Large companies weigh cost of dropping employee health benefits

[FinanceDude]

The joke with this argument is that subsequent administrations increased the benefits substantially under those programs. It's not accurate to say that the original cost projections in 1965 were too optimistic when the program itself is deliberately changed in a way that adds expenditures. You positioned it as a fait a compli that costs would exceed current estimates by 4x based on the history of medicare. But that only makes sense if we assume the same deliberate expansion of benefits, in which case those subsequent administrations will have to deal with the costs involved.

ALL THE MORE reason NOT to give the govt a crack at this Pandora's Box, it will make the problems in others pale by comparison...........

Social Security was never intended to be the primary source of retirement income, it was meant to be a safety net, much like Medicaid is. It has turned into an albatross because once you start an entitlement program, you don't get a "do-ever". There is no "bending of the cost curve" in the Health Care Bill, or any other entitlement program, for that matter.......

The real issue is whether health care is a RIGHT, or a PRIVILEGE, for citizens of the US. Just because European countries went that route doesn't mean it will work for us. They have highly punitive taxing structures in place to help fund it..........

 

[barker]

Massachusetts has a health insurance and care system that is very similar to what is now legislated for the U.S. Their initial goal was to provide coverage to as many people as possible. They are now looking at how to rein in the costs of providing health insurance and care.

It is going to take time - many years. This whole issue will have to be addressed. As things progress, I would hope we'll see more govt controls and regulations on the entire health care field, and a govt option like "medicare for all".

There is no free ride here; we will pay for it one way or the other anyways. Done privately, we'll pay for it with increased product and service prices. Done by the govt, we'll pay increased taxes.

 

[ziggy29]

Massachusetts has a health insurance and care system that is very similar to what is now legislated for the U.S. Their initial goal was to provide coverage to as many people as possible. They are now looking at how to rein in the costs of providing health insurance and care.

Part of the the Massachusetts problem is being replicated in Obamacare. Namely, the penalties for being uninsured aren't nearly strong enough and the young/healthy folks aren't signing up at a rate which will allow the subsidies for lower-income folks to avoid being a budget buster.

It should shock no one that in Massachusetts, the rate of poorer households signing up for "free" or nearly free health insurance greatly exceeded their estimates. (Hmm -- where else have we seen the government underestimate the public demand for free and heavily subsidized stuff? Cash for Clunkers, anyone? Or the recent Texas fiasco in rebates for energy-efficient appliances and such?)

It should also shock no one that with weak penalties for being uninsured, many of the young, healthy folks whose participation in a pool is critical if there is to be no medical underwriting chose to "go naked" and pay the relatively small fine rather than purchase health insurance.

These problems with the Massachusetts plan were already well-evident when the federal health care bill was being drafted and debated, and yet they devised a system that would likely suffer the same problems. The penalty for being uninsured should be no less than the annual cost of the lowest priced plan available to that uninsured person. If a young, healthy individual is uninsured and the lowest-cost policy available to them is $200 a month, the annual penalty for being uninsured should be $2400. This removes all incentive to "go naked."

 

[Westernskies]

So we can either pay for peoples' health insurance through taxes or we can pay by higher prices on all the products we buy being more expensive.

We pay either way, so what's the big deal?

...because companies who are paying for employee health care have higher overhead, making them less competitive in the world market. (i.e. Caterpillar's recent earnings write-down to cover higher health care costs)This debate isn't defined to the US; it affects every company's operating costs. Whether you are local, national or global you need a level playing field to compete. Unfunded mandates do nothing to adresss this.

That's why it is a big deal.

 

[Texas Proud]

The cost of the bill is obviously determined by the generosity of the subsidies. It would have been worthwhile to have a full debate on what the subsidies should be. I don't recall one.

But some level of subsidies are necessary. And not just for "welfare" or "social justice" reasons. In order to keep premiums low, healthy people need to be in the pool. But to keep healthy people in the pool, particularly younger people who are earning their first paycheck, premiums need to be affordable. We can mandate that everyone have insurance, but if you can't afford it, you can't afford it. So to get everyone in the pool, we need to subsidize some folks.

Of course a national health care system gets around the need for explicit subsidies, phaseouts and "individual mandates" but we decided early on that was a non-starter. So here we are.

My bold...

This is one of the many reasons I disagreed with the health care reform... they kept talking about 'lowering the cost of healthcare'... when in fact all that was done was SHIFT the cost to someone else...

The health care bill has done very little to address the huge cost to our nation of healthcare... IMO the majority of the bill was to get the uninsured some insurance at a huge cost to taxpayers... it has been something the dems have wanted for decades... I just don't think the country can afford it... I also don't think the contry can afford the prescription drug law past during Bush... so I am not bashing it because of Obama... but because of the costs...


The young (especially male) pay a lot more on car insurance than we old folks... because they have more accidents... why should healthcare not be age adjusted If they pay more because as a general rule they are worse driver and cost more, then we should pay more because we are less healthy and cost more.... (in general)...

Having a 25YO pay the same amount as a 65YO is shifting costs...

Sorry for the disjointed post... just throwing out a few thoughts....

 

[barker]

...because companies who are paying for employee health care have higher overhead, making them less competitive in the world market. (i.e. Caterpillar's recent earnings write-down to cover higher health care costs)This debate isn't defined to the US; it affects every company's operating costs. Whether you are local, national or global you need a level playing field to compete. Unfunded mandates do nothing to adresss this.

That's why it is a big deal.

I do agree with what you've said, in that companies should not have to pay for health insurance for employees. We should, and I believe will, move away from employer based health insurance. It's best for the public and the economy as a whole.

In general imo, the best way to control all this and fund all this is once again a "medicare for all" program. That would allow the govt to control costs as well.

 

[ziggy29]

In general imo, the best way to control all this and fund all this is once again a "medicare for all" program. That would allow the govt to control costs as well.

Medicare would have to significantly increase provider reimbursement rates and force providers to accept Medicare patients. One of the only reasons some providers still *do* accept Medicare and its low reimbursement rates is because they can charge other patients (and insurance) more to make up for what they aren't getting from Medicare.

So tread carefully here. You could see a lot of doctors retiring if "Medicare for all" wasn't done properly.

 

[Texas Proud]

I do agree with what you've said, in that companies should not have to pay for health insurance for employees. We should, and I believe will, move away from employer based health insurance. It's best for the public and the economy as a whole.

In general imo, the best way to control all this and fund all this is once again a "medicare for all" program. That would allow the govt to control costs as well.

Again, people seem to want to get to the least common denominator when it comes to health care... I can hear the comment "everybody should have it at the same level..." that to me seems that I have no choice in what I want to do with my healthcare...

The reason we have employer provide healthcare is that it is pre-tax... even if you company does not pay a dime for it, you as an individual get a great tax break since you get to pay with pre-tax dollars...

Now, let me get my own insurance with pre-tax dollars and I would get me what I consider to be a better plan at lower costs... right now it costs me a lot more to go that way, so I live with what I am provided...


As for controlling costs... does anybody check the salary of doctors in other countries I had mentioned it before, but the salary for someone I knew in the UK whose wife was a doctor was very low... since there was a monopoly, you could pay what you wanted (in the same sense that we can pay teachers what we want since most are hired by school districts that basically pay the same in a given region)....

 

[FinanceDude]

Again, people seem to want to get to the least common denominator when it comes to health care... I can hear the comment "everybody should have it at the same level..." that to me seems that I have no choice in what I want to do with my healthcare...

The reason we have employer provide healthcare is that it is pre-tax... even if you company does not pay a dime for it, you as an individual get a great tax break since you get to pay with pre-tax dollars...

Now, let me get my own insurance with pre-tax dollars and I would get me what I consider to be a better plan at lower costs... right now it costs me a lot more to go that way, so I live with what I am provided...


As for controlling costs... does anybody check the salary of doctors in other countries I had mentioned it before, but the salary for someone I knew in the UK whose wife was a doctor was very low... since there was a monopoly, you could pay what you wanted (in the same sense that we can pay teachers what we want since most are hired by school districts that basically pay the same in a given region)....

I saw a specialist a few years ago who was from Egypt. he said the most he ever made there as a SURGEON was $40,000. Wonder how many surgeons we would have in the US if they could only make $40,000 a year. I think their student loan payments are about that, or the premiums o their malpractice, etc..........

 

[ziggy29]

I saw a specialist a few years ago who was from Egypt. he said the most he ever made there as a SURGEON was $40,000. Wonder how many surgeons we would have in the US if they could only make $40,000 a year. I think their student loan payments are about that, or the premiums o their malpractice, etc..........

http://siteresources.worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf

The equivalent of US$40,000 in Egypt is a LOT of money given the gross national income per capita there (US$5,470 or less depending on methodology). If you look at it in terms of a multiple over the national "average" income per capita, it's more like $300,000 or so, give or take, in the U.S.

 

[Texas Proud]

http://siteresources.worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf

The equivalent of US$40,000 in Egypt is a LOT of money given the gross national income per capita there (US$5,470 or less depending on methodology). If you look at it in terms of a multiple over the national "average" income per capita, it's more like $300,000 or so, give or take, in the U.S.

To me not a good comparison... I have been to Egypt and there are a LOT of very very poor people... so the average tends to be low... but the cost of living was not a huge multiple like the $40K to $300K you mention..

And as my example of the UK... the lady made like 40K pounds (where is that pound symbol)... which is maybe $60,000... but I can tell you the cost of living in London is a LOT more than here... my usual comment when people came over was 'compare the cost of something like it was listed in $$$s... so a coke for $1 cost 1 pound... etc...

 

[lets-retire]

One of the other problems is the cost of some of the medicine that is out there... why can we not have some negotiation with the companies... why does it cost us 25X here and only X in Canada or England....

It's cost shifting on a national level. We pay the higher price because we can. They pay the lower price because they won't pay the higher price.

 

[lets-retire]

...because companies who are paying for employee health care have higher overhead, making them less competitive in the world market. (i.e. Caterpillar's recent earnings write-down to cover higher health care costs)This debate isn't defined to the US; it affects every company's operating costs. Whether you are local, national or global you need a level playing field to compete. Unfunded mandates do nothing to adresss this.

That's why it is a big deal.

The problem is, if the companies decide to not pay for health care it gives them an advantage in the world market place. At the same time they just cut the compensation packages for all of their employees. They could just as easily cut the pay and receive the same benefit. They don't because people would stop working for them. What would you (not you specifically, but you the forum) do if when you were working your boss told you instead of your typical 1-2-3% pay raise this year you were going to take a $2k-4k-5k-10k pay cut because now you had to provide your own health insurance? You will not receive an amount equal to the cost of your insurance for a raise because taxes will be paid on your pay raise, and the company penalty has to be paid, and if it a zero sum issue there wouldn't be any advantage gained by the employer so there would be no incentive to change.

 

[samclem]

The problem is, if the companies decide to not pay for health care it gives them an advantage in the world market place.

Only because our laws have skewed what would normally be the case.

Fact: There's no law saying any private company has to provide any health coverage. So, why do they do it? Because it helps them attract the best employees. Why don't they just pay people more instead of buying them this one particular service? Because companies can get the insurance cheaper than the employees can buy it--because they can do it with "before tax" money and because they can get group rates from insurers.

These are the only reasons employers even bother supplying insurance. Those who cut this benefit will have to offer some amount of higher pay or other benefits to attract the present quality of employees, they won't just pocket all the money. (But, under the newly-passed law, the taxpayers will help subsidize this employer behavior by giving checks to workers to be used in the purchase of individual policies. As taxpayers, we will be in the position of helping employers provide compensation to their workers--hmm, there's a word for that . . .). At present, if the employers could offer lower compensation packages and achieve the desired result in attracting/keeping employees, they would (and should) be doing it already.

The present system actually benefits employers--at allows them to provide compensation (health insurance) to employees at a discount cost (compared to what the employee would have to pay--which is the value of the benefit to the employee, provided he would need/buy the insurance).

If we set up a system where people could buy individual policies at a standard (group) rate, and if we treated people and corporations the same in our tax code with regard to the purchase of health insurance, we'd quickly eliminate the dumb present link we have between employment and health coverage. But we'd have to address the adverse selection issue as well.