Who Pays? The Wage-Insurance Trade-off and Corporate Religious Freedom Claims

By Elizabeth Sepper

Happy new year to all and thanks to the Bill of Health for the opportunity to blog this month!

The first day of 2013 saw yet another ruling in the contraception coverage controversy.  And yet another private corporation—this time a real estate management company owned by the billionaire founder of Domino’s pizza—won a temporary injunction against the mandate on religious freedom grounds.  The company’s claim boils down to this:  the Affordable Care Act forces it to pay, through its insurance plan, for healthcare (in this case contraception) to which it objects as a matter of religion.  Let’s bracket, for the moment, the question of whether an artificial entity can have religious beliefs, let alone a conscience, and ask “what wrong with this argument?”

At heart, it misses a basic fact of health economics:  health insurance, like wages, is compensation that belongs to the employee.  Study after study shows that employers pay in wages whatever they don’t pay in health insurance premiums.  Most recently, a study of Massachusetts’ health reform found that firms offering health insurance pay wages lower by an average of $6,058 (nearly exactly the cost of annual health insurance premiums).  Each employee’s actual “salary” is wages plus the employer share of the health insurance premium.  So, when a corporation purchases a health insurance plan that its employees (and their family members) may or may not use to buy contraception, it is no more paying for contraception than it does when employees use their wages to buy it.

Unfortunately, this basic fact about employer-sponsored insurance is invisible to the public.  Employees are ignorant of the effects of insurance on wages and see insurance as a gesture of goodwill with employers reaping the benefits.  This year for the first time, W-2s must list the total annual premium paid toward health insurance (thanks to the Affordable Care Act).  It’s a first step.  But I suspect that it will do little to change our societal perception of employer-sponsored insurance.  In the litigation over contraceptive coverage, I fear that courts may continue to overlook the fact that insurance (and the healthcare it buys) is paid for by employees, not employers.  If so, the courts will only open the door to future challenges to employees’ healthcare decisions, whether paid for with insurance or wages.