Racial and Ethnic Disparities in Employer-Sponsored Health Coverage

Health care as a human right is a principle building momentum in the current political climate, where proposals for universal health care have again taken center stage. A healthy society is composed of healthy individuals. Yet, civil rights violations resulting in many racial and ethnic disparities still need to be addressed in order to deliver equitable health care and coverage.

Health Care: A Civil Rights Issue

White supremacy influenced an evolving, private, job-based, health care infrastructure that deliberately excluded the Black population, preventing it from sharing in its societal benefits. Our health care history is another disgraceful chapter where race often determines treatment and outcomes. The actual desegregation of the medical system did not eliminate the disparities in societal benefits between whites and Blacks.

Since slavery was abolished, segregated health care determined your standard of living, your longevity, and your dignity in death. Charitable health organizations, formerly devoted to helping the “poor and dispossessed,” disavowed themselves of the obligation to help Black people in need of health care, instead helping “citizens only” during the Reconstruction Era.

In the late 1800s, while Germany was creating Europe’s first national health care system, America staked deeper roots in segregated private health care and charity-based systems. While other nations focused on access and equality, our deep-seated attachment to America’s racial hierarchy tied us to a health care system encompassing racial disparities by design.

Decades of Jim Crow, lynchings, and unceasing injustice birthed the civil rights movement, incorporating into its mission systemic transformations including desegregated hospitals and government-funded health programs. The National Association for the Advancement of Colored People (NAACP) and the National Medical Association (NMA)—the Black iteration of the then segregated American Medical Association (AMA)—fought for the passage of Medicare and Medicaid. When Medicare funds were distributed to almost every hospital providing care to elderly patients, formal segregation in hospitals ended, mandated by the Title VI nondiscrimination clauses. Not only did this funding end hospital segregation, but it radically changed health outcomes in a divided system where the color of your skin determined your quality of treatment and your mortality.

My generation doesn’t recall a pre-Medicare, pre-Medicaid America. These programs were victories of a greater civil rights strategy to desegregate and equalize health care and coverage. Yet, discourse surrounding the movement that ushered in the Civil Rights Act is centered around voting rights, education, and integration. Title VI of the Civil Rights Act protects people from discrimination based on race, color, or national origin in programs and activities that receive federal assistance. The Civil Rights Act served as a health care bill.

Role of Health Insurance in Reducing Racial Disparities in Health Care

Insurance status is a fundamental predictor of the quality of care a patient receives. Generally speaking, private insurance delivers higher-quality and more consistent care than publicly funded insurance programs like Medicaid and CHIP (Children’s Health Insurance Program), and being completely uninsured ranks last for quality and consistency of care. Racial disparities in health coverage account for barriers to health care access faced by many Black, Indigenous, and people of color (BIPOC). These inequalities result in disproportionate gaps in coverage, inconsistent access to services, and poorer health outcomes.

The long-standing lack of civil rights for the Black, Latinx, and American Indian populations directly impact the persistent health inequities they experience. Civil rights are the social determinants of health, affecting the organization of resources such as housing, education, transportation, employment, and the justice system. In turn, societal distribution of these resources affects injury, illness, disease, and health. The enforcement of civil rights legislation affects the distribution of health risk and safety factors and resources that enable prevention and provide treatment. Equitable access to health care provides palpable health benefits.

Public health insurance programs play a major role in providing affordable health care and better outcomes for BIPOC. A sordid history ensured that Black Americans are one of the most economically depressed groups in the United States, experiencing illness at very high rates, with a lower life expectancy than other racial demographics. Since the enactment of the Civil Rights Acts of the 1960s, Black Americans have made advancements in education, both in high school and college graduation rates, and their earning potential has increased as well. However, their pay still lags behind that of their white counterparts doing the same work.

While the majority of Black Americans have health coverage, they are also the group most likely to fall into the “coverage gap”: Their earnings are too high for Medicaid eligibility, but not high enough to take advantage of subsidies under marketplace plans.

We can improve health outcomes for BIPOC, increase their life expectancies, and reduce the racial and ethnic disparities in care by restructuring health coverage sources. Because many BIPOC do not have health insurance throughout adulthood, it prohibits them from accessing health care. The greater likelihood of losing health coverage they once held is responsible for significant disparities in the health care BIPOC receive. Frequent changes in coverage, often intertwined with employment transitions, cause interruptions in care and bring unfamiliar providers.

How Employment Took On Health Coverage

The marriage of health insurance and employment was a product of the escalating World War in 1942, when rising prices and competing wages caused considerable inflation in the United States. Desperate to stabilize the economy, FDR’s administration produced the perfect storm: The National War Labor Board (NWLB) instituted a wage cap, leaving employers searching for alternatives to pay to lure new hires; the NWLB exempted health insurance from that wage cap; the Internal Revenue Service declared employer contributions to health insurance premiums tax-free.

Health insurance was a tough sell in the first third of the century. But upon improved medical care (penicillin!) and the tax policies and wage cap that serendipitously linked employment and health insurance, in just 12 years, the number of people with private health insurance exploded from 8 million to 92 million.

The Folly of Employment-Sponsored Health Coverage

Relying on employment for society’s health coverage is flawed. This system is expensive, produces “job lock,” promotes increased spending on unanticipated costs, and is inequitable and deficient.

As a result of the tax exemption for employer-sponsored health coverage premiums, the federal government lost income and payroll taxes, estimated to be $260 billion in 2017 alone, far more than the government costs of the much-maligned Patient Protection and Affordable Care Act (ACA). Health insurance costs are also unanticipated in an unregulated market in an age when people live longer and health care has improved. This system encourages increased spending on health insurance premiums, which have been consistently growing for over a decade. Wages, meanwhile, have remained constant.

Workers becoming dependent on their employment because it is inextricably linked to their health coverage is known as job lock. Because of job lock, employees reject better offers and resist entrepreneurship out of fear that market plans or Medicare will pale in comparison to their existing coverage. Productivity suffers because of job dissatisfaction; workers are not best matched to their positions, which undercuts labor market mobility.

The inequities between lower-income and higher-income workers are vast, owing to the tax disparities, the rates of offer and acceptance of employer-sponsored health coverage, and the benefits those plans conferred upon them. Employees with higher-paying jobs reap more benefits from the employer-sponsored health coverage system than those with lower incomes. Over 40 percent of Americans pay no taxes and, of those people, 60 percent are employed. For them, employer-sponsored health coverage does not provide any tax benefits at all. Lower-income workers who do pay taxes enjoy smaller benefits than do higher-paid employees because of their low tax rates. Many lower-income workers are not offered employer-sponsored health coverage at all. Conversely, employees with higher-paying jobs are most likely to have employer-sponsored health coverage, and, because of their higher tax bracket, the tax exclusion will confer a larger benefit. In the lowest income quintile, approximately one-third of employees are offered employer-sponsored health coverage with an acceptance rate of only 20 percent. However, over 80 percent of employees in the top quartile of those highest paid are offered, and accept, employee-sponsored health coverage. Over time, the value of the benefits received by the higher-income employees grew at a much faster rate than the value of benefits to lower-income workers.

Our health care system is fragmented, and employee-sponsored health coverage contributes to the disorder. No one set of policies govern health care in America, nor do we have an agency dedicated to overseeing it. The system is decentralized and poorly organized. Smaller employers struggle to negotiate group plans because they lack bargaining power. Large employers that do have the bargaining power often self-insure to save on health care costs and are unsuccessful.

One consequence of the coronavirus on public health that is seldom raised is the failure of an employer-sponsored health coverage system to support society when there is a sudden, very high rate of unemployment. The pandemic has rooted out many truths. Now, even some of the well-employed are scrambling for health coverage. The social determinants of health, housing, education, and employment surrendered BIPOC to the frontlines again. Many are working low-wage, essential jobs, exposing themselves to health risks, while they lack insurance. Health care linked to employment is neither a sustainable nor equitable model.

The union of employment and health coverage contradicts the principle of health care as a human right, treating it rather as a privilege conferred upon those who are well-employed. From this contradiction, the first government-funded health care programs were realized: Medicare, Medicaid, and CHIP.

Racial Inequality as a Product of Employer-Sponsored Health Coverage

Whether you carry health insurance is directly related to where, when, and whether you seek health care, and to your overall health. According to a 2018 analysis of the Census Bureau’s American Community Survey (ACS) by the Kaiser Family Foundation, 66 percent of whites, 46 percent of Blacks, 41 percent of Latinx, and 36 percent of American Indian/Alaska Natives (AI/AN) are covered by employer-sponsored health insurance. The ACA, Medicare, Medicaid, and CHIP narrow the coverage gap. Poor health, obesity, and mortality rate directly correlate to insurance status. Access to good health care for all would reduce instances of chronic and acute illness and infirmity in underinsured communities.

Disparities in health care access exist across all racial and ethnic lines. Health insurance is the financial gateway to preventive care, screenings, disease management, and prescription drugs. Coverage Matters: Insurance and Health Care, published by the National Institutes of Health, explains, “the voluntary, employment-based approach to insurance coverage in the United States functions less like a system and more like a sieve. There are many ways to slip through the holes.”

Requiring employment to be the main porthole through which insurance is sought makes living in a single-parent home a barrier to access. Although many Black Americans work in firms that employ 500 or more workers, they are 10 percent less likely to hold employer-sponsored health coverage than their white counterparts, even though these firms hold significant negotiating power with insurance companies. When insurance loss is a risk, instability affects the patient’s decision-making. They may choose short-term treatment options requiring fewer follow-up visits, postpone visits to health practitioners, or avoid medical care altogether in anticipation of future bills. An ongoing relationship with a health care provider is indicative of a connection to the system, a valuable piece of health care access. That connection is facilitated by consistent health coverage. Precarious health coverage may lead to physician bias in referrals to specialists or against recommending certain treatments with better outcomes.

Confront Racism to Reduce Racial Disparities

Advocates say that providers must acknowledge that race and racism factor into health care to reduce and eliminate these disparities. Better health outcomes require pointed solutions to problems that contribute to the disparities. But it’s not only providers that can change the system. Policymakers, recognizing the role discrimination, bias, and systemic racism play in health outcomes, should consider the social determinants of health when proposing health care reform.

Institutional racism, “the systematic distribution of resources, power, and opportunity in our society to the benefit of people who are white and the exclusion of people of color” affects an individual’s, and, therefore, society’s health. Your home, schooling, environment, and nutrition directly affect your likelihood of earning a degree, exposure to toxins, and your foundation, and are therefore predictors of whether you will secure a well-paying job, be offered employer-sponsored health insurance, have a regular health provider, and develop chronic health problems as you age.

Controlling for factors like income, education level, and genetics, correlations were found between repeated acts of discrimination and increased rates of illness, such as asthma and diabetes, in the Black community. The expectation of racist encounters, in addition to actual lived experiences, cause biological reactions—rapid heart rate and the increased flow of stress hormones—that resemble other stress reactions. Over time, they accumulate and contribute to health problems that might otherwise have been less severe or completely avoided.

Providers that examined disparities in the system, with a critical eye toward racism as a cause, proposed solutions that narrowed the gap. Engaging in routine action to combat racism in health care and eliminate the disparities faced by BIPOC is effective: Develop partnerships with community advisory boards and empower patients to take part in finding solutions; make racial equity a long-term strategic goal by setting regular objectives and providing consistent board dialogue rather than only periodic cultural competency trainings; and prioritize data collection reflecting racial disparities within institutions and by providers. Adopt policy that supports community-based providers, which are disproportionately used by BIPOC. Preventing state efforts to impose restrictions on Medicaid eligibility and incentivizing Medicaid expansion, especially for the southern states, will also close the coverage gap. All levels of government have been derelict in their duty to collect and publish data that would compel action by providers and public health officials. Concrete steps must be taken to improve health outcomes. Without combating racism, we will never be able to fully eliminate the racial and ethnic disparities in health care.

Effect of the ACA on Racial Disparities in Health Coverage

In 2010, Congress passed the Patient Protection and Affordable Care Act (ACA), providing health coverage options capable of narrowing the gap in existing racial disparities. Prior to enactment of the ACA, almost 18 percent of the non-elderly population was uninsured. Medicaid reduced the coverage gap somewhat. BIPOC were far more likely than whites to fall into the uninsured category, the highest rates among Latinx and AI/AN, despite most households having one adult employed full time. Private insurance was financially unattainable in these oftentimes lower-income households, where the workers were not beneficiaries of employer-sponsored health coverage.

The ACA increased coverage rates for all racial and ethnic minorities. In 2014, Medicaid and marketplace coverage expansions resulted in the greatest rate increases. Since 2017, however, the Trump administration has been chipping away at benefits extended to the uninsured. Congress repealed the individual mandate in the 2017 Tax Cuts and Jobs Act, the administration issued guidance encouraging states to apply for waivers allowing additional eligibility requirements for Medicaid, and funds toward enrollment assistance and outreach were cut. Coverage rates stalled and even dropped for some BIPOC, with uninsured rates for whites at 9.8 percent, Blacks at 13.6 percent, Latinx at 27.2 percent, and AI/AN at 28.6 percent.

While coverage rates increased for all minorities after the ACA was passed, states that adopted the Medicaid expansion saw greater rates of growth in coverage compared to states that rejected Medicaid expansion. Most southern states denied their residents Medicaid expansion, disproportionately affecting the large population of Black Americans living there. Conditions preventing the gap from narrowing more between Latinx and whites include the five-year waiting period after obtaining lawful status before Medicaid eligibility and the inability of undocumented immigrants to become eligible for Medicaid or to purchase a marketplace plan.

Objections to the ACA are race-based, echoing disapproval of universal health care in its civil rights era framework. Studies correlate racial bias and opposition to the ACA, congruent to racial biases against Medicaid, a central piece of the ACA.

Conclusion

The fight for universal health coverage is a commonly overlooked pursuit in the civil rights movement. Our employer-sponsored health coverage system was an accident of its era that dovetailed with the white supremacy found in other institutions and should be relegated to the history books. As one of many contributors to racial disparities in health coverage, it is long past its expiration date.