Who has insurance, who doesn't and why.

Who Has Health Insurance, and Why?

              There is a lot of talk in the health care reform debate about covering everyone. That there are 45 million Americans uninsured and its necessary that we cover them (a more accurate number is 26 million, but that issue will be discussed later). Whatever the exact number is, there are a lot of uninsured Americans, and it is important to understand why.
              During WWII the United States government issued wage controls to businesses. Employers could not pay their employees more than certain government mandated thresholds. But employers wanted to pay employees more money than that, because if they could compensate their employees better they could recruit the top talent. It is easy to understand that if one firm A is paying 25% more than firm B, then firm A will have first pick for all its positions.
              Since Employers were not allowed to directly increase wages for their employees due to federal law, they circumvented the law and provided other benefits to their employees namely health insurance. Since the IRS agreed not to tax businesses contribution to employee health insurance, business was allowed to do this, and health insurance through business has dominated the US for the last six decades.
              People who have health insurance have it overwhelmingly through their employer. 87% of non-elderly with insurance in the state of Missouri have it through employers (Show Me Series, pg 12). For people under the age of 65 (and thus ineligible for Medicare), employee based insurance dominates.
              The reason that people prefer to receive health insurance through their company is because of tax incentives. Companies can buy health insurance tax exempt, but if an individual attempts to buy health insurance that money is subject to tax. This makes it overwhelming more affordable for people to get insurance through their employer. This system also makes it more difficult for people to get insurance if they are unemployed or if their employer does not offer health insurance.
              Lets take a look at the implication of this. A janitor who makes $25,000 a year isn’t offered insurance through his company, but the engineer who makes $95,000 a year is. Now that engineer’s insurance plan isn’t taxed, because it’s been bought through his employer. But if the Janitor wants to go out and buy health insurance, it will be taxed.
              This example of the janitor and the groundskeeper is exactly what happens to people in this country. The tax code that treats business who buy health insurance better than individuals who buy health insurance hurts the people that can’t afford it the most.
              Why would a company provide health insurance for its engineer and not for its janitor? Its very simple, employer offered health insurance is a wage. It is a wage now, and it has been since companies used it as a wage to circumvent WWII wage controls. In general it is a wage in the several thousand dollar a year range. That means that the company is paying the janitor $25,000 a year, but is really paying the engineer $102,000 or higher. The engineer knows this and would accept a job paying $95,000 with insurance over one without insurance.
              So why does the janitor not get insurance? Because he makes less money. The employer of course could offer the janitor $18,000 a year with insurance, but choose to offer $25,000 without it. One of the largest sources of inequities in who has health insurance is who makes more money.  The % of employers offering health insurance to its employees increases the farther away from the federal poverty line. For people who are earning at or below the poverty line only 55% are offered insurance that number improves to 69.5% offered insurance for people making between 100% and 199% of the poverty line. When someone makes between 200% and 399% of the poverty line the chance of employer sponsored insurance is 85%, and people who make more than 400% the poverty line employer offered insurance is 92.6%.
              In the US people overwhelmingly have insurance through their place of employment. It is advantageous to people to get insurance through their company rather than trying to get it individually. The closer people are to the poverty line the less likely they are to be offered insurance by their employer because health insurance is a form of wage.