The future of employer-based health insurance.

America honors four presidents with monuments on the National Mall in Washington, DC, and Franklin D Roosevelt didn’t get his by chance. Leadership out of the Depression, triumph in World War II, and the New Deal are just part of his immense legacy. But President Roosevelt didn’t do it all. In 1935, forced to choose between his highest domestic policy priorities—a minimum guaranteed income for the elderly and a national health insurance program— he picked the former (ie, Social Security) putting medical coverage on temporary hold. (“Temporary” stretched to 30 years until the passage of Medicare legislation in 1965.) President Roosevelt’s dream of a national health insurance program was never realized as the next decade brought World War II and a severe domestic labor shortage. The resultant inflation spawned wage controls and, to remain competitive, employers offered health insurance as a substitute for salary increases. That precedent and a post-war economic boom contributed to enormous growth in employerbased health insurance. Between 1940 and 1950, the number of Americans with such coverage grew from 21 million to 142 million. In 1954, the pre-eminence of employer-provided health coverage was further cemented by the Internal Revenue Service decision confirming the tax deductibility of such premiums. A tax break, a popular employee benefit, a distinguishing feature in recruitment and retention ... all at a modest cost. What was not to like for American business? Unfortunately, the moderate costs didn’t last. And now, with the relentless growth of health care expenditures, many American companies, faced with increasing competition due to globalization, have had to restrict or even jettison medical insurance coverage for their employees and retirees. Every fall, in an unwelcome annual rite, corporate benefit managers nervously await the survey of premium increases. On September 26, 2006, right on cue, the Kaiser Family Foundation delivered this year’s bad news: Between 2000 and 2006, premiums had risen 87% while wages had increased 20% and inflation 18% (Figure 1). Overwhelmed by these costs, for the first time the percentage of employees receiving insurance coverage dropped below 60% to 59% (Figure 2). No employers, not even corporate giants and governments, escaped the squeeze. General Motors, Intel, Costco; the states of New York, Maryland, and Nevada; San Diego county and the city of Arlington, Texas all COMMENTARY