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Although positive and negative assessments of tying health insurance to employment abound, most scholars and policymakers have acknowledged that our long history in this area predicts our future. What they have largely ignored, however, is the extent to which individual attachment to employment-based insurance is at the root of our inability to make broader health reforms. The attachment (1) harms exchange-based insurance and (2) denies employers the ability to use Health Reimbursement Arrangements (“HRAs”) to subsidize the purchase of insurance by their employees on the exchanges.

This Article advocates reducing or eliminating workers’ overvaluation of their health insurance and increasing their exposure to health insurance offered outside of employment. First, the Article details how our attachment to employer-sponsored health insurance developed and why the attachment persists. I explain that law and behavioral science scholars have missed an opportunity to apply their theories to prevent the overvaluation of employee benefits. Next, I discuss how the attachment to ESI has raised fears that the ACA will result in employers “dumping” employees on the exchanges and how this is motivating the administration to take further steps to preserve the current system while implementing health reform. Finally, the Article provides background on the growth of defined contribution plans in health financing backed by the notion of increasing consumer choice and how recent IRS guidance halts innovation in this area. I argue that employers should be allowed to use HRAs to subsidize employees’ purchase of health insurance on the exchanges because it would reduce the attachment to employer-sponsored insurance and create larger, more diverse exchanges.

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University of Kansas Law Review