A lot has changed in the world since the 1940s, and changed for the better. Except the employer-based health insurance system. This vestige of World War II economic policies allowed employers to skirt wartime wage controls by granting them tax advantages for offering this “benefit” to their employees.

Over the years, this arrangement has effectively functioned as a mutually beneficial conspiracy between employers and employees to shield earnings from the sticky fingers of Uncle Sam. Yet while distortions in compensation and unnecessary breaks in health insurance coverage plague the system today due to these archaic policies linking employers to health insurance, many mistakenly view employer-sponsored health insurance as the key to expanding health insurance coverage.

We know the rising cost of health insurance squeezes employers, but the impact to employees is often overlooked. While their total compensation package increases, employees find little of the increase actually making it to their pocket. A recent report by Families USA found that health insurance premiums in Texas rose almost 80 percent between 2000 and 2006, significantly outpacing increases in median earnings which grew by almost 11 percent over the same period.

While these numbers are often used to highlight the hardship health care costs place on working Texans, the truth is that working Texans could pocket more of the overall increases in compensation each year if they shared the responsibility to keep the cost of health care and health insurance low.

However, the present employer-focused system separates individuals from the cost of their health care and health insurance. This effectively insulates the individual from any responsibility to manage their health care as a way to manage the cost of premiums.

When health care providers and advocacy groups arrive in state capitols around the country asking for new disease-specific and provider-specific mandates on insurance policies, individuals are often unaware of the impact these regulations have on their pocketbook. Keeping the cost of health insurance down means rejecting regulations that drive up costs at the outset, and there is no better way to focus attention on this fact than to have individual consumers engaged in the discussion.

This 1940s era system of providing health insurance through employers is fracturing. It can neither meet the demands of our modern economy and mobile workforce, nor effectively control the growth in health care and health insurance costs as others pay the bills.

If lawmakers are serious about increasing access to health insurance – or more importantly, quality health care – they should stop creating new incentives and penalties that further tether employees to the provision of health insurance by employers. Instead, lawmakers should remove the tax code’s bias toward employer-sponsored health insurance, or at least offer equal financial incentives and tax advantages to individuals who purchase coverage for themselves.

Next, lawmakers should remove government-imposed barriers and biases that increase cost through regulation, and limit both competition and consumer choice. In particular, lawmakers should remove state mandates on health insurance coverage that often drive costs up and value down, as well as allow individuals the freedom to purchase coverage from any insurer in any state.

In addition, Congress should expand Health Savings Accounts by loosening limits on contributions, ensuring that individuals can better build savings to cover out-of-pocket costs, as well as loosening restrictions on purchasing coverage with HSA funds.

By creating real health care consumers, rather than separating the individual from their health care decisions and health care dollars, individuals will increasingly demand better quality services at competitive prices. Furthermore, these consumers will rightly demand greater choice through a deregulated health insurance market that offers individuals more flexibility in choosing coverage that meets their needs.

The wartime economy of the last century should no longer be allowed to dictate the health care choices available to this century’s health care consumers.

Mary Katherine Stout is the director of the Center for Health Care Policy Studies at the Texas Public Policy Foundation.