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Thursday, June 28, 2018

Redesigning employee benefits

Nortin M Hadler
Professor Emeritus of Medicine and Microbiology, University of North Carolina at Chapel Hill

The American “healthcare system” has evolved piecemeal over the course of the last century. With Theodore Roosevelt’s defeat in the presidential election of 1912, the United States diverted from the European dialectic. America disavowed nearly all social legislation that addressed challenges to health, work capacity, and longevity. Only the Prussian notion of Workmen’s Compensation Insurance made landfall and was rapidly embroiled in debates relating to Constitutionality. The solution was that each state was to develop a scheme that required employers to provide medical care and income substitution for a worker who suffered an injury that arose out of and during employment. Insurance to provide for the care of the ill, the disabled and the aged and moved to the forefront after World War II and spawned several independent insurance bureaucracies whose form, management and regulation was influenced by the precedent Workers’ Compensation insurance industry.

For the past 50 years interacting with one or more of these bureaucracies colors adult life in America. Each takes pride in its moral imperative. America takes pride in a healthcare system that abounds in technological and scientific accomplishment. Yet each of the components has managed to find its own bumpy road to its form today. And each road is littered with attempts to smooth out or circumvent the bumps. For example, the FDA evolved alongside the healthcare system starting in the 1970s when it was clear that too many interventions offered too little benefit. Today all pharmaceuticals must survive scientific testing to be licensed for use in practice. And all devices must pass through a far less stringent gantlet. But this has its own “bump”; an agent with statistically significant efficacy may offer a clinically insignificant benefit in practice. The FDA is but one of many patches placed on the care of the ill as it evolved over the past 50 years. As another example, the American nursing home industry has elicited more regulations than any other industry except the nuclear power industry.

Patches and regulations are so abundant today that its harder and harder to see the moral imperatives through the miasma. Furthermore, as complex as the regulatory response has become to salve inadequacies in the system, regulatory capture has become a national sport. Regulatory capture describes the distortions that result from the influence of the regulated on the regulators.  It’s also harder and harder to tolerate and justify the enormous transfer of wealth required to support this component of life in America, particularly when the expenditure far outstrips that of all our sister countries. That fact has captured the attention of our body politic.

Attempts to reform the American “healthcare” system leaves a legacy of disappointments and unintended consequences. Some 20% of the GDP is invested in the “healthcare” status quo. Everyone agrees that something must be done because the system is unsustainable. At this rate, at any given moment half the population will be patients, providers, practitioners or all 3. This is an exercise in medicalizing the people that will deplete people of their sense of invincibility and deplete coffers at the same time. But no participant wants to assume responsibility for calling a halt to finger pointing and the “blame game.”  Reforming the American healthcare system has proved Sisyphean, if not counterproductive.

Rather than pursuing reform, Nortin M Hadler and Stephen P Carter have crafted an alternative system that takes this mixed legacy as object lesson.  Synergy of their perspectives in medicine, law, epidemiology and risk management resulted in the Universal Workers’ Compensation Model (UWCM), an innovative approach to providing healthcare for one large segment of the population, the American worker. As part of this effort, now ongoing for over a decade, UNC Press is publishing “Promoting Worker Health. A new approach to employee benefits in the twenty-first century.”

This concise pamphlet is designed to introduce the UWCM into the public conscience and the health policy debate. Today, employee benefits in America are a highly variable package of insurance policies designed to mollify the consequences of many untoward events for which workers are at risk. Each of the categories of indemnity are served by separate companies and regulatory schemes. Most are “defined benefit” policies; the worker pays whatever the employer doesn’t for coverage the insurer defines. The UWCM stipulates a single policy providing rational and reasoned recourse for universal risks: illness, injury, disability, death. It is a defined contribution model that requires no more than 2% of wages from employees. Administration is fiduciary; money not expended transitions to a return on premium for workers to be used to purchase supplementary health insurance as needed, for family members as an example. Profitability is constrained by law.

The cost-effectiveness of the UWC reflects its fiduciary nature (we’re not saving money, we’re saving the employee’s money), the elimination of redundant overhead, the constraints on profitability, and the coverage itself which is designed with the employee as the sole beneficiary. As a legislative expedient, UWC is saddled with many terms that are characteristic of current benefit programs, but it is not a variation on current themes. This is a totally novel alternative. The enabling legislation, the UWC Act, permits an insurance company to offer a novel insurance policy that is defined and constrained by stipulations in the UWCA.  No insurance company has to offer this policy and no employer must purchase the policy.

The UWC will monetize altruism.