Employment-Based Health Insurance Fails America

If you haven't gotten much of a raise lately, it's probably because the extra money that might have been put in your paycheck instead went to your health insurer if you are enrolled in an employer-sponsored plan.

Many Americans haven't seen a pay increase of any kind because their employers can't both increase their wages and continue offering decent health care coverage. It has become an either-or for people like Zeke Zalaski, a factory worker in Bristol, Connecticut, who hasn't had a raise in years.

I met Zalaski during a stop at the state Capitol in Hartford last year. He wasn't there lobbying for legislation that would create a state-run "public option," as many others were that day. Unlike those citizen lobbyists, Zalaski was actually able to vote for the public option.

Zalaski is a rarity in U.S. politics. He's not a lawyer, small business owner or career politician. He's a blue-collar worker who is also a Democratic state legislator, serving his fourth term. When he's not in the Capitol, he's working as a "power-press setup guy" at a plant producing precision-engineered springs.

Pinched American Families Losing Financial Ground

Zalaski, who is also president of his union, shocked me in revealing he hadn't received a raise in five years. In fact, because he and his fellow workers are now paying a greater share of premiums and more out of their own pockets for coverage because of higher deductibles, they are actually taking home less today than they were in 2006. And they are far from alone. Most U.S. workers are in the same boat, even if they have been receiving modest pay increases.

According to the U.S. Census Bureau, American families have been losing ground financially over the last decade. The median household income in the U.S. in 2009 was $49,777. While that is 22.3 percent more than the median of $40,696 in 1999, after adjusting for inflation the median is actually 5.3 percent lower than it was a decade before.

Meanwhile, according to the Kaiser Family Foundation, the cost of coverage for a family of four has climbed 131 percent from 1999 to 2010. The average annual premiums for employer-sponsored health insurance in 2010 was $5,049 for single coverage and $13,770 for family coverage. It is little wonder why more and more businesses are no longer offering coverage and why more and more employees of companies that do still offer it are saying, "thanks but no thanks."

Although most Americans with private insurance still get it through the workplace, our employer-based system of health insurance is failing more and more of us every year.

The structure of the U.S. health care system is, to say the least, unique. No other country in the developed world has a system that is so dependent on the benevolence of employers that its citizens can find themselves in the ranks of the uninsured if they lose their jobs or if their employers decide to stop offering coverage.

Employer-Based Health Insurance Doesn't Help the Unemployed

Indeed, the main reason why 51 million Americans are uninsured is because most of them have either lost their jobs -- and, along with them, their benefits -- or they work for businesses that have been priced out of the health insurance market.

And there is no relief in sight. According to The Segal Company's 2010 Health Plan Cost Trend Survey, U.S. health plan cost trends will continue to dwarf annual increases in average hourly earnings. And employers are shifting more of the cost of care to their employees. In a recent survey of employers by the benefits-consulting firm Mercer, nearly a fifth of respondents said they planned to eliminate what they consider high-cost options and move their workers into so-called "consumer-directed" health plans, all of which feature high deductibles.

If there is a silver lining, it is this: U.S. businesses reportedly are planning to give their workers a 3 percent raise on average this year, which, according to the Society for Human Resource Management (SHRM), is getting close to pre-recession levels.

"However," according to a recent SHRM report, "what could be considered as a 'normal' pay increase budget gradually has shifted lower, from a long-standing 4 percent level to a 3 percent level. Still, that's higher than the median pay increase of 2.2 percent at the beginning of 2010 and 2.7 percent in mid-2010."

Out-of-Touch CEOs Make Millions, Have No Worries

Speaking of considerably higher, there is one special group of employees who will be seeing pay increases of way more than 3 percent. You guessed it: CEOs.

A recent analysis conducted by the Associated Press revealed that the typical pay package for the head of a company in the Standard & Poor's 500 was $9 million in 2010. That was 24 percent higher than a year earlier.

When you make that kind of money, chances are you're pretty much out of touch with what life is like for the average American worker -- people like Zeke Zalaski. If you don't have to worry about premium increases and higher deductibles, you can easily believe the employer-based system is just as solid as ever and is meeting everyone's needs just fine. News flash: it isn't. Not by a long shot.