Are there a long term consequences to employer based health care?

Great Debates
1

Right now on Fox News they are talking about the costs of the health care bill to small businesses, and you’ll be shocked to hear the commentator was describing how it will cause their demise.

Try to set aside your ideological beliefs for a second, try to forget about the health care bill, and consider this issue from a more practical stand point. There are social and economic consequences (whether good or bad) to having health insurance tied to employment, and I would like to explore them here.

I have an employer provided group health plan that costs me $800 a year with an $4,000 deductible. To get a similar private health insurance plan (trying to compare apples to apples if that’s even possible) would start at $2880. When I look a bit closer at the plan details I think the policy closest to what I have would be $3396 per year.

Recently I was asked, “Why do you think your premium is so low?” There are two answers: it’s a group of 8,000 people so larger group means smaller risk; my employer is picking up the tab for half of my premium. My employer is huge, and able to negotiate a better health care plan. This gives them a huge advantage over smaller employers. To me that suggests that the current system hurts small business.

I would argue that without external interference, this gap would continue to grow. We all seem to be in agreement that health care expenses are going to continue to go up. It follows from that that health insurance will continue to grow, and from that the gap between private insurance and group insurance will continue to grow.

Here are a couple of anecdotes to show what I’m thinking:

Over the past couple of years, I have had friends dream of getting out of a massive organization and work for a smaller firm. In 3 of the 4 most recent cases they didn’t because of the cost of health insurance at the smaller company.

I also had a couple of friends recently that wanted to take a layoff package and start their own business. One of them crunched the numbers and decided that he couldn’t afford the cost of health insurance. The other waited until he could get on his fiance’s insurance.

I work with this sweet old lady, one day out of no where she began to bitch about how her husband had planned to retire at 55, but because of a heart attack at 54 his planned changed to working until 65* when he could switch from employer based to medicare. He stayed in the workforce longer than he wanted to, because of health care decisions.

To me, this suggests that the free-market and innovative environment so heralded in the US is disappearing, because of employer based health care. I admit they are anecdotes and don’t count for much. But do you hear a lot of people saying, “I don’t need health insurance so I’m going to…” My argument here is that the statement, “I need health insurance so I’m going to…” is much more pervasive.

After living in the US for nearly 5 years I’ve begun to notice the way the quest for health insurance has altered your mindset towards employment. On this board I consistently hear comments made to the effect, “if you’re sick, find a job with health care, even if it pays less, even if you have to drive an hour even if you don’t like it, even if you would be more productive doing something else.”

It seems as if the definition of job and employment has changed to mean “a way to get health insurance.” People are choosing lower paying, less “productive” jobs, in order to secure health insurance.

The US is remarkable for the ability to make money in unique and creative ways. But the concept of a dream job, doing what you love, or doing what you are good at is gone, replaced by the quest for health insurance.

In one of the ways the US is more free than Europe, I could start my own bank here. I think that would be kind of fun, I’d get one of those weird visors and come up with crafty ways to screw people. But I won’t, it’s not enough to make $100,000 a year any more, I need group based health insurance.

I’ve come to the conclusion that Americans are no longer as free as they think they are. It’s all about getting employer based health insurance and moving on from there.

So what do you think, do you see any positive consequences to having employer based health insurance?
*I think she might have been wrong, since I think there is a provision to get medicare earlier if you have health conditions.

2

Well, first I think you need to disabuse yourself of the notion that there was some time in the past when thing were measurably “better”, it’s a fallacy that is open to a massive debate…

That point aside - in addition to all of the observations you made, I see a great cost to society in labor/management relations arguing about who will bear the burden for rising health insurance costs.

Most all of the major points that used to be argued in labor negotiations have been pretty much written into law (I know, I know, this is another huge debate - but for the purposes of this discussion let’s all please focus on Most and major points, thx.)

So, what is left is health insurance costs - labor and management sit across the table from each other arguing for weeks, months, while the insurance companies who set the prices sit back chortling with glee, 'cause they’re gonna get paid either way.

Removing the employer based health insurance model from the mix would solve this particular labor problem.

3

Supporters of HCR and the Democrat’s approach in general like to point to other industrialized countries and how they have some form of UHC that we don’t and how much less they spend on HC than we Americans do. I would ask if any of those countries has a successful program that is based on employer based health care. I think the answer is “no”, but I’m open to being corrected.

4

This link shows that the Netherlands (select it from the menu) has a kind of employer based coverage, with a 7.5% tax on salaries paying for care with employers often paying 2/3 of it. However they also have universal coverage. Many of the countries listed there have employer paid universal coverage. It doesn’t say what happens for those self-employed, but when my daughter was in Germany last year she had to buy coverage on her own. It was very inexpensive, about 60 Euros a month.

I don’t know if this is what you mean by employer-based healthcare. These countries did not have the odd situation of wage controls and a labor shortage we did, and so no doubt never got into our system.

5

France’s system is employer-based in the sense that contributions are collected via payroll, but rather than going to for-profit insurers the contributions go to nonprofit funds.

6

I think the Japanese system might be employer based UHC, and might be the example to prove me wrong.

Does anyone know how health care in Japan is provided?

7

The essential part of our system, that I think is unique, is the tax exemption given to employee-based plans. What you’re describing is more like FICA.

8

Well, I too am shocked, shocked that a Fox News commentator would say that HCR will lead to the destruction of free market capitalism as we know it.

9

The long term consequence is better health and a happier population. Damn it.

10

Part of the problem is the definition of health insurance. When you talk about General Motors it’s an HMO involving $10,000 a year per person. When you talk about a GM vendor it could be a small shop that buys catastrophic insurance in the range of $3,000 per person.

The prior advantage of both was the tax free buying power of a group or the ability to self insure as many large companies have done in the past.

What this means for the small business is probably an increase in cost brought about by legislation to include everything for everybody. This will jack up the cost of insurance. For larger companies that self insure it will only change if they did not include the mandated benefits.

For businesses that did not provide insurance they either have to raise their prices or lower their wages to cover the cost. The money has to come from somewhere. For businesses that are on the edge of being forced to buy insurance the solution will be to fire employees to get under the target number.

11

The increasing cost of health care was one of the driving reasons why I had to leave a small company that, in general, I liked. It wasn’t the only reason, but in the end, no raise + health care premium increase + new house = skirting way too close financially.

Employer-based health care makes it harder for new businesses to complete.

12

I think it will be interesting just to see how much unmet need is out there.

Folk who are not insured but need medical attention, folk who are under insured, folk who cannot afford the copays, medical conditions that are not covered.

Once this sort of picture emerges it’s likely that the moral imperative of universal healthcare will slowly swing to ‘absolute necessity and human right in a civilised nation’.

The huge cost of that unmet need will have to be covered though, and it will come out of taxation.

13

I’ve always been interested in this part. I have a nice, well paying professional job. My husband does as well. In another 12 years our kids will be through college and we will be in our mid-50s with plenty of money to live on in retirement - if we don’t have huge private health care premiums. But instead we will tie up our jobs until we retire for health care.

My father was just in this position - he just qualified for medicare and retired. But - ignoring health insurance - he could have afforded to retire five or ten years ago - freeing up his job to someone coming into the market. And he was eager to five years ago but health insurance wasn’t affordable.

How many people are sitting on jobs for health insurance, where if health insurance wasn’t tied to jobs, those jobs could be freed up for people who needed the income instead of the insurance.

14

Maybe I’m missing something but if you’re forced to buy insurance it will certainly be catastrophic. “Co-pays” will be in the form of a deductible which means all medical expenses are paid in addition to the insurance premium.

15

Forget about recent legislation. Pretend if you will, that the courts decide UHC is unconstitutional, but let’s medicare be grandfathered in. I am truly curious to know what you think are the short and long term consequences of the current employer based health care system.

I’m basing a lot of this on the assumption that health care costs are going to continue to rise, not to infinity, but at least comparable to the increase from 1990. When you consider how far they’ve risen from 1970, there is going to be considerable growth before it tapers off.

I completely forgot about the auto industry. Having to provide health care for multiple generations destroyed the big 3.

I know you’re against UHC. So can you point to obvious benefits to the current system? Do you see a point in 20 years where because of an employer based system American companies are better off and able to compete globally? Where employees are better off?

16

The current system of HMO’s is a good example of government social engineering in private industry. It was a tax incentivized attempt at UHC at a time when there was the heavy industry to back it up. It replaced traditional insurance that was designed for catastrophic coverage. Patients were completely removed from the economic aspect of health care. What it did was hide the rising cost of insurance and it took away any personal incentive to reign in those costs. We’ve started to see the light of reality in recent years by way of increased co-pays and policies that demand generic drugs when applicable.

The current system of HMO’s is just a private version of UHC from the perspective of cost control. If it were up to me, I’d promote the use of catastrophic insurance policies (vs HMO’s) from larger businesses and return the difference paid in the form of wages. Those wages could be used to buy HSA’s that roll over from year to year as a cushion for deductibles as well as taxed to shore up medicaid.

Where government’s role is best used (IMO) is the regulation of insurance companies and the incentivization of personal insurance policies through the same tax rebate we give businesses. The formula for government intervention should be to level the spikes in health care costs and not try to impose a one-size-fits-all level of insurance for everyone. Young women who want to have children should pay for that option while allowing an older woman to shift her health care dollars toward issues that are age related.

The high cost of drugs can be mitigated through bulk purchase guarantees or tax incentives or extended patent rights in return for lower costs. We can’t remove the profit from drugs and expect companies to invest in bringing leading edge technology forward if they cannot profit from it. We would all be driving Trabants if we dictate production via profit risk.

We can standardize billing software and patient file protocols through a national version of OpenOffice that is developed in our tax funded colleges.

17

I think we have already seen the effect in the auto industry. One of the the problems they have is the rising cost of the level of medical insurance that they have negotiated with the unions. I think I remember that every American built car has $1500 of health insurance in the cost, substantially more than Japanese or German cars. Another effect is the trend of companies to hire part-time workers so they don’t have to pay them the benefits that full-time workers get. We also have people that might otherwise start up new businesses, or join startups, trapped in jobs because they can’t afford private health insurance.

18

Okay, so pretend that doesn’t get to implemented. Do you see any long term consequences from the current system?

While I was running this evening they had the Kudlo report on CNBC. That guy is pretty hardcore conservative in his fiscal view of the world. Which got me thinking about someone’s comment recently about how, “having a fucked up health care system is a good incentive to work hard and be responsible.”

I’m paraphrasing a bit, but it got me thinking about all the people working on their art history degrees, or think they’re going to become musicians. If employer based insurance becomes more important, but harder to get, you’ll see a dramatic decrease in those career directions.

Parents won’t bother asking, “how are you going to make money as a skateboarding writer.” They’re simply going to say, “if you don’t get health insurance you’re going to die, cut your fucking hair and go work at the call centre.”

Pretty strong motivator. The kid could potentially live at his parents house for ever, but if he can’t stay on their insurance past age 18 he might as well be out on the street.

Now that I think of it, as the cost of insurance rises, I could see companies shifting their hiring policies towards the young, healthy, and single. I’d like to think that sort of discrimination is illegal, but then again the government really shouldn’t be telling employers what to do.

19

You mean people are happier when they have less choice over which insurance plan to buy (generally no choice, unless they decide to change jobs) and which job to take (because they have to consider which has better insurance) ?

And people are healthier when they can’t stick with the same doctor (because they had to change insurance when they changed jobs)?

:confused:

20

Your employer is not paying for your health plan, you are. If the employer did not pay for your health plan than it would have to make up the difference in salary. The reason employer’s provide health insurance is a legacy of WW2 wage controls. The compensation you receive in health care is taxed differently than your salary, thus it is economically smart for your company to provide as much of your compensation in health care as possible. A wise politician proposed doing away with the disparate tax treatment during the last presidential election, but the American people chose a man with an inferior plan. Health insurance is an expense just like car or fire insurance. If a job is not renumerative enougn to provide you with enough money to meet your expenses then whether the expense is health insurance or car insurance is immaterial.