Health Insurance Tax = Higher Wages?

[easysurfer]

Interesting article.

Health insurance tax = higher wages? - Yahoo! Finance

The wheels are turning...where it lands, no one knows

[ziggy29]

It wouldn't surprise me at some point if employers (particularly in the private sector), assuming significant health care reform is enacted, begin to phase out health insurance benefits (like they did with pensions) and give all their covered employees a one-time "raise" to use in buying health insurance on the open market (presuming no underwriting or exclusions are allowed under the reform).

[hugo121175]

If universal healthcare is to pass, who is going to do all the hard labor jobs? The only reason to take some of these jobs is for the benefits. No one would join a union. I am union myself, and only joined the union for the benefits. Why pay union due, deal with union politics, and have all the headaches that come along with unions if you can get the same without them. The unions aren't going to pass that saving onto their members either, so anyone thinking that can kiss that idea good-bye. I'm a firefighter. I am union. I think universal healthcare will kill the unions.

[youbet]

Quote:

Originally Posted by ziggy29 It wouldn't surprise me at some point if employers (particularly in the private sector), assuming significant health care reform is enacted, begin to phase out health insurance benefits (like they did with pensions) and give all their covered employees a one-time "raise" to use in buying health insurance on the open market (presuming no underwriting or exclusions are allowed under the reform).

I wouldn't be surprised by that outcome either. Not being responsible for people's medical insurance would be a huge plus for employers. No HR staffing to answer questions, take care of problems, etc. No pissed off employees blaming the company when medical insurance doesn't work out the way they expected when claims are filed. Etc., etc.

I would be surprised if companies give a one-time "raise." I think they're more likely to just drop it, after a warning period, as they did defined benefit pensions and even 401k matches.

[ziggy29]

Quote:

Originally Posted by youbet I would be surprised if companies give a one-time "raise." I think they're more likely to just drop it, after a warning period, as they did defined benefit pensions and even 401k matches.

I suspect on average most will give some base pay increase (to reduce the outrage and temptation for politicians to "intervene") but not enough to compensate for the loss of medical benefits, making it a net pay cut.

If they spend $10K on someone's health insurance benefits, it wouldn't surprise me if they goosed pay by (say) $5-7K and let the other $3-5K go straight to their bottom line.

[ziggy29]

Quote:

Originally Posted by hugo121175 If universal healthcare is to pass, who is going to do all the hard labor jobs? The only reason to take some of these jobs is for the benefits. No one would join a union. I am union myself, and only joined the union for the benefits. Why pay union due, deal with union politics, and have all the headaches that come along with unions if you can get the same without them.

Most of the unions still have defined benefit pensions, right?

[samclem]

Since the article indicated employers will be cutting the level of health care benefits in policies, the headline should have read "Health Insurance Tax = Higher Wages (which you'll need to pay for the health insurance cuts)".


- Employers may reduce insurance benefits in order to avoid the tax on "Cadillac" plans. If they do, I'd expect they'll increase pay, too (only because they are in competition for workers, and they'd need to pay more). But, more fundamentally I think they'll first decide whether to offer insurance at all. The penalty tax for not providing insurance+any higher pay needed to keep employees might end up costing less than providing medical coverage. The employees can then purchase individual policies (with a big "freebee" of subsidies from other taxpayers). Voila'! The goal will have been met--Americans are now dependent on the government instead of their employers.

[youbet]

Quote:

Originally Posted by ziggy29 I suspect on average most will give some base pay increase (to reduce the outrage and temptation for politicians to "intervene") but not enough to compensate for the loss of medical benefits, making it a net pay cut. If they spend $10K on someone's health insurance benefits, it wouldn't surprise me if they goosed pay by (say) $5-7K and let the other $3-5K go straight to their bottom line.

Maybe. But I think most companies that "froze" defined benefit pensions did so without a corresponding salary increase. Same kind of thing, no? You just have more faith and confidence in MegaCorp than me!

[ziggy29]

Quote:

Originally Posted by youbet Maybe. But I think most companies that "froze" defined benefit pensions did so without a corresponding salary increase. Same kind of thing, no?

Actually, a lot of them replaced the DB pension with a new or increased 401K match. So taking away something worth $2X and giving you back something worth $X is not unprecedented...

[youbet]

Quote:

Originally Posted by ziggy29 Actually, a lot of them replaced the DB pension with a new or increased 401K match. So taking away something worth $2X and giving you back something worth $X is not unprecedented...

As I said, you have more faith and confidence in MegaCorp than me! Perhaps you are correct and my skepticism will prove to be unfounded.

[ziggy29]

Quote:

Originally Posted by youbet As I said, you have more faith and confidence in MegaCorp than me!

Actually, what I have is a belief that they don't want to cause people to scream bloody murder to the point where Congress gets involved. It has nothing to do with corporate altruism.

[harley]

Quote:

Originally Posted by ziggy29 I suspect on average most will give some base pay increase (to reduce the outrage and temptation for politicians to "intervene") but not enough to compensate for the loss of medical benefits, making it a net pay cut. If they spend $10K on someone's health insurance benefits, it wouldn't surprise me if they goosed pay by (say) $5-7K and let the other $3-5K go straight to their bottom line.

You have WAY more faith in corporate America than I do. I suspect they would goose pay by $3-5K, add $2 to their bottom lines, and use the rest as a performance bonus for company execs.

[Rustic23]

This is going to be a case of the rich get richer. Companies will do what they always do, however, now they will not be fettered by benefits rules. They will cancel health benefits, and give some employees raises enough to cover their expenses and others less, depending on the needs of the corporations. As time goes on this difference will become greater.

[Independent]

If I believe that the US has a reasonably competitive market for labor, then I agree with SamClem, with a minor mod. "Wages go up as health benefits drop below the 'Cadillac' level. Workers may use the wage increase to replace the top-end health benefits, or they may spend them on something else."

If I believe that the US labor "market" is very inefficient, with employers basically making unilateral decisions and workers never moving for a better deal, then I conclude that the drop in health care costs will be captured by the owners.

But, if I believe the market is that inefficient, I have a problem explaining why employers provide these benefits today. Why don't they just drop them, with or without a tax?

[Rustic23]

I am not an employment expert, but I think if a firm offers benefits to full time employees it has to offer benefits to all full time employees. That is why many large corporations have so many part-time employees. I see no reason to believe they will not take advantage of a new law.

[ziggy29]

Quote:

Originally Posted by harley You have WAY more faith in corporate America than I do. I suspect they would goose pay by $3-5K, add $2 to their bottom lines, and use the rest as a performance bonus for company execs.

I don't think they would be that greedy in one fell swoop, as I already mentioned in this thread. And it has nothing to do with caring for the employees, but rather that they may think giving the ultimate shaft will lead to a government smackdown.

I'm as cynical about corporate motives as the next guy, but I think being *too* opportunistic here would really do more harm than good.

[Rustic23]

ziggy I agree, It will happen over time. For the most part business does what business does, it maximizes profit. If that means lower labor cost they will do it, to the extent that labor allows. That's what capitalism does, no complaint here.

[hugo121175]

Quote:

Originally Posted by ziggy29 Most of the unions still have defined benefit pensions, right?

To tell you the truth I'm not sure. My pension is handled by the state. I do pay into a union fund, but no one knows where the money disappears to. Most of my friends, that are not government employees, are layed off so long that they don't even get credit tward their pensions. For their pensions system, they have to work 180 consecutive days for their time to be creditable.

[dgoldenz]

Most employers could easily offer their employees a high deductible policy that is compatible with a health savings account, contribute half the deductible to the HSA for employee use each year, and increase their salaries substantially, all instead of offering benefit-rich policies that most companies do.....but what do I know....