Why Employer Funded Health Insurance is So Corrosive

The Provocateur ^ | 07/31/2009 | Mike Volpe

[fiscon1]

In an earlier post, I gave my policy ideas for fixing our health care system. In my hypothesis, I made the point that the nexis of many of our structural problems in health lie in the fact that employers are the ones that overwhelmingly provide health insurance. I think it's important to expand on what exactly is so corrosive with having a system in which employers provide health insurance for their employees.

[Onelifetogive]

I am so glad that my employer does not use my money to buy me auto and homeowner’s insurance...

[freedomconservationist]

Nice. I brought up this argument on June 22nd here, and now the idea has a support of a publication. :)

[CharlesWayneCT]

That’s funny.

Here’s what I wrote to the blog:

Your point about how health insurance decisions are separated from the consumers by employer-provided plans is a valid point, but that point is obscured by most of your arguments, which lack merit.

So long as employer-provided plans don’t preclude pre-existing conditions, the issue with non-portability is minimized; you switch employers, you simply switch insurance to another “gold-plated” policy.

Cobra provides the ability to keep your insurance when you leave an employer, but it is very expensive because of how much employers are paying.

The issue with employer plans is that they eliminate choice, because you only get to choose the plans they offer, and you can’t just get the money they would pay for your plan and go get your own plan.

If you simply changed the law so that it required a company offering health care to also offer to the employee a voucher equivalent to the employer cost which the employee could use, you’d get the same benefit as eliminating company programs (for those who chose to take the money, it would be exactly like the employer raising your salary and you getting a tax break to buy insurance). But you wouldn’t disrupt the 150 million people who have plans through their employers they like; realise that many large employers don’t actually BUY insurance, they self-insure using an insurance company to manage the plans.

However, employers aren’t looking to provide gold-plated policies; you fall into a liberal trap in discussing gold-plated policies as if they are the “norm”. Most employers are doing everything they can to cut their health care costs.

Major companies are eliminating options, and more and more are switching to single health-care options that are run by the companies themselves — all to cut costs.

Sure, because of the tax break to employers, it’s cheaper to provide an employee with health insurance than to increase their salary (although salaries are also deductable business expenses). But if employees got tax breaks for buying insurance, the end result would be the same.

You can buy platinum-level maintenance agreements for your car; some of them include every service, some just cover damages. Some car dealers offer free service in order to get people to buy cars. It could drive up costs for others, but only through market forces, determined by the buyers and sellers of the services.

But again you have fallen into the liberal trap — why is it inherently a problem that people get more health care? Why is it a problem that people pay more of their own earned money to buy more health care?

Now that you can get big-screen TVs, people spend a lot more money on TV viewing. People pay more for HD cable; People pay more for internet access. I don’t hear the outcry that our country spends “too much” on TVs now that all the TV sets cost thousands of dollars.

The real problem isn’t supply-and-demand; supply-and-demand is what it is. If people can afford more health care, and buy it, then yes, it will cost more — but if it costs too much, people, even if those “people” are companies buying insurance, will cut costs.

However, companies are trying to short-circuit the process, by getting government to do the hard job of telling their employees they are cutting their costs. That is why so many businesses like this universal health care — they already offer health care and are paying the costs, and this will force their competitors to pay the cost as well.

The real problem is that we provide health care to people without insurance, and without money to pay. This drives up the cost to people who CAN pay, and to the insurance companies. But the insurance companies can fight for lower payments, which further drives up the cost for people who pay out of pocket.

I’m sure that some insurance companies rip off doctors, but that isn’t because employers paid for them. However, you are right that employees don’t get to choose their health insurance, except by shopping for an employer who offers insurance.

Frankly, the gold-plated insurance is most likely found in union shops and public employment. Because in those two cases, you have a further disconnect. Not only don’t the consumers of the insurnace pay for it, the person CHOOSING the insurance doesn’t pay for it either, it’s the company. So you have the union which forces the company to buy expensive insurance for the employee — the union has NO incentive to control costs because the costs are paid by the employer, and the employee has no incentive because they don’t pay anything; the employer would like to cut costs but has to deal with strikes and other labor unrest, and is bound by law to whatever contracts were signed, sometimes years ago.

And of course, public insurance isn’t paid for by the politicians, it’s paid by the taxpayers. The politicians have no incentive to reduce the cost, because if they are liberal they are elected by the public union workers who are getting the great insurance.

So any plan which eliminates employer-provided insurance (as opposed to requiring employers to offer the employee a choice to get their own insurnace) will take insurnace away from half the country that is happy with their insurance, and not solve the problem; unless it also eliminates union-provided and government-provided health care.

Of course, the plan in congress now will tax employer-provided plans, but exempt union and public plans. And nobody will eliminate union or public plans, and in fact they want to offer new public plans which will take over for the “evil” private insurance companies.