# Will companies drop health insurance plans and pay the penalty? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [November 12, 2012, 5:06am UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756 "2012-11-12T05:06:32Z")\ **Posts on this page:** 17\ **Page:** 3
**Author:** ![Broomstick](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/broomstick/32/246_2.png) [@Broomstick](https://boards.straightdope.com/u/Broomstick)\ **Post date:** [November 14, 2012, 1:07am UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/41 "2012-11-14T01:07:48Z")
> [@Fear\_Itself](#): > > Dollars and cents, and retaining valued employees. Given that there are a multitude of available qualified people for most work positions these days, if you drop coverage where, exactly, do you expect those “valued employees” to go? Somewhere else, where they would probably start with less pay and probably no health insurance there, either? ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [November 14, 2012, 1:13am UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/42 "2012-11-14T01:13:03Z")
> [@Broomstick](#): > > Sure. > > Now, if the cost of paying the fine for NOT having health insurance is less than the cost of PROVIDING health insurance which way do you think the average big corporation is going to go? Given that it’s already been asserted that such large companies don’t really care about people, and there is currently surplus of qualified employees for most types of jobs these days, some of them quite desperate. The average big corporation currently offering insurance has already decided that offering insurance makes financial sense. If Discount Store A doesn’t offer health insurance (or sick leave, or vacation or any other benefit) and Discount Store B does, all else being equal , will Store A get the best employees or will Store A have to choose from those that Store B didn’t hire ? Now Store A and B may disagree on whether offering benefits to get and keep the best employees makes financial sense- maybe Store A markets itself as being inexpensive and doesn’t care about high turnover, and Store B markets itself as having the best service, which you’re not going to get with high turnover But if Store B didn’t think it made financial sense to offer health insurance, they wouldn’t offer it now. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [November 14, 2012, 1:13am UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/43 "2012-11-14T01:13:25Z")
> [@Yeticus\_Rex](#): > > As a small business owner, I still offer insurance because I value my employees, but every year as the premiums go up, I either have to slide down the percentage of their premiums that I would pay, or pick a cheaper level of coverage. ATM, I cover about 60% of all premiums (regardless of their age bracket), and annually that’s about $120k. If Obamacare started in 2013, my penalty would be about HALF that amount. And what is the penalty NOW? Why would you wait until Obamacare to drop insurance, when it is cheaper to drop it now? ---
**Author:** ![Chimera](https://avatars.discourse-cdn.com/v4/letter/c/8e8cbc/32.png) [@Chimera](https://boards.straightdope.com/u/Chimera)\ **Post date:** [November 14, 2012, 1:15am UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/44 "2012-11-14T01:15:06Z")
That’s the answer that the alarmists can’t and won’t answer. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [November 14, 2012, 1:15am UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/45 "2012-11-14T01:15:08Z")
> [@Broomstick](#): > > Given that there are a multitude of available qualified people for most work positions these days, if you drop coverage where, exactly, do you expect those “valued employees” to go? Somewhere else, where they would probably start with less pay and probably no health insurance there, either? So why offer insurance at all? You’ve got them over a barrel. ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [November 14, 2012, 1:22am UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/46 "2012-11-14T01:22:31Z")
> [@Broomstick](#): > > Given that there are a multitude of available qualified people for most work positions these days, if you drop coverage where, exactly, do you expect those “valued employees” to go? Somewhere else, where they would probably start with less pay and probably no health insurance there, either? Turn it around. What would you do if a competitor offered you the same job but with health insurance? Would you stay where you are, or would you leave? ---
**Author:** ![Broomstick](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/broomstick/32/246_2.png) [@Broomstick](https://boards.straightdope.com/u/Broomstick)\ **Post date:** [November 14, 2012, 8:28am UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/47 "2012-11-14T08:28:48Z")
Since I already have health insurance that is not connected to my job providing that benefit is no longer such an important criteria _for me_. The competitor would have to offer me something else to sweeten the deal, like a higher salary or better working conditions. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [November 14, 2012, 2:16pm UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/48 "2012-11-14T14:16:05Z")
> [@Broomstick](#): > > There are actually considerable numbers of small companies, you know? They employ a relatively few number of employees. And they are actually less likely to offer benefits than the big corporations. If the group healthcare market has to rely on small companies where the management has a personal connection to their employees, it will disappear. > [@doreen](#): > > Maybe I’m not being clear. My argument is not that the trend of employers not providing health insurance will not continue. I’m sure it will. But I don’t think it has anything to do with Obamacare - I don’t believe that there are many companies (if any) that \*would have continued to provide coverage \* but will now end it because of Obamacare. I am sure there are numerous employers who would have stopped providing coverage with or without Obamacare. We’re going round and round here, and you’re not addressing the issue. There’s a cost of providing employer coverage. There is also a benefit. Under HCR, the cost will go down (not in absolute terms, but the cost relative to not providing coverage will decline, because of the penalties). However the benefit of providing coverage will also decline, since the value of the benefit to the employers will decline significantly. You’re not addressing this. Simply saying “there are still going to be employees who want coverage” doesn’t change the big picture. > [@](#): > > But even with your example, some companies still offer retiree health coverage and some even offer it post 65. You’ve pretty much made my point that Well if your point is that all corporations won’t drop coverage immediately in 2014, then that would help your point. But everyone accepts that. If your point is that the availability of an alternative does not accelerate the trend of dropping coverage, then it argues against your point. > [@Chimera](#): > > That’s the answer that the alarmists can’t and won’t answer. Just because you’re ignoring something doesn’t mean that they haven’t said it. It’s been answered repeatedly. > [@Yeticus\_Rex](#): > > OTOH, I think the $2k per employee penalty is not going to stay at $2k…I believe this will be increased in a few short years after they have woefully underestimated the cost of this. There’s been some talk about this, among analysts. But the problem as I see it is that it’s an orphan proposal. Republicans don’t like raising taxes on business, and they will be especially unlikely to do it in support of the HCR bill that they loath. Democrats have no problem raising taxes on business, but they are not particularly enamored of the employer-provided health coverage system to begin with, and would probably prefer to use it’s collapse as an impetus to enact a European style system. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 14, 2012, 2:19pm UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/49 "2012-11-14T14:19:13Z")
Very few large employers will actually drop coverage. Most of them will dump their employees on a private exchange. Small insurers will be dropping their employees on state exchanges instead. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [November 14, 2012, 2:22pm UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/50 "2012-11-14T14:22:52Z")
It’s possible. Some of the big consulting firms have been pushing their private exchange ideas. (Aon itself was the sole test case for their private exchange in 2012, but I hear they have 2 clients signed up for 2013.) It’s hard to know for certain what will happen. It’s a new situation. I’m not arguing that the employer system will definitely collapse. But it’s a very real possibility. ---
**Author:** ![Mdcastle](https://avatars.discourse-cdn.com/v4/letter/m/958977/32.png) [@Mdcastle](https://boards.straightdope.com/u/Mdcastle)\ **Post date:** [November 14, 2012, 2:37pm UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/51 "2012-11-14T14:37:44Z")
> [@Fear\_Itself](#): > > And what is the penalty NOW? Why would you wait until Obamacare to drop insurance, when it is cheaper to drop it now? NOW there is no realistic option for people to buy affordable insurance on their own. Under Obamacare there will be. If people can afford to buy insurance on their own, they’re less likely to demand if from an employer. A few more comments: There’s been a trend towards dropping benefits and increasing salaries instead, my employer used to offer free health insurance but now we pay it, due to “employee feedback” they’d rather be paid in the middle of the market range rather than be paid in the lower range with free insurance. Even though we’re not allowed to decline insurance unless we’re covered under a different policy. Although I generally agree with Obamacare, I’ll admit there were some elements that weren’t well thought out. I don’t think seperating employment from insurance is necessarily a bad thing, but if we don’t want that to happen, the fines need to be a lot bigger than what they are. I think forcing people to be insured is a good thing, but those fines also need to be bigger. And I think the tax on cadillac plans is a bad thing, but it we’re going to have it, the threshold needs to be a lot higher; it’s not going to be too long before plans that provide decent but not extravagant benefits hit the threshold. ---
**Author:** ![Jophiel](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jophiel/32/66_2.png) [@Jophiel](https://boards.straightdope.com/u/Jophiel)\ **Post date:** [November 14, 2012, 2:42pm UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/52 "2012-11-14T14:42:38Z")
> [@Fear\_Itself](#): > > High premiums. Indeed. In the years leading up to now, the companies I’ve been with still had the annual Ritual of the Insurance Memos: “We have been informed that HealthCorp premiums will increase 17% this year, we are looking at other options” “We will be having a meeting to discuss new insurance options” “To save money, we will be switching to InsuranceCorp and your per paycheck deduction will increase by $55, your deductibles will go up $250 and your doctor co-pays are now $70. See you next year…” ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 14, 2012, 2:48pm UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/53 "2012-11-14T14:48:57Z")
> [@Mdcastleman](#): > > Although I generally agree with Obamacare, I’ll admit there were some elements that weren’t well thought out. I don’t think seperating employment from insurance is necessarily a bad thing, but if we don’t want that to happen, the fines need to be a lot bigger than what they are. That goes to what was politically possible, rather than what was thought out. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [November 14, 2012, 2:58pm UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/54 "2012-11-14T14:58:58Z")
> [@Mdcastleman](#): > > NOW there is no realistic option for people to buy affordable insurance on their own. We have already established that employer decisions are based on dollars and cents. How does this change anything for employers whop are currently providing insurance, dollars and cents-wise? If people can buy equivalent insurance under Obamacare cheaper than what the employees pay to their employer, that is a good thing, and no employee will take employer-based health insurance. If the employee can’t buy equivalent insurance for less than what they pay their employer, then the employer will lose employees to other employers who offer equivalent insurance for less than Obamacare. It’s dollars and cents. For employers who currently offer insurance, there is no upside to dropping insurance after Obamacare, unless it is already unnecessary to retain employees, in which case, the employer has been a bad money manager all along, and is just using Obamacare as a convenient excuse. ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [November 14, 2012, 3:11pm UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/55 "2012-11-14T15:11:21Z")
> [@Fotheringay-Phipps](#): > > Well if your point is that all corporations won’t drop coverage immediately in 2014, then that would help your point. But everyone accepts that. If your point is that the availability of an alternative does not accelerate the trend of dropping coverage, then it argues against your point.Just because you’re ignoring something doesn’t mean that they haven’t said it. It’s been answered repeatedly.There’s been some talk about this, among analysts. No, my point is that 40 something years after Medicare was founded, there are still companies offering health coverage to retirees over 65 , and therefore there is no reason to think that employer paid health coverage will completely disappear anytime soon. Not in 2014 (which maybe everyone accepts ) but also not in 2020 or 2030. Because there will always be \*some \*companies where the cost-benefit analysis will favor providing insurance (whether a private policy or paying the premium for the exchange) even with a reduced relative cost and a reduced benefit . ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [November 14, 2012, 5:52pm UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/56 "2012-11-14T17:52:00Z")
> [@doreen](#): > > No, my point is that 40 something years after Medicare was founded, there are still companies offering health coverage to retirees over 65 , and therefore there is no reason to think that employer paid health coverage will completely disappear anytime soon. Not in 2014 (which maybe everyone accepts ) but also not in 2020 or 2030. Because there will always be \*some \*companies where the cost-benefit analysis will favor providing insurance (whether a private policy or paying the premium for the exchange) even with a reduced relative cost and a reduced benefit . It’s not as if the number of employers offering post-65 retiree coverage has stablized at some low level. It continues to decline year over year, and is likely to go to zero. The “40 something years after Medicare was founded” is not a valid comparison. The whole concept of employer health coverage is fairly recent and is derived from wage controls during WW2. At the time Medicare was introduced, there were relatively few actual retirees in retiree plans, and the costs on a PAYGO basis were minimal. (Furtermore, the costs of the plans themselves was also minimal, since they were integrated with Medicare.) What triggered the decline in retiree coverage was the introduction of FAS 106 in the early 90s, which required recognition on an accrued basis. As soon as the costs became significant, employers began cutting back on a steady basis. And the costs for active coverage are already very significant. In any event, after all these theoretical arguments, what is beyond all dispute is that many employers are currently contemplating dropping coverage. Anyone familiar with this field knows that. At this time, most (somewhere in the range of 85%) say they plan to keep their coverage. What I’m pointing out is that these employers are basing their decision on the landscape as it presently exists, but that once the minority of employers drop coverage, that fact on its own will have the effect of changing the landscape, such that some who presently intend to keep coverage might change their minds. ---
**Author:** ![Yeticus\_Rex](https://avatars.discourse-cdn.com/v4/letter/y/a698b9/32.png) [@Yeticus\_Rex](https://boards.straightdope.com/u/Yeticus_Rex)\ **Post date:** [November 14, 2012, 10:36pm UTC](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756/57 "2012-11-14T22:36:17Z")
> [@Fear\_Itself](#): > > And what is the penalty NOW? Why would you wait until Obamacare to drop insurance, when it is cheaper to drop it now? That’s an easy question…the penalty would be my employees losing coverage by my hand. It’s more than dollars and cents…it’s also about employee well-being and morale. > [@Fear\_Itself](#): > > We have already established that employer decisions are based on dollars and cents. How does this change anything for employers whop are currently providing insurance, dollars and cents-wise? > > If people can buy equivalent insurance under Obamacare cheaper than what the employees pay to their employer, that is a good thing, and no employee will take employer-based health insurance. If the employee can’t buy equivalent insurance for less than what they pay their employer, then the employer will lose employees to other employers who offer equivalent insurance for less than Obamacare. It’s dollars and cents. > > For employers who currently offer insurance, there is no upside to dropping insurance after Obamacare, unless it is already unnecessary to retain employees, in which case, the employer has been a bad money manager all along, and is just using Obamacare as a convenient excuse. I find your cynicism towards employers…_disturbing_. 😉 Look, I may not be totally up on the details of Obamacare, but I have yet to see rates posted (except the tax and penalty rates, of course) to see what I can afford as an employer to match or surpass Obamacare rates. I do see that our company (51-99 employees) would be eligible to shop from the state exchange which may or may not be a good thing (because it’s a _California thing_), but in our industry, I am still way ahead of the curve against like-companies in my area when it comes to pay and benefits, but the unknown (rates, penalties and tax rate consistency/stability) is still something small employers should be concerned about within the next 5-10 years. I may not have to drop employer-based coverage in the very near future, but I still believe the state-exchange and Obamacare has not considered the true cost of their programs. There is nobody here, including Obama himself, that can guarantee that this plan (what we know of it so far) will stay afloat by the end of this decade without some increase in rates/taxes/penalties. Right now, it sounds too good to be true. [Previous page](https://boards.straightdope.com/t/will-companies-drop-health-insurance-plans-and-pay-the-penalty/640756.md?page=2)