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Old 10-03-2010, 09:10 AM   #21
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Providing health care through employment is a bad idea. Not working together to develop a functional alternative is another bad idea. I actually think it is good for business to get out of health care, but to make political commentary or not be honest about it is disappointing.
I agree. Most people are way too insulated from what health care costs. Over the years my employees have paid from 12-18% of their total health care costs, and they think that's outrageous! They really have no idea and showing them makes no difference at all more often than not...they don't want to know.

The quote below is evidence of same, it will be many years if at all before labor costs go down (although some employers may try to do so). Private companies pay health care "premiums" or directly on behalf of employees right now. As these companies eliminate health care, they will gladly give the money (some or part) to employees to buy government or other private health care on their own. I would gladly give what we pay in premiums to our employees to get out from those costs, we would be money ahead every year ahead by avoiding the higher inflation associated with health care (averaging about 9-10% per year).

And employees can then be mad at the government for spiraling health care increases and/or reduced services - private companies will be thrilled to get out of the middle...

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...if the total cost of employing people goes down, more people are likely to be employed and the risk of offshoreing the jobs gets reduced (at least in theory)
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Old 10-03-2010, 11:38 AM   #22
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Providing health care through employment is a bad idea.
Absolutely. Hopefully in a year or two we'll have a chance to re-do the "reform" before the present ship hits the rocks. AT that time, lets all take a deep breath and remember this point of common ground.

FWIW, during the last election one of the presidential candidates campaigned on getting employers out of the health care biz. The other candidate got some cheap political mileage out of it ("My opponent wants you to lose your employer-provided health care"), making it very hard to do the commonsense thing later. But, that's water over the dam now . . .
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Old 10-03-2010, 12:18 PM   #23
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Eh? This has been going on for a long time. The trend for employers for the last 15 years or so has been to drop retiree medical benefits (along with pension plans and any other defined benefits)...

The whole employer-sponsored medical insurance thing has been slowly shrinking as well. Here's a peek at the trend for 2000-2005, for example.

Health insurance eroding for working families: Employer-provided coverage declines for fifth consecu
Here's a chart that specifically shows the long term trend for retiree health benefits:



Employer Health Benefits 2010 Annual Survey - Kaiser Family Foundation
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Old 10-03-2010, 01:36 PM   #24
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Absolutely. Hopefully in a year or two we'll have a chance to re-do the "reform" before the present ship hits the rocks. AT that time, lets all take a deep breath and remember this point of common ground.
Oh, joy. I think I'll just go soak my head in a bucket of water.
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Old 10-03-2010, 02:14 PM   #25
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Oh, joy. I think I'll just go soak my head in a bucket of water.
?? Okay. Hey, it's one procedure that is fully covered under all plans and requires no co-pay.
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Old 10-03-2010, 02:28 PM   #26
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?? Okay. Hey, it's one procedure that is fully covered under all plans and requires no co-pay.
I just can't stand the thought of another round of "Death Committee!" and "Get the Government Out of Medicare!", and another March for Innumeracy.
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Old 10-03-2010, 06:20 PM   #27
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Reintroducing slavery would have much the same effects. No slave ever complained about not having a job. Investors loved it.
From an investor's perspective slavery is a bad idea. Slaves have no incentive to work hard or efficiently, you have to make much more substantial investments in security and have the risk of an uprising disrupting production. There is even the very real risk of a complete revolution. A free labour market works much better.

With respect, there is no rational reason for employers to make payments for people who no longer work for them. The recent and largely American experience is, historically, an aberration which is not seen in other countries or other periods of history. Loading costs onto employers may be politicaly popular with politicians up for re-election and employees who don't want to bear the cost of the services they use, but it is a good way of reducing employment opportunities and adding to the incentive for companies to shift jobs offshore.
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Old 10-03-2010, 06:58 PM   #28
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With respect, there is no rational reason for employers to make payments for people who no longer work for them.
Historically, in the US there has been a rational (given the circumstances) reason. Due to tax laws and the nature of the insurance products, employers could buy health insurance much more cheaply than employees could buy it. Similarly, employers could buy it less expensively for their retirees than the retirees could buy it for themselves. So, it was a cost-effective retention tool. All of this was because of govt-induced distortion (dating back to WW-II) of the normal market and pricing mechanisms for health insurance in the US.

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Loading costs onto employers may be politicaly popular with politicians up for re-election and employees who don't want to bear the cost of the services they use . . .
Of course, the employees pay for all these costs anyway. It's all bundled into "compensation," and if the employer weren't paying for health care, then the takehome pay would be higher (given a competitive and free labor market.) But, that won't fit on a bumper sticker.

An even bigger cost of employment-linked health care is the reduction in the mobility of the labor force. Lots of people are locked into jobs that don't fully use their talents, or which they hate, because it's the only way they can get coverage. As a whole the US economy will be more productive if the labor market is more efficient and if the workforce is more mobile.

In some cases I think individual employers have benefited from the present setup. They can get (and trap) highly qualified employees because they are able to provide health coverage at far lower cost than the employee can get it themselves. Do these companies have to pay as much? No way. Do they know that they can make very large demands and offer very low pay to Ernie Employee because, if he quits, there's no way Ernie can afford to self-fund his wife's dialysis treatments? You bet.
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Old 10-03-2010, 10:02 PM   #29
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From an investor's perspective slavery is a bad idea. Slaves have no incentive to work hard or efficiently, you have to make much more substantial investments in security and have the risk of an uprising disrupting production. There is even the very real risk of a complete revolution. A free labour market works much better.

With respect, there is no rational reason for employers to make payments for people who no longer work for them. The recent and largely American experience is, historically, an aberration which is not seen in other countries or other periods of history. Loading costs onto employers may be politicaly popular with politicians up for re-election and employees who don't want to bear the cost of the services they use, but it is a good way of reducing employment opportunities and adding to the incentive for companies to shift jobs offshore.
Sorry, the multi quote is not working
Better provide a cite for your comment on slavery. People were actively investing in slaves right up to the civil war. Owners also paid vast sums to recover runaway slaves. Of course you could argue that rich southern white males were complete screaming idiots who could not add or think , and there would be historical evidence to support it. but the facts in general are against you.

There are lots of reasons to pay workers who no longer work there. they are called contracts. What workers did not know was that what they thought was a "contract" was actually a target painted on their backs. I fully agree that they were stupid to trust in the integrity of corporations and theri "promises" , as were the scottish clansmen to trust in the integrity of the Lairds who enclosed the clan lands

Over in Europe Workers have actual real contracts. here most are day laborers, admittedly one step above peasants.
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Old 10-03-2010, 10:29 PM   #30
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Historically, in the US there has been a rational (given the circumstances) reason. Due to tax laws and the nature of the insurance products, employers could buy health insurance much more cheaply than employees could buy it. Similarly, employers could buy it less expensively for their retirees than the retirees could buy it for themselves. So, it was a cost-effective retention tool. All of this was because of govt-induced distortion (dating back to WW-II) of the normal market and pricing mechanisms for health insurance in the US.

Of course, the employees pay for all these costs anyway. It's all bundled into "compensation," and if the employer weren't paying for health care, then the takehome pay would be higher (given a competitive and free labor market.) But, that won't fit on a bumper sticker.

An even bigger cost of employment-linked health care is the reduction in the mobility of the labor force. Lots of people are locked into jobs that don't fully use their talents, or which they hate, because it's the only way they can get coverage. As a whole the US economy will be more productive if the labor market is more efficient and if the workforce is more mobile.

In some cases I think individual employers have benefited from the present setup. They can get (and trap) highly qualified employees because they are able to provide health coverage at far lower cost than the employee can get it themselves. Do these companies have to pay as much? No way. Do they know that they can make very large demands and offer very low pay to Ernie Employee because, if he quits, there's no way Ernie can afford to self-fund his wife's dialysis treatments? You bet.
Yes, there was a time when American companies faced (i) a shortage of skilled labour and (ii) an absence of meaningful competition from abroad and (iii) greater obstacles to shifting costs overseas. For many (if not most) industries those days are long gone and are very unlikely to come back. The rational for offering extensive benefits (including ones which extend beyond the termination of employment) is not what it once was. Rising unemployment at a time when the work force is (arguably) better qualified than at any time in history supports this view. I would expect that there are an awful lot of people who would rather have a job without health benefits than no job with health benefits.

As to it being cheaper for companies to take on the cost and factor it into compensation packages, this is true BUT from the companies' perspective, the logic breaks down when the cost marches relentlessly upwards without matching gains in productivity AND the ability to use lower cost labour in another market becomes easier by the day. If the costs were stable and/or reasonably predictable over at least the medium term, the retention effect argument would be stronger. When workers are mor easily replaceable (as they are today), the argument gets progressively weaker. (This is for the bulk of employees. There will always be a very small group of people whose skills or other attributes make the additional cost of retention worthwhile.)

I agree with you on mobility - as a whole we are better off if people have the flexibility to move as they wish. Life long benefit arrangements (including many defined benefit pensions and health care) are an obstacle to workplace mobility.
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Old 10-03-2010, 10:51 PM   #31
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With respect, there is no rational reason for employers to make payments for people who no longer work for them. The recent and largely American experience is, historically, an aberration which is not seen in other countries or other periods of history. Loading costs onto employers may be politicaly popular with politicians up for re-election and employees who don't want to bear the cost of the services they use, but it is a good way of reducing employment opportunities and adding to the incentive for companies to shift jobs offshore.

If you are only talking about health care... then you are correct... most countries have state run health care so the companies do not pay even when employed.... if you are talking payments in general, you have not looked at other countries much....

It was well know that in Japan they paid workers who were not productive to just sit around.. forget what the term is.... but very common... In a bunch of European countries it is very common that people are hard to fire and there are examples in Italy where they are paid five years and have not shown up for work....

Here in the US, it is very common to just let people go with little to no severance.... especially if a small company... Megas are different... I got about 8 months when I was let go from mega... but if I had been working in the UK my severance would have been over 1 year... (I worked there for a year and know this for a fact)....
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Old 10-03-2010, 11:01 PM   #32
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Sorry, the multi quote is not working
Better provide a cite for your comment on slavery. People were actively investing in slaves right up to the civil war. Owners also paid vast sums to recover runaway slaves. Of course you could argue that rich southern white males were complete screaming idiots who could not add or think , and there would be historical evidence to support it. but the facts in general are against you.

There are lots of reasons to pay workers who no longer work there. they are called contracts. What workers did not know was that what they thought was a "contract" was actually a target painted on their backs. I fully agree that they were stupid to trust in the integrity of corporations and theri "promises" , as were the scottish clansmen to trust in the integrity of the Lairds who enclosed the clan lands

Over in Europe Workers have actual real contracts. here most are day laborers, admittedly one step above peasants.
I should have added some emoticons to my (obviously) unsuccessful attempt at humour. But since you asked for a cite: http://cniss.wustl.edu/workshoppapers/whitepaper.pdf

Adam Smith's writings on the subject also make interesting reading (as do the comments on his work).

A contract is a binding agreement. Either you have one or you do not have one. If there is a binding agreement to pay then, absent a restructuring on insolvency, of course companies should pay and the courts will normally enforce such contracts. If there is no binding agreement then expectations have either been mismanaged or raised unrealistically high (either by management or by the employees or both).

As to Europe, a daily read of the financial news is enough to convince me that the only part of Europe's economic policy that is working well is the French and German efforts to help their very succesful exporters through competitive devaluation (which is the effect of joining the Euro on the Eurozone's stronger economies).

This is not about what is right/wrong or what is fair - subject to any legal overlay, it is about the economics. Investors will send their money to the companies which they see as providing the best return on their investments - which will often be the ones with the lowest overheads. Companies with the lowest costs will have better prospects for survival and growth - including job creation - than those with higher costs. As a simple example compare an established company with a long history of paying benefits to its growing ranks of retirees and a newer company without those historical legacy costs. Which company will make the better investment? Which one will be able to sell its goods/services more cheaply without going broke? Which company will be better able to invest in growing its business? Which company is more likely to survive during an economic recession? Which company will be able to offer greater job security? Which company will have the potential to attract the best and brightest workers? I know which company I would invest my money in and which one I would prefer to work for.

It's ugly (very ugly) for people who were expecting or hoping to receive such benefits, but in today's competitive and global economy providing such benefits comes with a very high price tag.
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Old 10-04-2010, 06:46 AM   #33
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A contract is a binding agreement. Either you have one or you do not have one. If there is a binding agreement to pay then, absent a restructuring on insolvency, of course companies should pay and the courts will normally enforce such contracts. If there is no binding agreement then expectations have either been mismanaged or raised unrealistically high (either by management or by the employees or both). .....

This is not about what is right/wrong or what is fair - subject to any legal overlay, it is about the economics. Investors will send their money to the companies which they see as providing the best return on their investments - which will often be the ones with the lowest overheads. Companies with the lowest costs will have better prospects for survival and growth - including job creation - than those with higher costs. As a simple example compare an established company with a long history of paying benefits to its growing ranks of retirees and a newer company without those historical legacy costs. Which company will make the better investment? Which one will be able to sell its goods/services more cheaply without going broke? Which company will be better able to invest in growing its business? Which company is more likely to survive during an economic recession? Which company will be able to offer greater job security? Which company will have the potential to attract the best and brightest workers? I know which company I would invest my money in and which one I would prefer to work for.

It's ugly (very ugly) for people who were expecting or hoping to receive such benefits, but in today's competitive and global economy providing such benefits comes with a very high price tag.
I must need a tutorial on the multi quote

Obviously in the short run the best return on investment goes to the firms who can lie the best to their employees and give them the impression that they have a certain benefit while in reality they get nothing. That is why I put "contract" in quotes. I have law classmates who specialize in such "disappearing parachutes". In the state of Maryland some legislatures want to take away retiree health benefits that were earned over 30 years of service with the claim that the state is "immune" to any claims of morality and ethics and only has to do what is strictly required by the constitution

Professional and business ethics are/were a substitute for a rather inefficient legal system. When the ethics break down you get law, unless of course you allow the corporations to buy the political system too.

The next step is screwing investors. that was the heart and soul of the CDO scandal. Investors were sold stinking garbage packaged as AAA bonds.

the same folks who sold out employees sold out investors.
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Old 10-04-2010, 11:58 AM   #34
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Back when I worked for Lucent (were they a mega corp?) in 2000/01 I remember getting a letter saying they were stopping health care unless you had 10 or 15 years in already.
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Old 10-04-2010, 12:34 PM   #35
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Back when I worked for Lucent (were they a mega corp?) in 2000/01 I remember getting a letter saying they were stopping health care unless you had 10 or 15 years in already.
Very helpful. Thanks.
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Old 10-04-2010, 01:09 PM   #36
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I think they cancelled/froze their pension shortly after (I really don't remember!). But I got laid off in 2001 so was able to cash my pension out. I only worked there 2 years, but they added 5 years "bonus" time for getting laid off. So, think I got $15K or so in 2006 when I rolled it into my TSP.
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Old 10-04-2010, 07:32 PM   #37
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Wonder if this is the first of more to come. Right now, medical coverage is part of my Megacorp pension - not sure for how long...
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Old 10-06-2010, 05:18 PM   #38
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The problem with healthcare (retirement funding... pensions, 401k, etc), is that we have gradually creeped from the old model to "no model". The new approaches were not thought out and crafted, but the result of abandoning corporate costs.... not trying to address the problems and issues or head in a direction that works for people.
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Old 10-06-2010, 09:34 PM   #39
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The problem with ____________ is that we have gradually creeped from the old model to "no model". The new approaches were not thought out and crafted, but the result of_______, not trying to address the problems and issues or head in a direction that works for people.
Save that, Chinaco. It can be used as a posting on any number of subjects related to Congress and the Federal government.
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Old 10-06-2010, 09:40 PM   #40
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Save that, Chinaco. It can be used as a posting on any number of subjects related to Congress and the Federal government.
+1

Actually, the approach being taken does address the fundamental problem that the current approach does not work and is unsustainable (as well as having the other issues identified in previous posts).
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