Your employee benefits package is a hostage situation. Here’s the proof — and the fix

Consider a meeting. A talented employee whom you took the time to recruit, train, and promote has been coasting for two quarters. You have the conversation: expectations, growth plans, maybe a performance improvement track. She nods, agrees, promises to do better. Nothing changes. What didn’t you say? There is a version of that conversation that neither of you will ever have: I’m not here because I want to be. I’m here because my daughter has asthma and my husband is self-employed and your insurance plan is the only thing standing between us and medical bankruptcy. I will do exactly enough to not get fired. I have no realistic incentive to do more.

That meeting is not a culture problem. It isn’t a management problem. It is the structure of the game being played.

In the United States, employers hold one lever no other developed economy grants them: the ability to tie a family’s access to medical care to an employee’s continued compliance. That asymmetry has a name in game theory, and it isn’t “benefits.” It’s coercion.

When you model any asymmetric negotiation, as I do for the U.S. Naval War College, the same pattern appears: when one side holds levers the other cannot match, the weaker side’s rational strategy is always identical: minimize exposure, comply at the lowest acceptable level, and exit at first opportunity. The employer-employee relationship has this structure. And in the United States, employers hold one lever no other developed economy gives them.

A Hostage Situation, Not a Benefit

In the United Kingdom, Germany, Japan, Canada, France, and Australia, your employer cannot threaten your family’s access to medical care, because it was never theirs to give or withhold. Healthcare arrives with citizenship, not with a job offer. Lose your job in London, and you lose your income. Lose your job in Louisville, and you lose your income and your child’s pediatrician.

There is a difference between a manager who can threaten your bonus and a manager who can threaten your child’s access to an oncologist. The first is pressure. The second is a hostage situation. In the United States, your employer holds a direct, credible threat to the physical wellbeing of you and the people you love. We don’t call it a threat. We call it a “benefits package.” But the structural reality is that your child’s access to healthcare is contingent on your continued compliance with your manager’s expectations. In any negotiation I have ever modeled, that is not a benefit. That’s a hostage.

The system began as a wartime workaround. Companies competed for scarce workers with healthcare coverage when wages were frozen. During World War II, with wages frozen by federal mandate, companies competed for scare labor by offering healthcare coverage — a benefit the government exempted from wage controls. Over eight decades, what started as an incentive quietly became something else: the most structurally coercive lever in American employment.

Why Engagement Initiatives Don’t Work

Harvard Business School professor Amy Edmondson has demonstrated — across decades of team research — that psychological safety is the single strongest predictor of team performance. She’s right. But you cannot build psychological safety inside a hostage negotiation. The precondition for genuine trust is mutual vulnerability: I trust you enough that you could hurt me, and you choose not to. That reciprocal vulnerability is the engine of discretionary effort. It’s the difference between a workforce that commits and one that complies. And you cannot build it with someone whose family’s medical care you hold as collateral. Every culture initiative, every engagement survey, every pizza party lands on top of that coercion architecture and changes nothing.

The Evidence: Job Lock, the ACA, and the Great Resignation

Economists have a name for what that architecture produces: job lock. The phenomenon — workers remaining in jobs they want to leave because leaving means losing healthcare — has been studied since the 1990s. It is not a metaphor. When the Affordable Care Act created a marketplace alternative to employer coverage, researchers documented the result: measurable increases in labor mobility, self-employment, and entrepreneurship. The ACA did not change wages or culture or management quality. It weakened one lever, and behavior changed.

The Great Resignation made the same mechanism visible at scale. Stimulus payments reduced income dependency. Remote work disrupted social pressure. The ACA marketplace offered a partial, imperfect, but real alternative to employer insurance. For a brief window, the coercive levers were externally weakened — not by employer choice, but by circumstance. The Bureau of Labor Statistics recorded the highest quit rate in its history: 3% in November 2021, representing 4.5 million people leaving their jobs in a single month. When the disruption wore off, the old terms returned. The quit rate fell. The mechanism had been visible the entire time. Employers just weren’t looking at it.

What Costco Actually Did

Costco’s annual employee turnover is 7%. The retail industry average is above 60 percent. The conventional explanation is that Costco pays well. It does. But so do other companies that churn through employees. What Costco actually did is de-weaponize the healthcare lever within the system. It provided coverage so comprehensive and accessible that it stops functioning as a threat. The lever still exists. Costco has simply committed, credibly, not to pull it. The result is a workforce that stays because it chooses to, not because it’s trapped. Every company has access to that structural move. Most choose not to make it because holding the lever feels like power. It isn’t. It’s the most expensive management strategy in the world, and you are paying for it in every disengaged employee, every quiet quitter, and every exit interview that told you exactly what was wrong.

What You Can Do Before the System Changes

So what do employers actually do? You cannot single-handedly reform American healthcare. But you can stop exploiting the coercive lever the system gives you.

If you sit on a board, start with the most structurally significant move available to you: guarantee transition-period coverage. Tell employees on day one that if they leave voluntarily and in good standing, you cover their healthcare for six months. This is a full structural inversion — not educating people about the exit, but funding it. It seems wildly counterintuitive. It costs real money. It also costs less than replacing the employee who left because she felt implicitly under threat, which SHRM places at 50%–200% of annual salary depending on position.

If you lead HR or People operations, go further than you think you should. Subsidize COBRA for departing employees. COBRA exists in theory; its costs are so punishing that almost no one uses it, meaning the “exit” from employer healthcare is functionally a wall. Covering three to six months for employees who leave in good standing is almost certainly cheaper than replacing them — and it sends a clear signal: we are not trapping you.

If you have the leeway, go further still. Decouple benefits eligibility from full-time hour thresholds. The threshold ties healthcare not just to employment but to scheduling compliance. Remove it and you have weakened two coercive levers at once.

If you manage people, you can do something tomorrow that costs nothing and signals everything. Host a benefits literacy workshop. Don’t make it about your plan’s features — make it about your employees’ total options landscape. Walk them through the ACA marketplace. Explain COBRA in plain language. Show them what their insurance picture looks like if they leave. This sounds like handing people an exit toolkit. It is the most powerful trust-building move available to you.

When you show someone the exit and make it less frightening, you communicate something no engagement survey can capture: we know the system gives us a hostage, and we refuse to exploit it. The manager who hands her team an exit map and watches most of them stay anyway has done something the board retreat, the culture consultant, and the engagement platform cannot. she has replaced compliance with choice.

The employee with the asthmatic daughter is sitting across from you right now. She is performing exactly as well as a hostage performs: enough to survive. The question is not how to engage her. The question is whether you are willing to disarm.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune, the U.S. Navy, the Naval War College, or any agency of the U.S. government.