Employer-Sponsored Insurance Delivers $1.5 Trillion in Value for Employees, U.S. Economy

Throughout the COVID-19 pandemic, employer-sponsored insurance (ESI) provided much-needed peace of mind and support for the more than 160 million Americans that benefit from its robust, flexible, and affordable health coverage. The significant retention of employer-sponsored coverage during the pandemic further proves its value to individuals and families; as employment dropped over the course of the past year (at one point to 20%), the number of people with employer-sponsored insurance only incrementally fell by only 1% or 2%. It is particularly ironic that after such affirming statistics, some still support shifting individuals into Medicare or a public option. The US Chamber of Commerce knows the value of this coverage to employees, families and communities and we urge policymakers to strengthen, rather than destabilize, ESI.

In a recent op-ed for the Wall Street Journal, Casey Mulligan, professor of economics at the University of Chicago and former chief economist of the White House Council of Economic Advisers, highlights how this valued benefit enjoyed by employees and their families translates into significant revenue that benefits our economy and country. At such a critical time for American businesses and employees, the many benefits of ESI far exceed the mere health benefits and coverage for a diverse workforce. Highlights from the op-ed and Mulligan’s new analysis include:

• “…Employer-sponsored insurance has tremendous value for Americans, taxpayers and the health system. One way to quantify the value is to look at how much consumers are willing to pay for their coverage, which is at least as much as they pay in premiums—or else they wouldn’t have purchased the coverage—but could be higher.”
• “In a revealed-preference analysis released by the National Bureau of Economic Research, …employers and employees together value employer-sponsored insurance 75% to 84% beyond what they pay for it. For them, that is a surplus of $800 billion annually.”
• “This doesn’t count the cost to taxpayers of the well-known exclusion of employer health-insurance premiums from taxable income, which reduces income- and payroll-tax revenue. On the other hand, the employer system encourages work and business formation, which adds to tax revenue. Based on tax-revenue studies published by the Congressional Budget Office and the White House Council of Economic Advisers, … the tax exclusion is an annual cost of about $200 billion, while the work and business-formation effects, together with increased insurance coverage and reduced subsidies paid through Obamacare and Medicaid, represent an additional social benefit of $900 billion annually.”
• “Together, all these benefits and costs constitute an annual net benefit of $1.5 trillion. That’s nearly $10,000 for every person insured. From providing coverage for 160 million Americans to encouraging work that drives the economy, this value more than justifies the dominant mode of health insurance in the U.S.”
• “The alternatives to employer-provided health insurance—individual plans, government plans and going uninsured—often involve more public subsidies and can’t replicate much of employer coverage’s value. Employer-provided insurance is the vital centerpiece of American healthcare. It should stay that way.”

Mulligan notes that alternative options, including those proposed by policymakers that would erode or decimate the ESI program, don’t deliver on the financial value or long-term benefit that employer-sponsored coverage can provide. It’s a telling message as millions of Americans transition to new or evolving workplaces where their benefits will be even more important than ever.

Read more about Mulligan’s original analysis in NBER here. Learn more about the U.S. Chamber’s partnership with other leading business and employer groups to protect the employer-sponsored market and employees’ coverage here.

About the authors

Katie Mahoney

Katie W. Mahoney is the former vice president of health policy at the U.S. Chamber of Commerce.