Back then it was thought unfair that so many soldiers risked their lives overseas for low government controlled wages, while those who stayed at home enjoyed high wages. Therefore those not fighting the war should also share the burden of war by having their wages controlled. In addition, shortages in labor due to increased wartime production and so many workers shipped to war, drove the cost of labor up, and wage controls were deemed necessary to keep production up. And therefore the U.S. government set wage limits in numerous private industries.

Consequently, to attract good workers, employers got around wage restrictions by offering various benefits, such as health insurance, pension plans, paid holidays, etc., that were not subject to the government mandated wage ceilings. And this is how the employment based health insurance we have today was born.

U.S. tax laws then further skewed the market in favor of an employment based health insurance system by allowing employers to get tax deductions for the expense of paying for such a benefit, yet not taxing employees for receiving it, and not allowing taxpayers to deduct the cost of insurance if they get it on their own. This effectively means that health insurance obtained through employment is not taxed, while health insurance obtained independently is.

Therefore, market distortions that emerged as a result of government intervention in the free markets is the reason why we have employment dependent health now. What’s the typical socialist solution then? More government intervention! Just swell…

Sources:
“Is Employer-Based Health Insurance Worth Saving?” – NY Times Blog
“Price Controls” – U-S-History.com
“National War Labor Board” – Wikipedia



Tiny alternate link for this article: http://tinyurl.com/kkev9d

3 Comments

1

The real truth that must get out is that this current (and past) discussion about so called universal health care or socialized medicine has absolutely nothing to do with anybody caring one bit about your health and well being. Not any more than the climate change discussion has anything to do with people being genuinely concerned about the ecology. Both of these red herrings have to do with only ONE THING. POWER!!! The beurocracies that will be built up around CAP and TRADE and socialized health care will build dependentcies, and a goverenment structure that will be almost impossible to reverse, short of armed revolution. We have to wake up and understand what is happening here! HEALTH CARE REPRESENTS 1/7 OF OUR TOTAL ECONOMY! IF ANY ONE ENTITY CONTROLS 1/7 OF OUR ECONOMY (PLUS WHAT THEY ALREADY CONTROL) THEY WILL BE IN COMPLETE CONTROL OF OUR LIVES AND MONEY. DO YOU TRUST THOSE IN WASHINGTON TO BE IN COMPLETE CONTROL OF YOUR LIFE AND MONEY?

2

Wow, you guys are really a bunch of crackpots! Amazing what a keyboard and access to fox news will get you. You both show a general lack of empathy towards your fellow human being and understanding for the need for governmental controls. Do you really think the richest 1% care if you have a job? You want to keep jobs in America but they will go where it is cheapest and when India offers the deal, they will go to India. You want government to step in and regulate where jobs are by lessinging tax burdens but where do you think those taxes go? Do you not drive on the roads or drink clean water? I am sure I am wasting my breath but WOW! Your ignorance is showing and you may want to tuck it back in a bit.

3
Capitalist in Chief
May 15th, 2010 at 12:15 pm

Wow, you guys are really a bunch of crackpots! Amazing what a keyboard and access to fox news will get you.

Blah blah blah… Fox News… blah blah blah. Are you writing this because you have access to a keyboard and the New York Times? Oh please, give me a break. It’s amazing how accusations of “crackpottery” are followed by stupefying rants.

You both show a general lack of empathy towards your fellow human being and understanding for the need for governmental controls.

You can have your empathy, but we’ll actually help people by promoting prosperity.

Do you really think the richest 1% care if you have a job? You want to keep jobs in America but they will go where it is cheapest and when India offers the deal, they will go to India.

India is already offering a cheap deal, but yet, we still somehow have jobs in the U.S. that haven’t gone there and never will.

You want government to step in and regulate where jobs are by lessinging tax burdens but where do you think those taxes go? Do you not drive on the roads or drink clean water?

Yes, we’re sure that trillion dollar deficits are necessary to build roads and keep water clean. Asphalt is so expensive you know…

I am sure I am wasting my breath but WOW! Your ignorance is showing and you may want to tuck it back in a bit.

You’re a classic case of the ignorant claiming ignorance on the other side.

Leave a Comment