Articles/Letters Published • Nov 1999 • Free-Market Health Care

Xerox Prepares to Free Employees from Limited Insurance Options

In a powerful act of courage that opposes conventional practice, Xerox officials have proposed putting employees in charge of their own health insurance within seven years. Xerox plans to give at least $5000 to each of their 50,000 employees so they can purchase a portable customized insurance policy. A portion of the money must be used for insurance, and would therefore be tax-exempt, but the remainder would be taxable cash compensation.

According to the Los Angeles Times, managed care proponents are dismayed."This could totally unravel American health care." said Uwe Reinhardt, a Princeton University health economist who participated in multiple working groups of the Clinton Health Care Task Force.

As health care policymakers and managed care advocates know, the 1973 HMO Act propelled managed care into dominance through employer-sponsored insurance. Until 1995, the Act mandated that most employers offer HMOs. Eventually, many businesses offered only HMOs.

Xerox employees may think they are getting a raw deal. Reformers will try to feed their fears, claiming a loss of group power, and insurmountable vulnerability against Big Insurance and Big Medicine. They will say that these choices are too complex for ordinary folks. However, as insurance is increasingly disconnected from employment, economies of scale will occur as in other self-purchased insurance. Marketing materials will cater to individuals. In addition, fears of health-related job discrimination and medical records snooping by employers will disappear.

Fearing wholesale exodus from employer insurance, health care reform advocates may now try to pass legislation forbidding pure cash compensation in lieu of benefits. Such a law might attempt to force employers to offer funds dedicated to health insurance.

The best solution is not yet available: the elimination of all tax deductions for health care expenses. This would restore patient interest in every health care decision, lower medical costs to the patient's ability to pay, reestablish patient-doctor relationships, reduce paperwork, enable charity care, restore accountability for dollars spent, and promote inexpensive insurance for the unplanned disaster instead of expensive prepaid health care for care rarely used.