Jacob Sullum

It's no mystery why each party portrays the other as bent on destroying employment-based medical coverage. Surveys find that a large majority of people who have such insurance are happy with it. According to a recent Zogby poll, 77 percent of Americans oppose "taxing employer-provided health care benefits."

Yet it's the tax-free status of those benefits that favors them over cash compensation, maintaining a bizarre system in which most Americans get their health insurance -- unlike their car, life or homeowner's insurance -- through their employers. As a result, they are insulated from the actual price of their insurance and are more likely to have plans with low deductibles that cover routine medical expenses as well as large, unpredictable costs. In choosing among providers, drugs and courses of treatment, they have little incentive to economize and usually do not even know the relative costs of the various options.

The artificial dominance of job-based plans, along with misguided restrictions on where insurers can sell policies and what types of coverage they can offer, has stunted the development of alternatives. Even so, the large price difference between the job-based and individual insurance markets (some of which may be due to differences in the age and health of policy holders) suggests the savings that are possible when people decide how to spend their own money: In 2007 the average annual premium for nongroup health insurance was about $2,600 for single-person coverage and $5,800 for family coverage, compared to $4,500 and $12,100, respectively, for job-based plans.

In addition to enhancing competition and controlling costs, cutting the link between employment and health insurance would relieve the insecurity that many Americans feel about going without coverage when they lose or leave their jobs. Obama is right that it would be "a radical shift" -- radical in the sense that it goes to the root of the current health care mess.

Jacob Sullum

Jacob Sullum is a senior editor at Reason magazine and a contributing columnist on Townhall.com.
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