Healthcare Vouchers
Healthcare Vouchers
Background: Sens. Ron Wyden and Susan Collins have proposed a new voluntary mechanism to give small employers and their employees more options to purchase health insurance. Under the bipartisan “free choice voucher” proposal, an employer gives an employee a fixed amount of pre-tax dollars (a voucher) to spend in a health insurance exchange. Within the exchange, employees can compare a variety of plans and choose the one that best fits their needs. Insurance brokers and agents can help them choose.
Free choice vouchers recognize that the employer-employee relationship in America has changed considerably since employer-sponsored insurance began in the 1940s. In some ways, this arrangement resembles a 401(k) plan. The employee gets tax-advantaged resources to tailor the purchase to his or her own preferences and needs. If the employee wants a more expensive product, he or she can add extra dollars of their own to the voucher. If they prefer a less costly product, they can pocket the difference.
Benefits for Employers: The typical small business owner has little expertise in health insurance. Owners don’t have much time to acquire such knowledge and usually have no HR department. The advantages of vouchers and an exchange include:
- Businesses can help employees with insurance without heavy personal involvement.
- The owner can devote more time to operating and growing the business.
- Search and administrative costs are lower.
- The owner is free from the arduous task of purchasing group coverage.
- The size of the employer contribution level is flexible.
- Participation in the voucher program is purely voluntary.
Benefits for Employees: Vouchers are also good for employees. Advantages include:
- Employees gain portability. An employee who changes jobs, becomes self-employed or stops working can carry insurance from place to place. Today, leaving a job usually means changing insurance plans, and sometimes it means losing coverage altogether.
- Employees get the freedom to choose from multiple plans in the exchange. Small employers today rarely are able to offer more than one plan. Greater choice can include varying levels of deductibles, copayments, treatment coverage, physician networks, etc.
- Employees who purchase insurance requiring fewer dollars than the voucher provides can keep the difference in cash. This gives the employee the incentive to be a conscientious shopper.
- Since employees decide which plan to purchase, they won’t face the situation where the employer requires them to change plans and, perhaps, change doctors.
Benefits for the economy: Vouchers help the healthcare and non-healthcare parts of our economy:
- Because employees will be able to choose their policies, they will be more involved and invested in the decision. They will be more aware of costs, hopefully helping to “bend the cost curve.”
- Because health insurance is portable, employees are not locked into jobs when better opportunities come along. Job lock limits innovation, productive capability and entrepreneurism.
A choice NFIB’s members support: Asked in a survey to name the best approach to controlling healthcare costs, members’ most popular choice, by far, was, “Individuals shopping for the best prices in healthcare and health insurance.” Asked to name the preferred role for employers in financing employee healthcare, members overwhelmingly selected, “Voluntary provision of employee health insurance.” The free choice voucher proposal matches both preferences.