Sunday, November 28, 2010

They're Baaaack

The attack on employer-provided health insurance is not over yet. Its elimination was defeated as part of the “health care reform” bill, but proponents in Congress are now working on including its demise in the guise of “deficit reduction” legislation.

The employer-paid portion of health insurance represents income upon which you do not pay income tax, and Congress is again considering eliminating that “tax break” to raise revenue and reduce the deficit. Or, perhaps for other reasons; the AP article is as poorly written as that organization’s articles usually are, and the intent of the change is not totally clear. While deficit reduction seems primary, the article also says,

The idea isn't to just raise revenue, economists say, but finally to turn Americans into frugal health care consumers by having them face the full costs of their medical decisions.

That seems to be an attempt to ressurect the “health care reform” argument that high health care costs are due to patients’ huge enjoyment of MRI’s, colonoscopies and invasive surgeries and their demand to receive such procedures too often and for no reason. The insanity of the argument is clear when you consider all of the countries in which patients pay absolutely nothing for health care, they contribute zero percent to the cost of their care, and those countries all spend less then half what we do on health care and get better results.

The reality is that the intention is cost shifting rather than cost reduction. If consumers have to pay, then insurance companies and employers won’t have to. It’s short sighted, as most legislative initiatives are, in that if consumers are forced to pay they will not be able to; health care providers will suffer a steep decline in business, and we will become an even less healthy nation than we are now.

But the insurance companies and employers outnumber the health care providers, and individuals don’t give big bribes make large campaign contributions.

The degree to which such a change would benefit the health insurance industry is simply staggering, for a couple of reasons.

First is that as employers drop provisions the employees would be driven, by law rather than by choice, to purchasing individual insurance plans, and those plans are vastly more profitable than are the group plans sold to large companies. The degree to which that remains true under “health care reform” is unclear, but I have no doubt that insurance companies will find a way. One business proinciple will always remain true, and that is that individuals purchasing separately will always pay a higher price than when they band together and buy as a large group.

The other reason is that many large companies do not even carry insurance at this point, but merely use insurance companies to administer “self insurance” pools of coprorate-provided cash. As those plans are dropped by employers because the tax code no longer makes them an economic advantage, those employees represent new customers to the individual policy rolls of the insurance companies.

Then there is this little treasure, in a pretense of populism, “Proponents of repeal usually call for a tax credit to offset part of the cost of individually purchasing coverage.” Sure, to further complicate an already ridiculous tax code and compete with the tax penalty for failing to purchase coverage. What would be the effect of claiming both the tax credit and the penalty?

And... This makes sense, right? We are going to tax you on the part of your income that is your employer paying for your insurance, but if you pay for your own insurance we will give you a tax credit. On what planet does that "raise revenue" or even make any kind of sense?

1 comment:

Eric said...

Excellent analysis.

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