The Amazing Maze of US Health Care

Most people across the political spectrum agree that health care is a social good.  They agree that someone else’s health is in their interest.

People may not express it that way.  But as the adage goes- actions speak louder than words.

We support health care for old people through Medicare.  It was Republican President George W. Bush who partially filled the biggest gap in coverage for older people with legislation to add prescription drug coverage to Medicare.

We support health care coverage for poor people through federally supported state Medicaid programs.

We support the Children’s Health Insurance  Program (CHIP) that expands Medicaid programs to the children of the working poor.

We support health care for Native Americans through the Indian Health Service.

We just seem to have a problem with people who work.

It might seem logical that, since we clearly have recognized that health care is a social good, that we should require all employers to provide health insurance.  After all, we require employers to pay for workers’ compensation insurance, and unemployment insurance.

If health care is a recognized social good, then you might conclude that we would not permit companies to seek a competitive advantage by not offering health coverage.

You would be wrong.  In this debate, free market ideology prevails over social good, or notions of a level competitive market.  Loyalty to employers trumps any duty to employees.

Listen to those who speak for employers

The Chamber of Commerce Vice President Randel Johnson

I believe, the issue of a new employer mandate, euphemistically called ‘pay or play,’ has largely been lost in the debate and in the press. This is highly ironic given that this is, let’s be clear, a sweeping new burden on employers of unprecedented proportion in the benefits areas.

Or James P. Gelfand from the Chamber of Commerce

The Chamber of Commerce is not mincing words. The senior manager of health policy for the Chamber, James P. Gelfand, says: “The problem is instead of focusing on the 90% of issues that everyone can agree on, we’re getting stuck on the 10% ideological, uncompromisable, unworkable provisions… like creating a government-run insurance plan, forcing employers to provide health insurance. That’s the kind of stuff that reads like a poison pill.”

Or the National Federation of Independent Business (NFIB)

The mandates also impede business investment and effectively impose regressive taxes on both employees and owners of small businesses.

Or the Society for Human Resource Management (SHRM)

“Pay or play” proposals would limit employers’ flexibility and innovation. Under this approach, some employers may simply choose to “pay” rather than offer coverage, leaving employees without the coverage they have grown accustomed to.

How do the legislative proposals address this issue?

Not simply.  The Senate version has some weak provisions that have been referred to as the free rider provision.  The House bill is a bit simpler.  It requires employers who don’t’ offer coverage to pay a fee equal to 8% of their payroll.

But both have exceptions.  Exceptions are otherwise referred to as loopholes.

What is the problem?

In 2009 according to Kaiser Family Foundation 60% of all employers offered health insurance in 2009, down nine percentage points in nine years.  But firms not offering health insurance generally employ fewer than 200 workers.

So why offer a loophole to the very group you are targeting?

What are the loopholes?

If the loophole is defined by number of full time employees, employers will be encouraged to substitute part time employees or contract workers.

If the loophole is defined  by payroll size, employers could be encouraged to substitute contract workers.

There is experience with this. Hawaii is exempt from ERISA because it had an employer mandate in effect before passage of ERISA.  ERISA is the federal law that regulates employee benefit plans and has handcuffed state level experimentation with health care reform.  The Hawaii law does not apply to all part time employees or contract workers.  Guess what is happening in Hawaii?  Hawaii’s rate of uninsured, once the envy of the mainland, has doubled since the 1980’s as employers discover and use the loopholes available to them.

Is there another way?

A different model is suggested by the City of San Francisco and upheld by the 9^th Circuit of Appeals.  The City of San Francisco requires all employers to pay a flat amount per hour for all employees working in the City of San Francisco.  This payment can be offset with payments for employee health care.

It closes the loophole for part time employees but still leaves open a loophole for contract workers.

My proposal

I suggest a flat tax on all forms of compensation including wages and non wage income and payments for contract labor.  Absolutely no exceptions.

These payments are directly offset by health care coverage that meets some very minimal standard.  Low wage employers who provide health care benefits that cost more than the payments would receive a tax credit.

The value of this proposal is that it levels the competitive market somewhat.

It does not however begin to address those on the margins of the workforce, those between jobs, or those trying to enter the workforce, those marginally employed and self employed

That’s an additional challenge.

This entry was posted on Saturday, November 21st, 2009 at 4:00 pm and is filed under Employer health insurance, Health Care Reform, Small business health insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.