Rosie the Riveter’s Healthcare Legacy: Why an 83-Year-Old Executive Order Is Killing American Business
How a World War II Wage Freeze Created the Healthcare System Nobody Designed
American workers’ wages have been essentially flat for two decades. Where did the money go? Healthcare. Employer healthcare costs have increased 4x since 2000, consuming what should have been wage growth. The average employer now spends over $22,000 per employee annually on health insurance—more than many workers earn in take-home pay for four months of work.
This isn’t the free market. It’s the legacy of a World War II wage freeze that created a system nobody would design today. And it’s quietly destroying American competitiveness, entrepreneurship, and worker mobility.
An Accident of History
Your employer-provided healthcare benefits aren’t the product of careful policy deliberation or free-market innovation. They’re not in the Constitution. They’re the result of businesses in the 1940s working around wage controls instituted by President Franklin Roosevelt to combat wartime inflation.
FDR’s Price Control Act of 1942 froze wages at September 15, 1942 levels for every working person in the United States. The executive order prohibited increases in wages “unless such an increase is necessary to correct maladjustments or inequalities, to eliminate sub-standards of living, to correct gross inequities, or to aid in the effective prosecution of the war.”
The market found a workaround. Businesses couldn’t pay Rosie the Riveter more to build B-29s, but they could offer her a major medical plan for her family. After the war ended, the system became permanent through tax policies that made employer contributions to health plans tax-exempt for employees and tax-deductible for employers. By 1950, more than 50% of Americans had employer-provided insurance. By 1960, it was 66%.
Nobody sat down and decided this was the optimal way to deliver healthcare to the American people. It just happened. And we’ve been stuck with it ever since.
Where We Are Today
According to the Bureau of the Census, 92% of the American population had health insurance for some or all of 2024. But look at the sources: nearly 40% of Americans receive healthcare directly from government programs—Medicare, Medicaid, Tricare, and the VA.
Republicans can rant about their opposition to government-provided healthcare from every legislative chamber in the country, but the math doesn’t lie. Healthcare is already a massive federal bureaucracy. This percentage will only grow as the population ages.
Let’s talk about healthcare without partisan noise. Here are the facts: Healthcare is nearly 20% of GDP and growing. We already have enormous government involvement in healthcare. The question isn’t whether the government is involved—it’s whether we’re getting value for what we’re already spending.
The Hidden Tax on American Business
The total cost of employer-provided healthcare in the United States is $1.3 trillion annually—nearly twice the $850 billion defense budget and approaching the $1.6 trillion we spend on Social Security benefits.
Employer-provided health plans are exempt from income tax and payroll taxes. The cost is a deductible expense for employers. Effectively, the government forgoes over $300 billion in annual tax revenue by threatening workers with additional taxes if they don’t opt into employer-provided insurance. It’s the functional equivalent of the individual mandate in the Affordable Care Act—just less honest about it.
Let’s look at a real-world example. Assume Rosie’s 2025 health plan costs $8,000 annually, or $667 monthly. Rosie pays 20% of the premium; her employer pays the balance.
The $6,400 in employer-paid premiums are exempt from federal income and payroll taxes. If this were taxable income, Rosie would pay about $750 more in federal income tax and $500 more in payroll taxes.
The $6,400 is also tax-deductible for Rosie’s employer.
The $1,600 Rosie pays is pre-tax, saving her an additional $200 in federal income taxes and $120 in payroll taxes.
Rosie’s choice of health plans is limited to providers selected by her employer.
Rosie’s access to health insurance is directly linked to her employment. If she’s laid off, she loses coverage.
Meanwhile, businesses in Germany, Japan, and South Korea don’t carry this burden. Their healthcare systems—whether public, private, or hybrid—don’t saddle employers with $22,000 per worker in healthcare costs. When an American manufacturer competes with a German one, they’re starting 15-20% behind on labor costs before anyone picks up a tool. This isn’t about worker productivity or wages—it’s about a system that makes American business less competitive by design.
The True Cost of Employer-Based Healthcare
Wage Suppression: Healthcare inflation has consumed wage growth. Workers aren’t paid less—their compensation is diverted to insurance companies instead of their bank accounts. Real wages have stagnated while total compensation costs have soared.
Job Lock: Forty-five percent of Americans report staying in jobs primarily for health insurance. Talented people trapped in the wrong roles, entrepreneurs who never launch, innovations that never happen—all because someone’s kid has asthma. This isn’t freedom. It’s coercion by circumstance.
The Gig Economy Mismatch: Thirty-six percent of workers are now freelance, contract, or gig—projected to hit 50% by 2027. These aren’t just Uber drivers. They’re software engineers, consultants, nurses, and designers building a $1.3 trillion segment of the economy. These people pay double what employees in larger organizations pay for medical coverage that is often far worse. Our economy evolved; our healthcare policy didn’t.
The Competitiveness Tax: Every American business pays a hidden tax their foreign competitors don’t. It’s not regulation or labor costs—it’s health insurance. This is especially crushing for small businesses, who pay 20% more per employee than large corporations and cite healthcare as their #1 barrier to hiring. Small businesses are the engine of job creation, and we’re drowning them in healthcare costs.
Terrible Outcomes Despite Maximum Spending: We spend more per capita than any developed nation and rank near the bottom in health outcomes. The system rewards procedures, not results. Volume, not value. Activity, not outcomes.
Three Paths Forward (None Require Single-Payer)
The Singapore Model: Health Savings Accounts + Catastrophic Coverage
Mandatory health savings accounts funded by employer and employee contributions that would have gone to premiums, paired with government-backstopped catastrophic insurance. Individuals control spending for routine care; society pools risk for disasters. Singapore spends 4.5% of GDP on healthcare with better outcomes than the US. It’s a market-based system with a safety net—exactly what conservatives claim to want.
The Swiss Model: Individual Mandate, Private Competition, Portable Coverage
Private insurers compete for individual customers, not employers. The ACA created a mandate for insurance. Everyone must buy insurance; government subsidizes those who can’t afford it. Insurers can’t deny coverage or price-discriminate based on pre-existing conditions. It’s a true market with real competition—not the employer-negotiated oligopoly we have now. Healthcare is portable, and employers are free to compete on actual wages. Switzerland has private insurance, individual choice, and universal coverage.
The Exchange Model: Build on What Already Works
The Affordable Care Act created healthcare exchanges, but they remain a second-tier market serving only those without employer coverage. Expand and improve them: allow anyone to opt out of employer coverage and purchase through exchanges instead, with employer contributions flowing to the exchange as premium support. Require insurers to offer identical plans and pricing in both employer and individual markets—no more discrimination against individual purchasers. Add a public option (Medicare buy-in at actuarial cost) to ensure real competition. This creates a genuine marketplace where individuals choose coverage that fits their needs, employers are freed from healthcare administration, and portability is automatic. The infrastructure exists—we just need to open it up and make it competitive.
The Common Thread: All three decouple insurance from employment. All three make coverage portable. All three create real market competition. All three would cost less than our current system while covering more people.
What Real Reform Looks Like
Any genuine reform must accomplish five things:
Make it Portable: Health insurance follows you from job to job, from employment to freelancing, from state to state. Your coverage isn’t hostage to your employer’s choices.
Make it Individual: You assess your healthcare needs and choose your coverage level, with catastrophic protection as a backstop. Not your HR department—you.
Make it Work in a Modern Economy: Enrollment and plan selection aren’t tied to employment. Gig workers and independent contractors have the same access and pricing as corporate employees.
Make it Outcome-Based: Pay providers for quality and effectiveness of care, not quantity of services. Tie reimbursement to health outcomes—reduced readmissions, patient satisfaction, improved chronic disease management. This value based model for healthcare delivery rewards results, not activity.
Protect Families from Catastrophic Costs: Create a risk pool for catastrophic illness that no individual or family could reasonably afford. Society absorbs the tail risk; individuals manage routine care.
The Conservative Case for Change
Conservatives claim to oppose government healthcare. Fine—but our current system is already massive government intervention. It’s just inefficient intervention that happens to benefit insurance companies at the expense of workers and businesses. We’re already “socializing” healthcare costs through emergency room mandates, uncompensated care, and cost-shifting. We’re just doing it in the most expensive, least effective way possible.
Conservatives claim to support free markets. But employer-based healthcare is the opposite of a free market—it’s a captive market created by an 83-year-old wage freeze that nobody would design today. There’s no price transparency, no real competition, and no consumer choice. That’s not capitalism—it’s corporatism.
Conservatives claim to be pro-business. But saddling American companies with healthcare costs their competitors don’t bear isn’t pro-business—it’s a competitiveness suicide pact. Every dollar spent on insurance administration is a dollar not spent on innovation, expansion, or wages.
The question isn’t whether to change the system. The system is already changing—the gig economy is growing, entrepreneurship is constrained, and American businesses are hemorrhaging competitive advantage. The question is whether we adapt intentionally with smart policy or let the system collapse under its own dysfunction.
The Choice Ahead
Republicans say they’re pro-business. Democrats say they’re pro-worker. Here’s a chance for both to be right: Free American businesses from the healthcare tax, and free American workers to pursue opportunity without fear of losing coverage.
The current system satisfies no one except the insurance companies profiting from complexity and the politicians who’ve built careers defending the status quo. That’s not a market—it’s a rigged game.
Rosie the Riveter took a factory job in 1943 to support the war effort and got health insurance as a workaround to wage controls. Eighty-three years later, we’re still living with the consequences of that emergency measure. Our economy has transformed. Our workforce has evolved. Our global competition has intensified.
It’s time our healthcare system caught up.
The accident of history has run its course. Let’s build something better—something designed for the economy we have, not the one we had when Rosie was building bombers.
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