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Attention all employers: Pay or play!

Posted by: Jeff Davis on Jul 01, 2009

Attention, all employers: It is time for you to pay. Or play!

The pay or play system will accomplish two things, both important for health reform:

1. It will give employees peace of mind, assuring them that they will not lose their insurance coverage

2. It will provide an affordable insurance option to those employees who are not yet covered by their employer.

Many employers have offered their employees health care coverage since World War II, when wages were frozen and the only way to compete for workers was to provide fringe benefits. Currently, 61 percent of non-elderly Americans obtain health care coverage through their employers.

In the current health care debate, some are calling on employers to share in the responsibility of providing health care coverage to Americans. Most large employers already provide insurance to their employees, so requiring the rest of employers to do the same would level the playing field while allowing those employees who are satisfied with their coverage to keep it.

Families USA recently issued a paper about the advantages of shared responsibility that requires employers to provide insurance. Here are some of the major points:

How employer responsibility works: Employers would provide health insurance to their employees or pay a fee that would be used to help subsidize the cost of their employees' health care. This is called "pay or play." Under such a system, some small employers will receive tax credits to help them pay for coverage for their workers, and if they still can't afford to either pay or play, they will be exempt from such a responsibility.  

Why is it a good system? Without such a requirement, employers might be tempted to drop coverage for their workers. Employers currently pay around $360 billion in premiums a year. If employers stop providing coverage, it would be almost impossible for employees to cover this amount. Employees already pay an average of $3,354 per year for family coverage and $721 per year for individual coverage. These employees can't afford to pay more.

Past experiences have shown that such a system works: Both the State of Massachusetts and the City of San Francisco have implemented such a system with much success. Due to a pay or play provision in Massachusetts's 2006 health care reform legislation, 159,000 Bay Staters have gained insurance through their jobs in the last two years. San Francisco's Healthy San Francisco program has also helped to provide 32,804 additional people with employer-based coverage.

This idea is also supported by President Obama, who believes that "every business has a responsibility to provide health insurance for its workers."

 

Update: View EPI's analysis here.