I hope I'm still posting this before the dead line
As all of you, I am also of the opinion that C displays the best answer choice. Apparently, the easiest way to determine that is by examining the "comparison issue", which has already been done by many of you. To make this post not completely redundant, though, I want to focus on other mistakes that the wrong answer choices contain.
(A) employers are largely depended on in the American healthcare system to provide health insurance
When I first read this, I thought the word "depended" was a typo and should have been "dependent". But I figured that no good question writer would make such a sloppy mistake, so I read again and discovered that this sentence actually makes use of the passive voice, which is definitely unnecessary.
Apart from that, the word order seems confusing as well. The injected "in the American healthcare system" breaks the flow and actually separates two parts that belong together. The sentence should have read "employers are depended on to provide health insurance" with "in the American healthcare system" either at the beginning or end of the underlined part.
(B) to provide health insurance in the American system, people largely depend on their employers
Apart from the faulty comparison, this sentence changes the intended meaning. It actually says, that it is the people who provide health insurance, which is clearly wrong. The people don't provide anything, their employers do.
(C) the American healthcare system is largely dependent on employer-provided health insurance
This is the correct answer, so no trouble here. The sentence is, concise, elegant, and grammatically correct.
(D) the American healthcare system's foundation is employer-provided health insurance
This sentence elegantly solves the problem of who provides health insurance. However, "healthcare system's foundation" sounds awkward. The American healthcare system does not actually "possess" its own foundation. It should therefore read: "the foundation of the American healthcare system". Admittedly, the faulty comparison is by far the biggest reason to eliminate this answer choice.
(E) employer-provided health insurance, upon which the American system depends
Using this option, all we get is a fragment and not a full sentence. When reading "Unlike [...], employer-provided health insurance, upon which the American system depends" we should ask: does what? "upon which the American system depends" is a relative clause. In each sentence, all relative clauses can be left out and the main clause (s) still constitute a grammatically correct sentence. If we take out the relative clauses here, though, we get: "Unlike a single-payer health insurance system, employer-provided health insurance". Not a sentence!