COVID-19: When Work-Based Insurance Hardly Works

By Laurie Huang

On January 20, 2020, the first case of the novel coronavirus was identified in Washington State. 28 million cases and more than half a million deaths later, the virus shows no sign of stopping its devastation across the United States. Although vaccination efforts have picked up across the country, Americans should not expect a return to normal life any time soon.

The pandemic has forced us to reexamine everything we once took for granted—commuting to work, eating at restaurants, visiting friends and family. We now view companies with greater scrutiny, and public health policy is more partisan than ever. It has also magnified the weaknesses in our health insurance system. The pandemic has finally pushed the system to a tipping point that it may not recover from. However, the recently passed American Rescue Plan offers a potential model for a more affordable, more robust American health care system.

An Employment-Based Health Insurance System

The United States is the only industrialized nation without a universal health care system. Moreover, it is the only industrialized nation where employment status is the primary driver of health insurance status. The system is a historical artifact of a wage freeze in the 1940s, as employers tried to recruit workers during World War II, followed by the Internal Revenue Service’s decision to exempt health insurance from taxation. Now, nearly eighty years later, our employer-based health insurance system is showing its fault lines.

Tying health insurance to employment only keeps individuals and families covered while they have a job. Due to the unprecedented spike in layoffs and furloughs, estimates suggest  between 2 and 5 million people may have lost employer-based coverage in the first six months of the pandemic. The midst of a pandemic may be the very worst time to lose your health insurance. And due to the nature of the pandemic, with many employers trimming their staff and cutting costs, finding another job is incredibly difficult. Losing your job under this system is a twofold blow to one’s financial security and health. Fortunately, Medicaid and CHIP have picked up many who have fallen through these cracks, a common trend during economic recessions.

Still, having a job doesn’t guarantee health care coverage. A study by the Commonwealth Fund found one in three people who lost their job due to the pandemic did not have insurance before being laid off. Like most explanations that have to do with the American health care system—it’s complicated. Not all employers offer health insurance to their workers. Small business owners were hit particularly hard by the pandemic, and not all that do offer health insurance were able to continue doing so.  

The fragmentation of our public health insurance system further exacerbates these cracks. Millions of people who live in states that did not expand Medicaid lack coverage because they fall in the coverage gap—the hole in the system that traps people who make too much money to qualify for Medicaid but not enough money to obtain subsidized private insurance. Adults and children may be eligible for Medicaid, CHIP, or lower-cost insurance through the marketplace, but not enroll because they are unaware that they are eligible. The convoluted network of fragmented systems is difficult to navigate.

This is not the first time that an economic recession has exposed the underlying problems with an employer-based health insurance system, nor will it be the last. President Biden has likened the COVID-19 unemployment fallout to the 2008 recession, when 3.9 million Americans also lost their health insurance due to economic downturn. The boom and bust cycle of capitalism has been a driving force in American politics and economics since the founding of the country. We should expect that future economic recessions will have the same impact on health care coverage if our insurance system does not change.

Where We Go From Here?

President Biden has not made any major moves towards comprehensive health care reform yet, focusing instead on coronavirus relief plans. Historically, Biden has supported a more moderate stance on reform, proposing building on the Affordable Care Act (ACA) with a public option, rather than supporting a more drastic transformation like Medicare-for-All. So far he has not budged from this stance, reopening ACA enrollment via Executive Order in January to allow more people to sign-up for Medicaid, and directing executive agencies to examine existing policies and state Medicaid waivers that undermine the ACA’s efforts to increase access

However, perhaps the recent passage of the American Rescue Plan will enable a down payment on health reform, much as the American Recovery and Reinvestment Act of 2009 did during the Obama presidency. The American Rescue Plan expanded eligibility for ACA subsidies through 2022, temporarily eliminated the 400% FPL subsidy cliff, and lower-income individuals who already qualify will see their subsidies increase. Moreover, states that have yet to expand Medicaid will be eligible for a 5% bump-up in federal matching dollars for their non-expansion coverage groups. These affordability expansions offer a model for a more generous ACA, but only temporarily. So, whether these changes become permanent remains to be seen. Eventually, Biden will have to address the scope of comprehensive reform head on. This will no doubt re-ignite the battle for health reform within the Democratic Party.

With more and more Americans vaccinated each day, we may be seeing the light at the end of the pandemic tunnel very soon. Once we reach it, we need to put our country back together. Some may argue that this recovery period is not an ideal time for major structural reform, but there is also something to be said for leveraging crises for action. The pandemic has shown us the deep cracks and inequities in our health care system.

Now is the best time to act. The effects of the pandemic are fresh in the nation’s memory, and President Biden has a Democratic majority in both houses of Congress. No other moment in recent history has so glaringly exposed the weaknesses of the American health care system. We must learn from this crisis to prevent it from happening again.

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