Incentives, not dishes, improve health

US District Court Judge Reed O’Connor recently ruled to uphold employers’ rights under the Religious Freedom Restoration Act rather than uphold a provision of the Affordable Care Act that requires employers to fund health care. The final ramifications of the ruling are still evolving, but controversy is already brewing.

Conflicting rights obscure incentives

Many argue the ruling jeopardizes employer-based health care, including insurance plans that cover drugs that help reduce the risk of HIV infection. These are logical arguments on their faces. For example, if people cannot afford drugs such as PrEP because their employer places greater importance on adhering to religious beliefs than paying for specific medical care, that health care becomes more expensive. Such consequences could worsen individual and public health.

In response to O’Connor’s ruling, Paul Kawata, executive director of the National Minority AIDS Council (NMAC), stated, “This decision has the potential to deprive millions of Americans of the life-saving drugs they need.” Additionally, Kawata suggests that “state and federal leaders must take all necessary steps to protect access to these vital medicines.”

Kawata is not alone in his opposition. Forbes’ Joshua Cohen suggests the ruling implicitly adopts a “death stance” and Vox’s Ian Millhiser says it’s a public health disaster.

While such arguments are valid, they show a narrow view of employers and their relationship with workers. Relationships between employers and employees are mutually beneficial and can often improve health.

Just because courts overturn mandates that oblige employers to provide health care does not necessarily mean that employers will not provide health care to their employees, their families, and even the wider community. Religious employers may still provide healthcare that they find controversial.

Employers are given incentives to improve health

Employers have been providing healthcare for over a century, regardless of federal law and court decisions, because they see incentives to attract employees, reduce turnover rates, increase productivity, and generate net income. Real wages, including salaries and health benefits, are important means of attracting and retaining workers.

Numerous examples from the 19th and 20th centuries show the spread of such incentives. Long before federal mandates in the United States, the owners and managers of coal mining companies provided sanitation. Similarly, cotton textile mills and railroads provided mosquito control. Think of Jay Gould, chairman of the St. Louis Southwestern Railway. In the 1910s, noting that many of his workers were contracting malaria, he set up a trust to fund subsequent mosquito control efforts, which ultimately helped bring the disease under control among his workforce.

Workers and employers, as well as trade unions, also have a long history of working together in the health sector. John Murray describes how workers preferred company health plans to provide insurance in the event of illness or injury, particularly between 1880 and 1940, which formed the basis of the American model of employer-based health insurance.

Christy Ford Chapin notes that early 20th-century American employers provided health care for many reasons, including improving working conditions and reducing insurance costs. Such services offered benefits to employers and employees alike through improvements in health, increased productivity and profits.

Such incentives are not unique to the United States. For example, with the rising HIV epidemic in South Africa, mining companies made testing, antiretroviral therapy and HIV-related health care available to their employees. Their efforts became so extensive and successful that they founded the Aurum Institute, now one of the world’s leading public health research institutions.

Workplace wellness programs are common. Although their impact on health outcomes has been mixed, employers can still use them to attract employees if they believe in the effectiveness of such programs. Employers and health plans also offer other health-related perks, from Fitbits, gym memberships, and personal trainers to flu shots and meditation sessions.

Job markets make sorting easier

Healthcare is one of the ways employers are attracting a larger pool of employees, limiting turnover, and increasing productivity and net sales. Such incentives remain in place regardless of court decisions and federal requirements.

Critics of O’Connor’s ruling might still be outraged, as those incentives may not directly help people facing higher healthcare costs. There is a silver lining, however, especially when labor markets are competitive.

In competitive labor markets, workers and employers cooperate to produce valuable goods such as health care. Workers and employers who do not produce such goods will tend to earn lower wages and/or lower profits.

Employers who hold strongly to their religious values ​​to the extent that they would refuse to cover some types of health care lose opportunities to attract employees who value those health commodities. Strong religious affiliation becomes costly for employers as current and prospective employees may seek employment elsewhere. Similarly, employers who are interested in building and maintaining relationships with employees, rather than any religious values ​​they may have, will likely provide the types of healthcare workers that are most valued. These firms will tend to fare better in a competitive job market than the religiously minded.

Byron B Carson, III

Byron Carson

Byron Carson is an Assistant Professor of Economics and Business at Hampden-Sydney College in Hampden-Sydney, Virginia. He teaches courses in Economics, Money and Banking, Development Economics, Health Economics and Urban Economics.

Byron received his PhD in Economics from George Mason University in 2017 and his BA in Economics from Rhodes College in 2011.

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