Ending Employer-Based Health Insurance Is a Good Idea

"The U.S. employer-based health-insurance system is failing," declares a new report by the Committee for Economic Development (CED). The CED is a Washington, D.C.-based policy think tank comprised of business and education leaders. And it is right: Employer-based health-insurance is indeed failing.

Between 2000 and 2007, the percentage of firms offering health insurance benefits fell from 69 percent to 60 percent. The percentage of people under age 65 with employer provided insurance dropped by 68 to 63 percent. In absolute numbers, those covered by job-based insurance fell from 179.4 million to 177.2 million.

Employers are jettisoning health insurance because costs are out of control. Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation is up 17 percent. The consequence is that health insurance is the number one domestic policy issue in the 2008 presidential race.

So what is the CED's prescription for our ailing health insurance system? The report promisingly begins by recommending the creation of "a system of market-based universal health insurance." In order to achieve this, the CED would make health insurance mandatory for every American.

The CED proposal envisions the creation of independent regional exchanges that would act as a single point of entry for each individual to choose among competing private health plans. The exchanges would set minimum benefit plans. The exchanges would also cut through the thickets of state health insurance regulations that add substantially to the costs of insurance. Individuals could purchase insurance above and beyond the minimum benefit plans with after tax dollars.

The cost to the employees would be much greater outside the group plan

Why does that have to be the case? If a company with 10,000 workers stopped covering their workers, and their workers all went to sign up directly with the insurance company, why would the economics of the deal change for either of them?

Walmart seems to offer low prices on goods, even though it's customers haven't joined together in a large purchasing block and negotiated low prices.

My car insurance seems to be reasonable even though my employer didn't get us all together and negotiate for a company-wide car insurance plan.

What makes health insurance the ONE thing that we think is better purchased by a 3rd party who limits our choice in exchange for delivering a large group of captive purchasers?

Our neighborhood HOA explored saving money for the members, and cutting down on trucks, by getting a single trash collector for the entire neighborhood.

In the end they found out that NO trash collecter was going to be cheaper for the entire neighborhood than what they could already get individually. And we found that neighborhoods who had done this in the past were now, often without knowing it, paying more per person from the company than the CHEAPEST rate that company offered in other neighborhoods where they had to compete for the business.

If 200 million people suddenly had to all make their OWN decisions on which health insurance to buy, my assertion is that there would be a HUNDRED new plans to choose from, offering a WIDE RANGE of different options for different consumers, and that those plans would be competing by slashing prices.

You don't see it much now because the few major companies have their captive audience to use as economic leverage to drive out competition. That, and they have stupid state legislatures who dictate minimum coverage requirements that limit competition.

I’m not sure why I care if “people” miss cancer because they are “cheap”. I only care that I DON’T miss my own cancer.

If we count on everybody’s own greed, people can take care of themselves.

If you tell me to spend my money to ensure I have coverage and don’t get cancer, and then turn around and say that if someone else who spent their money on trips and a big-screen TV and booze and what-not, and then they have a medical need, I have to pay more tax to treat THEM, what’s my incentive to take care of my own needs?

Is anyone jumping in to insure the folks who aren’t insured today, at a reasonable rate?

First of all, Yes. Many people who are uninsured could get health care at reasonable costs. For example, the Frost family, assuming they didn't have some preconditions BEFORE Their accident, had private medical plans available for as little as 400 a month or so. It's just that most people who don't have insurance aren't LOOKING for insurance, because they don't want to spend ANYTHING.

Second of all, many of those, like the Frosts, qualify for government plans, either medicaid/medicare or SCHIPS or other state programs. They may not have figured it out or signed up, but if they bothered to look, they'd be covered. So why would ANY private company go to the trouble and expense of setting up a reasonable-cost child insurance plan for people making $50,000 a year, when the insurance company knows that anybody at that range that LOOKS for insurance is going to find a FREE SCHIP program that the private company can't compete with.

Third, once you eliminate the pool of people who simply don't want insurance, and people who if they bothered to look would get free insurance from the government, there's also people who if they looked would find their employer insurance is a great deal. Once again, a private company isn't going to make money tailoring a plan for people who COULD buy from their company, since they can't compete.

Fourth, now that you've eliminated all those people, you are left with such a small number of people, scattered around the country, that it's hard to even target them for advertising. And that group includes a lot of people that WOULD be expensive to insure, which is why they got dropped out of the equation. And yet there ARE some companies going after these people -- it's just that the total market is too small to encourage a lot of competition.

So it is impossible to take what we see today and use it to picture what would happen if companies were forbidden to offer insurance, and if the government stopped running insurance programs.

Actually, a lot of over-utilization of the ER comes from people with employer-paid health insurance.

I don't believe that. When I've had to go to the ER, the place is full of hispanic faces. Few are speaking English. Few of them appear to have a real emergency problem. The ER staff grabs the real bleeding/broken bone emergencies ahead of the rest who are using the ER for "free" healthcare. This abuse is the reason many ERs are closing. If everyone coming to the ER had employer-paid health insurance, they wouldn't be drowning in red ink. They would be flush with cash from exorbitantly priced ER services. It is those with insurance that keep the ERs from completely shutting down.

One of the main differences would be the individuals would now be rated based on the risk they represent. An employer provided plan costs the same premium for everyone whether you are a 50 year old obese chain smoker or a 25 year old triathalon winner.

Once those two individuals hit the private market, the cost will go down for one and up for the other.

A big factor for most families is the lack of maternity coverage on most private pay insurance policies. Outside of employer provided coverage, it is nearly impossible to find maternity coverage. So the family is looking at a minimum $8-10k for a pregancy.

If we as a country were willing to let people with treatable illness die simply because they were too stupid to buy health insurance or save money for health care, that would work.

But I doubt you could get 5% of the public to support such a concept. We are happy to make stupid people drive crappy cars, eat cheap food, live in run-down rental units.

But we aren’t ready to let them die of treatable illness.

That skews things, but it isn’t unmanageable. The current system simply isn’t set up to provide appropriate incentives to counter the “free lunch” philosophy that stems from knowing that nobody is going to let you die of a treatable illness, at least if the treatment isn’t hundreds of thousands of dollars.

It’s not just government, look at how thousands of dollars are raised for individuals who come down with treatable diseases. Nobody who donates seems to be asking why the family didn’t spent a hundred a month for a catastrophic care insurance, rather than waiting until they had hundreds of thousands of dollars of bills and then expecting strangers to donate money to fix it.

I suppose there are freepers who would say that if your kid gets lost in the woods, you should hire a private company to find them, not call on the police and expect volunteers to come out and help find them.

This is the same thing. We expect people to not get lost in the woods, or to have health insurance or pay for health care.

But when they don’t, and they GET lost, or they have a treatable illness, we, even freepers, tend to want to solve the problem, not let the kid die in the woods, or the patient die in their bed, when we CAN do something about it.

If there was such a thing as “rescue insurance”, the only way to get people to buy it would be to force them to, since at this point rescue is a free service donated by government and private citizens. We essentially have universal rescue insurance, paid for by our tax dollars.

If “rescue” is too much of a unique thing for you, just substitute the fire department. We don’t have private companies that will come put your fire out, we pay taxes (required insurance premiums) to get public fire departments (mandatory insurance) since when our house in on fire, nobody is going to let it just burn down (let the treatable patient die) when we can stop it. And that’s even though most people HAVE fire insurance that will pay to rebuild whatever is lost.

The constitution doesn’t specifically say government is here to put out fires, or to help find lost children, or to provide health care. But the first two seem to be acceptable to even the most stringent of conservatives (maybe EV will express his principled opposition to this, I’ve always admired his consistancy).

We all scream about SCHIP, but I haven’t seen anybody here say the wilkerson baby should have been left to die because her family didn’t pay for health insurance, or that the Frost kids should have been left to rot away untreated.

If we aren’t willing to let people suffer the consequences of their inaction, we have already compromised. To then castigate conservatives who are trying to DEAL with that compromise is unproductive.

Sadly, calling an ambulance is the “right” thing to do for everybody, not just a kid. You get treatment on site without waiting, transportation to the hospital, and since you are under EMT care until they get someone to sign you over, you go straight to the treatment rooms without waiting.

Of course, if everybody called an ambulance, there wouldn’t be any available for real emergencies. Why don’t they? Because most people think they have to PAY for an ambulance. Some people do, but indigent people in the end don’t. But they don’t seem to know it yet.

Once they figure that out, they will stop calling cabs and start calling the ambulance.

But I doubt you could get 5% of the public to support such a concept. We are happy to make stupid people drive crappy cars, eat cheap food, live in run-down rental units. But we aren’t ready to let them die of treatable illness.

Nobody is expecting them to die of treatable illnesses. Treat them, bill them, and let them sort it all out. If they can't pay, then they'll be on the hook for the rest of their lives or until they can raise enough money through private sources. They'd even be eminently qualified to get hired by insurance companies as subjects of advertisements warning people what NOT to do when it comes to medical care.

That's exactly my point. There are plenty of resources in this country for people who don't have the werewithal to pay enormous medical bills. We tend to be very generous as a nation, though it's certainly worth noting that those in Washington who are the most ardent supporters of big government also tend to be the least generous with their own resources.

But we aren’t ready to let them die of treatable illness.

I had a 17 yo nephew die waiting for a heart transplant, in 2000. If his father had been unable to put up 100K in escrow, he wouldn't even have made the list. Trouble was, no hearts. He was an athlete, a straight A student, and he got the wrong kind of flu, the kind that destroys the heart. One of the 30K plus who die from influenza every year.

Lots of people posting here who don't know much about the system OR medicine.

Good response. You could add that the cost of making a pill is often nothing, the real cost is in the research and development.

So the company HAS to charge a high fee in the United states, where all the demand and money is, to recoup their investment.

But having set up such a system, the pills only cost a few pennies to make. If they can get another million dollars in sales by offering the pill in Mexico for a buck, they will do that, stipulating that the mexican pills CAN’T be brought back into the United States.

And if Canada requires a cut-rate deal to open the market, since the company makes money on every pill sold even at cheap prices, the company offers the lower price there, again hoping nobody can bring the drugs back into this country.

They could never offer the pills at that price to everybody — because they wouldn’t recoup their research and development costs.

And they have to do that, or they can’t make new drugs. And they only have so many years, because eventually they lose patent protection. Generics are cheap because the generic company only has to cover the cost of manufacturing the pill, NOT the cost of developing it.

Does requiring car insurance drive up the cost of insurance for everybody?

Well, where you don’t have to have insurance, the individual premiums are higher to cover accidents where the other driver isn’t insured.

But where everybody needs insurance, I guess the companies can make prices a little higher than otherwise, because they know you can’t just say “forget it, I won’t get insurance”. So if the companies can drive their competitors out, they have a captive market, and if they can’t,but can collude with their competitors, they can drive up costs.

But that’s just a price that is higher than the price if your insurance NEVER had to cover an uninsured vehicle.

So in fact mandatory health insurance might LOWER costs since the suppliers wouldn’t make your health insurance pay for uninsured people. Your cost would be higher than it would be with real and complete competition (which includes the right of refusal), but would be LOWER than it is now because the pool of money would include the money from all the people who currently pay NO insurance but still get treated with YOU picking up the tab).

I think it sounds horrible because the companies’ have the power of collective purchasing. If you belong to the company and have the opportunity to participate you gain benefits based on the size of the companies collective purchase.

Taking this out of the equation is a disincentive to work long term at one place. It’s also going to make it more expensive to shop for insurance becuase you have become a company of 1-10 people and have to face the lack of incentive on the health insurance company to keep your business.

There's that key word again . . . volunteer.

One problem with your post here is that your making a comparison between events/circumstances that do not necessarily correlate well. A "house fire" and a "lost child in the woods" are two events that occur extremely infrequently and therefore don't require an enormous commitment of resources on an ongoing basis. This is why, for example, such rescue missions are staffed predominantly by volunteers -- and why most municipalities in the U.S. have volunteer fire departments. Basic medical care, on the other hand, is rendered with such boring regularity that it doesn't even make sense to call a medical insurance policy "insurance" at all.

Not always. In Alaska, for example, there has been a strong push (and this may have even been implemented) to require some form of "rescue insurance" for anyone who tries to climb Mount McKinley. Basically, hikers would have to post a $50,000 bond to cover the cost of a potential rescue -- or they wouldn't be permitted to climb the mountain. This is exactly what happens when the dire event/circumstance in question happens with enough frequency that it becomes a pain in the @ss for the government to adress the problem free of charge.

The original purpose of a fire department was not to keep your house from burning down . . . it was to keep everyone else's house from burning down, too. That's why paid, fully-staffed fire departments are almost always found in urban areas or places with a lot of industrial land uses where fires can be devastating to the public at large and not just the owner/occupant of the property where the fire originates.

Dear the808bass,

“Plus, if you are paying only $250/mo. in premiums for your catastrophic insurance (total guess) vs. $1000/mo for full coverage,...”

In Maryland, my group policy with HSAs for a family with a $2,400 per year deductible, and significant co-pays until the out-of-pocket maximum of about $7,000 is reached, costs about $850 or so per month.

“Full coverage,” that is, no four-figure deductible, modest co-pays, and a low out-of-pocket maximum runs about $1,600 per month.

sitetest

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