Among many “changes” advocated by President-Elect Obama is a plan for mandated employer-based health insurance. I can’t find a clear description on exactly how the plan is going to work (the plan is outlined on Obama’s site here, and there is a NEJOM summary here), but there are many opinions out there on what the effects of the plan will be. See posts at Hot Air Blog, The Health Care Insurance Reform Blog, The Cato Institute, and John Goodman’s Health Policy Blog
I’m all for changing the current system, and I’m committed to giving Obama a chance to turn things around, but is mandating that employers pay for insurance going to improve healthcare in this country? I admit that I haven’t taken an in-depth review into the pros and cons, but in principle, I think it’s a bad idea. Reminds me too much of the “Hats” post I put up last year.
If you’re an employer whose bottom line is hit by a tough economy and you’re now forced to spend additional money to either “pay” a percentage of your payroll into a national plan or to “play” by purchasing “health insurance” for your workers, what are you going to do?
You’re going to find the cheapest way out.
If I were an employer faced with this directive, I’d probably do one or more of several things:
1. I’d have to fire some of my employees to cut the amount of money I was required to spend on insurance.
Now think about the repercussions of employers having to decrease the number of employees. Those former employees will have difficulty finding another job because most companies are downsizing because of the poor economy and to avoid paying extra for insurance for their employees. The former employees then end up sucking money out of the system by applying another mandated insurance plan called “unemployment insurance.” Instead of maintaining productive employees who contribute to the economy, mandated insurance will create out of work employees who take out of the economy.
2. I would purchase the cheapest insurance I can find.
As in “Yeah, I’ll take that $100,000 deductible plan right there.” Hey – the mandate says you have to purchase insurance, it doesn’t say what kind of insurance you have to purchase. Exclusions for pre-existing conditions? So? Five thousand dollar policy limit? Big deal. Only pays providers three cents on the dollar so no provider will accept patients who have that type of insurance? Who cares? According to the mandate, insurance is insurance … right?
3. I would consider whether or not to cut my remaining employees’ wages to offset the cost of the insurance I am forced to buy.
Depends on how far my company is in the black. If I’m having trouble making payroll and the economy is bad, where do you think the money is going to come from? Now consider the real-world impact. Employees who haven’t been fired will effectively receive less income so that employers can pay for the least expensive insurance they can find. In essence, the mandate is forcing the employees to pay for crappy insurance.
Not the States. They’re going to lose out with all the extra people using programs for the indigent because they are unemployed. Bigger drain on the system and I don’t know too many States that want to throw more money into social programs – most are trying to figure ways to cut back.
Not the employers. They’re losing money by being forced to purchase insurance for the employees.
Not the employees. The ones who haven’t been let go are probably going to get paid less so that their employers can afford to pay for mandated health insurance – health insurance that probably won’t cover them for very much in the “real world.”
The only winners are the insurance companies. They sell more policies, and if they make the policies very inexpensive but with huge deductibles, low policy limits, and multiple exclusions, they probably will have to pay out very little on those policies. Cha-ching.
President-Elect Obama is a smart guy. He and his staff will then just create more rules for the mandated employer-paid health insurance so that employers can’t game the system.
In addition to the employer mandated insurance the government would also have to require …
mandated maximum insurance premiums so that employers don’t go out of business trying to pay for it
guaranteed acceptance of enrollment so that insurance companies can’t cherry-pick healthy patients while excluding the chronically ill patients who will use so much more health care resources
mandated maximum fees that the healthcare providers can charge so that those who provide the care don’t gouge the insurance companies
mandated provider acceptance so that doctors and hospitals can’t refuse patients care to patients because the insurance doesn’t pay enough.
Oh … wait. We already have something pretty close to that.
It’s called Medicare.
Picture credit: American Medical News
P.S. Anyone want to go in on starting up an insurance company?