Let’s accept two notions as given for the sake of conversation. First, in the U.S. we like the free market, so for-profit insurance isn’t going anywhere soon. Second, for-profit entities like to please the folks who write the checks.

With me so far?

Health insurers derive their primary income from large contracts with corporations. In fact, the Kaiser Family Foundation reports that 48 percent of the population receives insurance benefits through an employer. If you exclude Medicare and Medicaid recipients, that number, according to 2010 census data, jumps to over 70 percent  of the employed population over 15 years of age. A tiny five percent of the population purchases private insurance.

And while employer-provided coverage is on the decline, it still accounts for the overwhelming majority of coverage. Simply put, this means the individual is not the concern of the insurance company. Insurance companies need to keep their corporate clients happy.

This is bad for everyone. It’s bad for you if you have employee coverage; it’s bad for you if you buy your own insurance.

Let’s be clear that employer provided health insurance isn’t part of some Grand Design for Health Care. It is an accident of history and circumstance. Health insurance was a way employers went around the wage and price controls that arose during the labor shortages of World War II. Health insurance, quite literally, was an accidental benefit of the war.

You might have the best employers in the world, but the reality is that they answer to the stockholder. Not to you.

The aim of employer provided health insurance is to provide just enough benefit to keep you working for them and no more. So the insurance company, knowing who pays the bills, is going to offer your employer packages that will achieve their goal of giving you the minimum requirement. They have no need to go above and beyond in the coverage or the service they provide. They just need to provide tidy, cost-efficient packages for their client.

Finally, if you are one of the 5 percent who purchases your own insurance, you are squarely in the minority. The incentive to work for you is tiny. The resources go into keeping the revenue generated by the premiums of the 48 percent, not the 5 percent. This may reveal itself in higher premiums for individual policies, less coverage, confusing conditions, and delayed approvals and payments.

What the Affordable Care Act should have done (it’s not too late!)

Over decades, “we have completely suppressed the marketplace” in healthcare, John C Goodman, author of "Patient Power" (1992) and “Priceless” (2012), explains. Goodman has advocated direct, consumer driven purchases of healthcare for decades. Unfortunately, the current version of The Affordable Care Act continues to suppress the market even as it marginalizes consumers.

However, had the ACA required all individuals or families to purchase their own health insurance, health care as we know it would have been transformed. This simple shift would cause insurance companies to compete for your business just like auto insurers do. If this change were put into place, we would see:

  • Clarity of benefits
  • Ease of use
  • Most needed and wanted benefits available
  • Competitive premiums

Little lizards would show up on late night TV explaining how easy it is to submit your health claims. Insurance companies would have trained agents to answer your calls and explain things in plain English. You would no longer need pre-approval for admission to the hospital for your heart attack. The premiums you pay would be based on the market, and not whether you’re self-employed or work for a small or large employer.

All of this would happen because the end user is the client, the actual customer.

You can still keep your corporate benefits

Employees still want their benefits, and corporations still want to dangle enough carrots to keep the staff happy. These desires are easily satisfied through employer reimbursements of premiums. The medical savings account can be an excellent vehicle for this type of benefit. Rather than paying premiums to an insurance company for you, your employer can deposit tax-deferred dollars into your account. You can then use your account to pay the premiums yourself. And when you use those dollars for premiums or other health-related costs, you will owe no tax on them.

Employers have no business negotiating health benefits for employees. It removes individuals from control of their own health care and divorces them from its pricing.  That, however, is a mistake that can be fixed. The Affordable Care Act, version 2.0, would put you and me, the true customers, back in charge.