RETHINKING REFORM damental importance, are systemic problems in the financing of health care and in the organization and delivery of care Not discussed in this paper, because of space limitations and because their relation to health care is usually indirect, are many problems that affect population health, such as cigarette smoking, diet, exercise, air pollution, and road safety a Health care finance. Employer-based insurance. Ever since World War II, the cornerstone of U.S. health care finance has been employer-based insurance. Today such insurance still covers approximately 55 percent of the population, but with de clining coverage and loss of community rating, its role as quasi-social insurance has greatly eroded in recent decades. Competitive pressures on U.S. firms have increased as a result of antitrust actions, deregulation of many industries, and the inroads of foreign competition. Many fewer U.S. firms now enjoy steady monopoly profits that hey can draw on to subsidize health insurance for their worker For example, forty years ago the largest private employer was AT&T, a regu lated monopoly with guaranteed profits If health insurance premiums rose, they could easily be passed on to telephone subscribers. Moreover, aT&T was underno pressure to force older and sicker workers to pay more than their peers to compen sate for their higher use of care. Today the largest private employer is Wal-Mart, which despite its size faces intense competition daily from a host of other retail outlets. When they offer health insurance, it must come out of their workers' wages; for minimum-wage employees, this is not possible, so it often will mean loss of jobs The decline of unions to about one in twelve private-sector workers has also re duced the role of employer-based insurance as quasi-social insurance In indus tries comprising many small firms, such as residential construction, strong unions organize industrywide labor-management health insurance plans, which typi cally allow for sizable cross-subsidies among firms and among individual employ- ees within firms. In the past, tens of millions of workers were insured through such plans, but the disappearance of unions from most of the private sector tends to diminish the importance of this type of coverage Today most beneficiaries of employer-based insurance are in plans in which the firms are self-insured or are experience-rated (which means that they are self insured with a year lag). Community-rated premiums have disappeared, thus eliminating cross-subsidies among firms and industries, and the move toward large deductibles and health savings accounts(HSAs)will reduce cross-subsidies among workers within individual firms. 4 Employer-based insurance involves high administrative costs for the more than 1,000 insurance companies seeking contracts with millions of employers and for providers seeking reimbursement. Moreover, the large costs incurred by employ ers when negotiating contracts and administering benefits do not appear in the health care spending estimates. Employer-based insurance has other serious flaws: It distorts the labor-market decisions of workers and firms; it generates dis- 1400 November/ december 2RETHINKIN G REFOR M damental importance, are systemic problems in the financing of health care and in the organization and delivery of care. Not discussed in this paper, because of space limitations and because their relation to health care is usually indirect, are many problems that affect population health, such as cigarette smoking, diet, exercise, air pollution, and road safety. • Health care finance. Employer-based insurance. Ever since World War II, the cornerstone of U.S. health care finance has been employer-based insurance. Today such insurance still covers approximately 55 percent of the population, but with de￾clining coverage and loss of community rating, its role as quasi-social insurance has greatly eroded in recent decades. Competitive pressures on U.S. firms have increased as a result of antitrust actions, deregulation of many industries, and the inroads of foreign competition. Many fewer U.S. firms now enjoy steady monopoly profits that they can draw on to subsidize health insurance for their workers. For example, forty years ago the largest private employer was AT&T, a regu￾lated monopoly with guaranteed profits. If health insurance premiums rose, they could easily be passed on to telephone subscribers. Moreover, AT&T was under no pressure to force older and sicker workers to pay more than their peers to compen￾sate for their higher use of care. Today the largest private employer is Wal-Mart, which despite its size faces intense competition daily from a host of other retail outlets. When they offer health insurance, it must come out of their workers' wages; for minimum-wage employees, this is not possible, so it often will mean loss of jobs. The decline of unions to about one in twelve private-sector workers has also re￾duced the role of employer-based insurance as quasi-social insurance.^ In indus￾tries comprising many small firms, such as residential construction, strong unions organize industrywide labor-management health insurance plans, which typi￾cally allow for sizable cross-subsidies among firms and among individual employ￾ees within firms. In the past, tens of millions of workers were insured through such plans, but the disappearance of unions from most of the private sector tends to diminish the importance of this type of coverage. Today most beneficiaries of employer-based insurance are in plans in which the firms are self-insured or are experience-rated (which means that they are self￾insured with a year lag). Community-rated premiums have disappeared, thus eliminating cross-subsidies among firms and industries, and the move toward large deductibles and health savings accounts (HSAs) will reduce cross-subsidies among workers within individual firms."* Employer-based insurance involves high administrative costs for the more than 1,000 insurance companies seeking contracts with millions of employers and for providers seeking reimbursement. Moreover, the large costs incurred by employ￾ers when negotiating contracts and administering benefits do not appear in the health care spending estimates. Employer-based insurance has other serious flaws: It distorts the labor-market decisions of workers and firms; it generates dis- 1400 November/December 2005