of placing EBHI at the center of our nation’s healthcare system. Section III
examines how the ACA undertakes to change the EBHI environment, and
how the Obama Administration, the Internal Revenue Service (“IRS”) and
the U.S. Department of Health and Human Services (“HHS”) are
implementing the relevant provisions. Section IV attempts to project how
employers will respond to these changes, and how the U.S. healthcare
system will evolve as a result. This prognostication is very difficult because
of the diversity and complexity of the factors bearing on this evolution.
Consequently, the paper’s contribution lies not in offering a definitive
conclusion and prediction but, rather, in setting out an analytical framework
by which readers can better understand what may happen over the next
decade and beyond. Section V summarizes the above and sets forth the
authors’ overall conclusions.
I. THE HISTORY OF EMPLOYMENT-BASED COVERAGE IN THE U.S.
The United States was not the first country to build a health insurance
system on a foundation of employer responsibility. That distinction belongs
to Germany, where workers in the mid-1800s pooled their resources to pay
the healthcare expenses of workers who got sick or injured and had been
regularly paying their monthly contribution to the cooperative.4 In an
attempt to counter the working class’s attraction to the trendy allure of
communism, Chancellor Otto von Bismarck turned this ad hoc arrangement
into a national system with his Imperial Insurance Order, issued in 1883,
which required all workers and employers across the country to pay into
“sickness funds.”5 To this day, employment-based health care is widely
known as the “Bismarck model.”6
The United States started from a similar grassroots premise, but moved
in a more voluntary, incentive-based direction. First came the institution of
health insurance itself. In 1929, Baylor University Hospital began offering
4. See Anne Underwood, Health Care Abroad: Germany, N. Y. TIMES (Sept. 29, 2009),
the history of Germany’s employment-based health insurance system.) Today, Germany’s
“sickness funds”, as these cooperatives came to be called, are financed through a payroll tax
levied on employers and employees. Albert DiPierro, Universal Problems & Universal
Healthcare: 6 Countries- 6 Systems, OR. FUTURE, 31 (2004), available at http://
5. Underwood, supra note 4; accord SOC. SEC. ADMIN., Otto von Bismarck,
http://www.ssa.gov/history/ottob.html (last visited Apr. 27, 2015) (discussing Bismarck’s
influence on social insurance in Germany).
6. Lorraine S. Wallace, A View of Health Care Around the World, 11 ANNALS FAM.
MED. 84 , 84 (2013); Olga Khazan, What American Healthcare Can Learn From Germany,
THE ATLANTIC (Apr. 8, 2014), http://www.theatlantic.com/health/archive/2014/04/what-