De-Linking Health Insurance from Employment Could Possibly Cut Health Insurance Costs By 50%
Submitted by CARPE DIEM
Click to enlarge.
The chart above compares the average annual costs in 2009 (individual and family coverage) for: a) employer-sponsored health health insurance (data from the Kaiser Family Foundation) and b) individual health insurance purchased privately (data from AHIP).
For employer-sponsored health insurance individuals pay only 17% of the total cost (employer pays 83%) and families pay 27% of the total cost (employer pays 73%), compared to private health insurance which is covered 100% by the individuals and families.
Maybe this illustrates one of the biggest problems with health care: our current system of tax-advantaged, employer-sponsored health insurance, which results in family coverage costing 111% more on average than private insurance, and individual coverage costing 62% more on average. Because of the tax advantage, and because consumers are insulated from about 75% of the full cost, there is a tendency to spend much more on health care insurance when an employer purchases it compared to when individuals pay on their own.
Solution: De-link heath insurance from employment. Jeff Jacoby has written about this here and here. Evidence shows that when families buy their own insurance they spend about half ($6,328) of what a typical employer spends ($13,375).
Update: Certainly the details (deductible, co-pays, etc.) and scope of the coverage are different between employer-sponsored and individually-purchased private insurance, as some commenters have pointed out. Another difference is that private insurance premiums are age-adjusted and young people get pretty low premiums (as low as $113 for singles and $214 for families), compared to employer-sponsored insurance which are usually priced the same for all age groups.
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