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Employment-based health insurance vs. the exchanges — 44 Comments

  1. ” After all, I did this on a Saturday night, while watching the World Series, which the Red Sox seem poised to lose.”

    Your American League – New England bias is duly noted. Go Cards!

    “If I’ve made any computational errors, let me know.”

    I know your errors, if they exist, are far superior to O’care errors.

  2. BTW, I reloaded 123 cases of 8MM tonight between watching the series and typing inane posts to neo-neocom.

    Goodnight to all from NE Iowa.

  3. Hey neo . . .

    If the BoSawx can come from behind three games to zip to take the 2004 League Championship Series four games to three from the Noo Yawk Yankees — which they did — then this year’s edition of the BoSawx ain’t poised to lose nuthin’ at *this* point.

  4. Well, since we’re already off-topic:

    This is the first baseball postseason since I cancelled my cable TV last November. I haven’t missed TV at all up to now, but it’s really tough not being able to watch the World Series.

    I did, however, see Gravity for the second time tonight. This is the first movie I’ve seen twice in a theater since Titanic. It’s an excellent movie and I highly recommend it.

  5. See this thread for all the “great deals” the self-employed are getting — Neo, I luv ya, but I think you’re in denial about this. Or that calculator is whack.

    “Healthcare Premium Horror Show”: http://minx.cc/?post=344496

    EVERYBODY is getting the shaft.

  6. Neo:

    I don’t use the term “the government” as the payor of subsidies for Obamacare. You shouldn’t either. Let’s be more political. Use the term “taxpayers,” because it is the taxpayers whose money is being taken by the Obama administration to pay some or all of the healthcare bill of other people. And of course, when those people receive subsidies to help them pay for healthcare they cannot afford, they will vote for the party that promises to continue providing those subsidies. Until the taxpayers, a minority, run out of money.

  7. Beverly,

    I think you’re misunderstanding the situation here. That link you gave, to the “Healthcare Horror Show” post at Ace’s, is to the very post by “Warden” that I’m analyzing in my post here.

    You need to distinguish between premiums for employment-based insurance (which “Warden” is discussing in his post) and premiums on the exchanges. The subject is complicated by the fact that people who are self-employed are limited to going on the exchanges (although they’re eligible for subsidies) or buying insurance on the individual market in the various states (unsubsidized). If their incomes are under 400% of poverty level, they get subsidies on the exchanges if they wish to buy their insurance there.

    On the other hand, people with access to employment-based insurance have to use that insurance, or go on the exchanges and pay full price (without subsidies), or can go on the exchanges and get subsidies only if their incomes fall within different guidelines than are used for those without access to employment-based insurance. In general, the threshold they (people with access to employment-based insurance) must meet to qualify for subsidies on the exchanges is much higher than if they had the same income, etc., and were self-employed. That’s the point of the post.

    “Warden” is not self-employed; he has employment-based insurance available, and those are the premiums he is describing in his post at Ace’s. My post compares those premiums to what he’d encounter on the exchanges, with or without subsidies. He could not get a subsidy, so he’d be paying a lot on the exchanges and there would be no point in his going there. But, at the same income level and age and family size, if he were self-employed and did not have access to employment-based insurance, he’d get a hefty subsidy.

    That is the point of the post: at a certain middle-income range, with a family, people are much worse off with employment-based insurance than they would be if self-employed.

  8. “It used to be that employment-based insurance was less expensive than individual, in part because of employer contributions and in part because the group was large.”

    Neo,

    This is somewhat of a mis-statement. Yes, out-of-pocket premiums are oftentimes less costly to an individual in a group plan than private insurance because, as you point out, employers are oftentimes paying part (or all) of the premium. In fact, group employer plans are mostly more expensive than private insurance in total premium cost because of adverse selection which offsets the size of the group.

    Those people who need insurance due to poor health tend to gravitate towards group plans because they would be normally be declined or face higher premiums with individual insurance. It is not uncommon for such an employee to choose one employer over another specifically because of the employer’s health benefits (or, alternatively, to remain in a job for fear of losing benefits due to a, now, existing condition). Thus, employer group plans tend to have a higher claims experience and are, therefore, actually more costly than private insurance on an apples-to-apples basis even when the employee is paying lower out-of-pocket premiums.

  9. T:

    You make a good point. I was going on the idea that people who buy in the individual market tend to be older, and by my own experiences in the individual market versus employment-based groups. But of course, individuals can be young and buy in the individual market, and they would probably (if healthy) have premiums that are lower than the premium offered through the company. The fact that the company pays for a portion of their insurance premiums means that their out of pocket costs for premiums would be lower if they choose the employment-based insurance vs. individual, but as you point out, that’s not the proper comparison.

    I’ll correct that part of the post.

  10. Hey Neo,

    There are several problems with your analysis (or really, with the original post)… first of all, the “premium” that the original poster is referring to is the employer contribution to his health care coverage, not the total premium (which typically employers do not disclose). The fact that his company decided to increase his contribution by 25% doesn’t really say anything at all about what the actual premium is, for all we know his employer’s HR department could just be being dicks and making their employees pay more for their insurance than they did a year ago. The second problem here is the poster assumes the reason this happened is “Obamacare” — but the actuarial reality is that Obamacare doesn’t significantly affect premiums in the employer market, since those are calculated based on the overall actuarial risks in the group plan his employer is a part of. Obamacare regulations apply to self-employed health insurance, not to employer-based health insurance.

    Also it should be mentioned that Obamacare DOES have subsidies for small businesses to help them offer health insurance. He probably doesn’t work for a small business. He does seem to work for a company that likes to gouge its employees for their health care contribution.

  11. Mitsu:

    You seem to be misunderstanding my post. I never say that Warden’s premium contribution raise is because of Obamacare.

    Actually, it’s impossible to say why his premium contribution was raised so much, although unless it’s ordinarily raised 25% each year (which seems extremely unlikely, from his outrage in his post) we can assume it’s no coincidence and that this might indeed be happening due to Obamacare. We can’t be sure, of course, but if this hike is way out of line with previous raises, it is a logical conclusion, whereas your suggestion that his company merely likes to gouge its employees for health care contribution has no evidence other than your imagination. “Warden” has prior experience with this company and doesn’t complain that that’s been their practice in the past.

    But as I wrote, it doesn’t really matter for my purposes WHY his contribution (and therefore his out-of-pocket premium payment) was raised so much, nor do I say in the post that it’s because of Obamacare. He thinks it’s because of Obamacare; I’m agnostic on the subject of why his premium went up so much. My post is merely about how much he will now be paying versus how much he would be paying on the exchanges, and to compare that to what a person of the same income would be paying on the exchanges if he/she did qualify for subsidies.

    As for what the actual premium total will be for his employment-based insurance—that is, what his company pays for it plus what he pays—we don’t know. But again, that’s not relevant to the post. The post isn’t about comparing the total premium for employment-based insurance to the total premium on the exchanges. It’s about comparing what he would actually pay out of pocket for his employment-based insurance premiums versus what he would pay on the exchanges unsubsidized, versus what he would pay on the exchanges if he had no available employment-based insurance and therefore would be eligible for subsidies. The comparisons I’m making in each case is to what his actual, personal, out-of-pocket costs for premiums would be under different scenarios.

  12. Yes, but the problem is we have no idea what the level of coverage he has now versus the coverage provided under the silver plan, the basis of your comparison. There’s really no way to make the comparison without looking in detail not only at the risk levels within his company’s pool, but at the coverage itself. It’s quite possible the coverage is much more extensive.

    I know that when I’ve priced out family coverage cost for my own companies the premiums have been far higher for a family plan than the numbers cited in the Obamacare exchanges. But I tend to try to give fairly good coverage for my employees (and I don’t gouge them on employee contributions; the most I’ve ever asked is $150/month.) The fact that the prices on the exchanges are lower is, one would think, a good thing; indicating the risk pool is in fact working.

    Keep in mind these prices aren’t set by the government; they’re set by the markets. There’s nothing magical about the exchanges except for the subsidies. The insurance companies are still calculating risk and pricing accordingly. If an employer plan is more expensive than an exchange plan, it means coverage or actuarial risk are different.

    It’s kind of pointless to compare things on a one-off anecdotal basis, for this reason. The only real way to see the impact of Obamacare on the employer market will be to look statistically at a large number of cases with truly comparable coverage levels.

    In any event I’m not sure how Obamacare would be responsible for major changes in the employer based market. Employer based plans are still operating under the same financial and actuarial conditions as before, for the most part. That is by design, precisely so that market will remain as it was. Perhaps not ideal, in many ways, actually, but that’s how the law was designed.

  13. But as I wrote, it doesn’t really matter for my purposes WHY his contribution (and therefore his out-of-pocket premium payment) was raised so much, nor do I say in the post that it’s because of Obamacare.

    So, as usual, actual facts don’t matter.

    But as was pointed out, we have two elements here. We have the cost of insurance, and the amount the employer is willing to pay. Say the cost is $10,000 but the employer paid $9000 in 2013. It could stay exactly the same in 2014 but the employer may decide they can only pay $8750. To the employee, though, this will be a ‘stunning’ 25% increase. In reality it is not an increase at all. It’s actually a wage cut, the employee was costing $10K plus pay and taxes in 2013. In 2014 he will cost the same less $250.

    Now let’s look at some actual facts:

    http://kff.org/report-section/2013-summary-of-findings/ reviews a pretty big survey of EBI. Overall between 2003 and 2013 the total cost rose 80%. Employee contributio has risen 89%.

    Someone correct me if my math is wrong but if $1200 represents 25% of what he is being asked to pay then he is being asked to pay $4800 in 2014. The average employee contribution in 2013 was $4565. It sounds like someone in his HR/benefits department said something like “look we are paying a larger than average portion of insurance, since we are out of line with the market, we should increase the employee contribution in 2014”.

    But that’s this year, how about next year? Well large employers are projecting a 7% increase in health costs (https://www.businessgrouphealth.org/pressroom/pressRelease.cfm?ID=214). That may sound like a lot except that’s exactly what they’ve projected for the last two years now. So much for ‘uncertainity’ about Obamacare and fears of increased costs!

    (Almost amazing, if you take $4565 and increase it by 7% you get $4815! Which seems to almost exactly be what our angry friend is being asked to pay by his employer in 2014! Makes me wonder if someone in his HR dept saw the Kaiser report, then saw the 7% increase and just put the two together to set his rates for the upcoming year!)

    Something else missed here, the ACA requires employers to tell employees the *total* cost of the health plan. Some already did this anyway (since it is kind of good PR for the HR departments, “see how much we are spending on you behind the scenes!”). But for those that don’t you can now at least see if the sudden spike in benefit cost is really due to premiums going up or if the boss is trying to disguise a paycut as something else.

  14. Mitsu:

    The point is not whether or not the plan is exactly the same. The point is that, although someone like Warden can go on the exchanges, he cannot have the same choices and government subsidies there as someone making the same income, of the same age, and with the same family size, who is self-employed or who for whatever reason does not have employer-based insurance as a possibility.

    And although it is impossible to compare plans exactly (not enough info available, too much variation from state to state and plan to plan), one thing that is clear is that someone of Warden’s income and family size who is self-employed or otherwise lacks access to employment-based insurance would get huge subsidies on the exchanges, and that Warden cannot get those subsidies if he goes on the exchanges.

    In addition, it is almost certain that Warden is getting a worse deal from his company than he would on the exchanges. The silver plan is considered a mid-range basic Obamacare plan, which pays (as I indicated in my post) 70% of costs (the consumer pays 30%). But—and this is the most important thing for the purposes of this post—someone on the exchanges with Warden’s income and family size would not be paying 30% of the costs. He/she would be subsidized in terms of co-pays and deductibles as well.

    The amount of the exact subsidy such people would get for co-pays and the like, and the exact form it would take, is also impossible to say because it varies from state to state. But there are some charts here that indicate the total out-of-pocket expenses for someone on the exchanges with Warden’s income and family size would be capped at half the maximum. Half the maximum is $3200. (And, if his income were under 200% of poverty level instead of slightly above it—for example, if it were $46,900 rather than $50,000—his out-of-pocket expenses would be capped at only one-third the maximum, or $2133.)

    That means that if such a person (or his family) is a heavy user of medical services, the most he could ever pay out-of-pocket would be $3360 for the premiums plus $3200 for every other expense he might possibly incur, for a grand total of $6560 a year maximum.

    Now I suppose it’s theoretically possible (although highly unlikely) that Warden’s employment-based policy is a Cadillac plan that has almost no out-of-pocket expenses and yet costs him premiums of only $6K a year for a family of four for 2014. If so, he would be remarkably atypical. I’m not going to go on and on about it, but if you look at the stats (you can look it up), Warden’s premiums for last year of approximately $4800 would be a fairly typical price for employment-based insurance for a family of 4, and virtually all such policies have significant co-pays and deductibles. So we can assume that’s what his plan is like—significant co-pays and deductibles.

    It is therefore very likely that he’d be paying quite a bit over and above that $6K for next year if he consumes any medical care at all. And with a family of 4, he probably consumes a fair amount. So he is getting a poorer deal than he would on the exchanges with a silver plan and subsidies. And he’s getting a much poorer deal if he’s not a very heavy consumer of health care, because if most of his expenses would be just his premiums, his premiums are a lot higher than those he would be paying on the exchanges if he didn’t have access to employment-based insurance.

    The point is not really Warden himself, though. He is just one example. But he is one that points out certain new inequities in the system. Over the last couple of weeks I have crunched the numbers for many many different scenarios other than this one, and for many of the people eligible for subsidies on the exchanges, the exchanges offer a distinct advantage that is denied those who have employer-based insurance. By the way, for those making over 400% of poverty level (which apparently is only about a third of the US population), those advantages of the exchanges disappear, and there is an advantage in getting employer-based insurance.

  15. Boonton:

    My comment below yours (which was not written in response to you; I had not seen your comment yet, and wrote mine in response to Mitsu) is my pretty definitive and comprehensive statement on what I am saying in this post and why. You might find it relevant to your comment.

    I don’t have time to write book-length comments explaining over and over, so I’ll rest on that. But I will re-emphasize that the point of my post is to compare Warden’s income and expenses for employer-based insurance (or that of a person like him) to what he could get on the exchanges with subsidies if he did not have access to employer-based insurance.

    Over and out.

  16. neo-neocon

    And although it is impossible to compare plans exactly (not enough info available, too much variation from state to state and plan to plan), one thing that is clear is that someone of Warden’s income and family size who is self-employed or otherwise lacks access to employment-based insurance would get huge subsidies on the exchanges, and that Warden cannot get those subsidies if he goes on the exchanges.

    Here’s a problem with your reasoning. The people are not the same. Consider Warden who earns $50K per year, but his employer subsidizes his health care to the tune of, say, $6,000 per year and asks him to pay $4000. He is really earning $56K or you can see him as earning $50K and getting a $6K subsidy from his boss.

    This is NOT the same case as ‘Joe’ who earns $50K per year either working a job that doesn’t offer benefits or is self-employed.

  17. But I will re-emphasize that the point of my post is to compare Warden’s income and expenses for employer-based insurance (or that of a person like him) to what he could get on the exchanges with subsidies

    Hmmm, weren’t we talking in previous posts about the exchanges falling apart in ‘cost death spirals’ since only sick people will enter them? It sounds like you’re now saying the exchanges are a pretty good deal for the self-employed, even the employed with EBI’s. If that’s the case then it sounds like they would have a somewhat diverse pool, not just sick people.

  18. Boonton:

    But we’re not talking about what Warden’s income would be if Warden’s employer stopped offering health insurance entirely, which is the only way he might ever get that extra money.

    If Obamacare worked by allowing Warden to choose the exchanges and then have Warden’s employer give him whatever the employer’s contribution to his insurance would have otherwise been, and then let him go on the exchanges for subsidies, that would change things and up his income (and by the way, if his actual income did go up that $6K to $56,000, he would still be eligible for large subsidies for premiums and co-pays and deductibles on the exchanges because now he’d be at 238% of poverty level rather than 212%). But Warden’s not going to get that extra money, so his available income is what it is, $50K, and that can be compared to a person getting that same amount but eligible for subsidies on the exchanges. That extra money his employer is paying for his insurance isn’t available to Warden as income, it’s only available if he gets insurance through work, and then it goes to insurance for which he’s also paying higher premiums and co-pays compared to if he took that same income and went on the exchanges.

  19. Boonton:

    Of course the exchanges are a good deal for many of the self-employed. As I wrote in another comment, however (I believe it was addressed to you), the health of the exchanges in terms of avoiding a possible death spiral depends on the health of those who sign up.

    It’s the Obama administration that has emphasized this over and over, not me (Ezra Klein has often written about that, for example here). The exchanges are great deal for some of the self-employed of a certain age and income level, but Obama and company have made it clear that the exchanges need a lot of young healthy people to enroll. And for that group, the exchanges are not that good a deal and insurance is not something they perceive as even necessary.

    The White House told Klein the exchanges need 2.7 million enrollees in the 18-to-35 set to avoid some sort of disaster. Those are not my figures; those are the White House’s. This group is composed of people who tend to think they don’t need health insurance, and for whom the exchanges are not as good a deal because their premiums are artificially inflated there in order to offset the reductions in the premiums older people will pay. So, even with subsidies, it’s just not as inherently attractive to them: if they want insurance, they can get it pretty cheaply elsewhere, and many don’t want insurance in the first place and would rather pay the penalty or blow off the penalty and take their chances. That’s the administration’s fear.

  20. But we’re not talking about what Warden’s income would be if Warden’s employer stopped offering health insurance, which is the only way he’d ever get that extra money.

    It’s not really relevant. Warden’s income is really $56,000, not $50,000. If his employer gave him a $6,000 raise but eliminate insurance, you’d say he didn’t suffer any pay cut. If his employer eliminated insurance but gave him no raise, then we would have to say that is a pay cut even though every paycheck offers him the same cash amount.

    I think you’re saying the bind is that Warden would probably be better off going to the exchange, but he can’t because his employer offers coverage so he cannot use the exchange with subsidies. The logic being that Warden is already getting a rather large subsidy (his employer pays no payroll tax on the $6000 it pays for his insurance, Warden pays no income tax on the $4,000 he pays and his employer again pays no income tax on that $4000 cash it pays Warden to pay for his EBI).

    What’s interesting to me is that if Warden was working just for the coverage, he very well might consider becoming an independant contractor in exchange for a possibly higher cash pay and use the exchanges for insurance. In other words, it seems like a gentle nudge towards breaking employer provided coverage as the ‘norm’ by making it slightly less appealing and buying insurance individually more appealing (but not required). Which actually seems like an experiment that is both ‘conservative’ and ‘Conservative’ since it’s a pretty common theme on the right that America’s ‘original sin’ with healthcare is the link between employer and insurance.

  21. The exchanges are great deal for some of the self-employed of a certain age and income level, but Obama and company have made it clear that the exchanges need a lot of young healthy people to enroll. And for that group, the exchanges are not that good a deal and insurance is not something they perceive as even necessary.

    But as I pointed out this logic should also hold for EBI. Why is this fellow you’re quoting upset about his health insurance? why not simply opt not to get it then not only does he get no 25% increase but he also gets larger paychecks in 2014? Why aren’t all these young people saying no to EBI crashing the plans of numerous large employers in ‘cost spirals’?

    I think a major reason is that either:

    1. Younger people do want coverage, even if it’s not strictly economically rational for them to want it. Examples of people behaving in an economic irrational manner have been found in the past, so this would not be impossible in itself.

    2. The meme that health insurance isn’t something that younger people need (barring some special health problem) has been overplayed. Maybe from late teens to mid-20’s the population is so exceptionally healthy it may make economic sense not to have insurance but beyond 30 or so people should have insurance, they know it and they want it….even though as you pointed out people don’t really start gobbling up lots of expensive health care until they hit 50. In that case the mandate helps but isn’t strictly needed since enough people want insurance who aren’t the sickest of the sick.

    But I think there’s another problem with the whole line of thinking that healthcare reform is unfair because people who ‘don’t need insurance’ are being pushed to get it. Let’s say you ditch the mandate and even ditch tax deductibility for EBI insurance (which, of course, hurts younger people since they would rather have $6-$10K more in pay, which would be taxed, than a $10K health policy when they only use the doctor once a year). Who at the end of the day is going to pay for those who are sick?

    Amazingly enough, it’s not really going to be the sick people. Unlike other products, we are not willing to say “you can’t pay, you don’t get” when it comes to health care. Well if we aren’t then ultimately those who aren’t sick are going to pay one way or the other. When you really push the right hard, they end up giving you proposals that essentially do this.

    For example, giving the sick huge vouchers so they can buy insurance despite their pre-existing conditions and higher risk since they are older? That means the non-sick taxpayer will pay. In that world your young person may get more pay, but will get a nice big fat tax increase to pay for the 45 yr old woman who just found a lump in her breast.

    Or how about making young people set aside their income in special savings accounts to pay for health when they get older? Again some people won’t have enough which creates the issue above. Even if not you’re still forcing people to do something they don’t think they have to do.

    How about just making special tax credits for the young to set aside money on a purely *voluntary* basis. Sorry, still ultimate a tax increase. The young person who wants to spend, not save, his $10K raise gets taxed so the other young person who does save can get all types of IRS goodies on their 1040.

    If you have other suggestions please feel free to share?

  22. Boonton:

    But if he declined the employment-based insurance he would most likely not actually get a higher paycheck. It is unsual for employers to return the money they would otherwise have paid for towards a person’s premiums if he/she declines the insurance.

    By the way, Here’s an article from—of all places—Daily Kos describing the same general phenomenon I’m describing about employment-based insurance and how it penalizes quite a few people compared to the exchanges and subsidies.

    I’m not the one saying that enough of the young won’t buy health insurance to make the Obamacare exchanges work. I have no idea what they will do. I’m reporting what the White House is worried about, and the reasons they have to be worried.

    As far as the solution goes—it depends how libertarian you are, and how willing you are to accept the idea that some people will go without good health care because they’re poor. If you want people to be covered, you either have to pay for them or force them to pay.

  23. I have not run the numbers, but I strongly suspect that the taxpayer could buy health care insurance for the truly poor, through HMO like organizations for a fraction of what this boondoggle is going to cost.

    Of course, as we know, that is not the ultimate goal of Obamacare. Government controlled, rationed, and dispensed medical care is the goal. Dependence on the Federal Government for every necessity is the goal.

    During WWII, when my Dad was gone, a wonderful Dr in Ybor City, Tampa, Fl named Gonzalez ran a clinic. You paid a flat rate and received comprehensive care, a pre-HMO HMO? Since the families of enlisted men did not rate any gov’t help with health care; and the allotments for family support was meager by any standard, my Mother had to shop for affordable care. Through Dr Gonzales’ clinic, she found comprehensive medical care at a reasonable cost. It may not have been elegant, but it was competently delivered in acceptable facilities. She had a hysterectomy, my brother and I had tonsillectomies, and my sister had a broken arm treated, in addition to the usual childhood issues. One price.

    Seventeen years ago, my premature twin grand children were born, and nurtured for two months in the pediatric ICU at their HMO until they were self-sustaining. Now they are high level high school athletes. Over the past year, their older sister was hospitalized and treated for Leukemia through the sponsorship of the same HMO; her treatment included a bone marrow transplant, and a month’s stay in an allied world class hospital.

    Based on personal observation, I do not accept that the concept of HMOs is a priori an unacceptable concept for health care delivery. I do not accept that quality and affordable health care can not be provided for the needy through a similar arrangement.

    I know that times have changed and the concept of what is acceptable health care has escalated. Even so, I have no doubt that competent medical care can be provided by the taxpayers to those who cannot pay their own way for a fraction of the cost of Obamacare.

    For those who can make other arrangements, leave them free to do so.

  24. Okay, I think I understand the point you’re making, Neo, thanks for the clarification.

    There are two principal disadvantages that employers + employees suffer from under Obamacare (and these are the same disadvantages that occur under Romneycare — and are actually even worse under Romneycare) — the first is that employees usually (though not always) have no choice about what health coverage they get from their employer. So, if their company insists on giving them a better plan than they might be willing to settle for on the exchanges, tough luck, they still have to pay whatever their employer wants them to pay (provided it is under the limits that allows them to go shop on the exchanges themselves).

    The second is that employees aren’t eligible for the subsidies available in the exchanges.

    Regarding the first — a 70/30 plan probably is less coverage than this particular employee is likely to be getting from their employer. But, the employee doesn’t get to make that choice — the employer has the unilateral right to do so. As I mentioned before, the Wyden Amendment would have changed that — employees would not have been eligible for government subsidies but they would have been eligible to get their employer’s contribution to their group plan, and take that money and use it to shop for plans on the exchanges. This would, however, potentially create problems for employers if a lot of their employees opted out of their group to shop on the exchanges, because the health of the employer’s group plan also depends on the number and health/age/etc. of employees on the plan. So I can see why the Wyden Amendment was shot down.

    As for the second issue — the fact that there aren’t government subsidies available for employees — that’s certainly true. But there are subsidies available for small businesses, which offsets this to some degree. Ultimately, of course, the point of Obamacare or Romneycare is to plug a hole in our system, rather than replace it entirely with a French-style single payer system. To make that work, it has to work for individuals who are self-employed… one argument is simply that large employers can more readily afford to budget “subsidies” (i.e., employer contributions) for health care by spreading it around the group and factoring it into their cash flow — individual self-employed people, whose income is frequently quite erratic and uncertain, may not have the same ability to confidently do so. So, in this case, the government steps in for those with lower incomes and makes it easier for them to cover themselves. It does, as you point out, create a slight disadvantage for employees who work for employers who don’t qualify for government subsidies — but then again, those are the employers that can best afford it.

    Is this completely “fair”? It’s hard to say whether it is or isn’t, but it is minimal in the sense that if we were to try to fashion a program that didn’t have this difference, it would mean having to supply subsidies to employers/employees much greater than those available under Obamacare, which would necessitate more taxes, and so on. I.e., it would involve much MORE government intrusion on a system that is already in place, something which this law was intentionally designed to avoid.

  25. “He does seem to work for a company that likes to gouge its employees for their health care contribution.”

    What company “gouges” employees for their health care contribution? That would mean they actually charge the employees *more* than it costs them! I doubt this happens much if at all. More tendentious dishonesty from mitsu.

  26. But if he declined the employment-based insurance he would most likely not actually get a higher paycheck.

    Agreed, very few employers will give you a higher paycheck. Some will give you some additional money. For example, I worked at one a few years ago that offered something like $50 extra per month if you declined the coverage. The idea was to encourage those who had spouses with other companies that offered coverage to take that coverage, but I never encountered one who actually was willing to give the entire cost of the employer’s side as additional pay or anything near it. Nonetheless, you could make a play on that pot of money by becomming a contractor.

    As far as the solution goes–it depends how libertarian you are, and how willing you are to accept the idea that some people will go without good health care because they’re poor.

    It should be noted with the ACA you as young healthly person do get:
    1. Actual health insurance, which is a valuable thing even if your hunch is you won’t need it.

    2. The ability to fully decline and opt out entirely with only a very modest penalty.

    Not it’s not Ayn Rand’s healthcare reform, but it also isn’t LBJ’s or Ted Kennedy’s. It’s actually pretty conservative, and probably one of the most conservative of possible plans that still seek to accomplish the goals the reform set out and Republicans would do well to admit to that reality.

    Oldflyer

    Based on personal observation, I do not accept that the concept of HMOs is a priori an unacceptable concept for health care delivery. I do not accept that quality and affordable health care can not be provided for the needy through a similar arrangement.

    We haven’t talked about insurance as a concept yet but the whole concept of insurance works very much like going out to lunch with your friends and splitting the bill. The bill for each person will simply be the average of what everyone eats. If you happen to like steak, you can eat on the cheap by being buddies with lots of light salad eaters. But ultimately your individual bill can only get so cheap, it can never be less than the average amount everyone eats. On average I think Americans spend $6K per person per year on healthcare.

    Beyond that insurance companies can make money only by the following:

    1. Decrease costs by putting themselves between the health care system and the patient. challenge treatments that seem unnecessary, negotiate with doctors to provide services at lower rates, make deals with hospitals etc.

    2. Decrease costs by cutting demand. Get your pool to go for regular checkups, encourage them to exercise and eat healthy. Promote flu shots etc.

    3. Decrease costs by gaming your pool. Try to get the sick people to not join. This can be overt (kicking anyone who seems like they will be sick out) or covert (hyping things non-sick people will find cool but deter sick people. Example, reduced gym membership or aromatherpy sessions….20 somethings might like the idea but someone whose had cancer will probably care more about all the areas best oncologists being in-network).

    Sadly #3 is probably the easiest way to make money but it’s also the least good for society. If you’re running Aetna, you make more if all the sick people go somewhere else. But for society as a whole those sick people end up somewhere. #1 and #2 do actually provide a benefit to society beyond the simple “let’s split lunch” scam the steak eater tries to pull on the salad eater. But they are really hard, require a lot of data mining and have to be done in a way that doesn’t make patients feel they are being treated in a cheap manner (think news stories of dying cancer kids being told by the insurance company “no more chemo”!). Left to its own, I suspect the market will veer towards #3. 1 & 2, though, are hardly perfect. To date HMO’s seem like an attempt to accomplish #1 but they are pretty clumsily and often poorly done.

  27. “I have not run the numbers, but I strongly suspect that the taxpayer could buy health care insurance for the truly poor, through HMO like organizations for a fraction of what this boondoggle is going to cost.” (Oldflyer @1:17 AM)

    I suspect that if anyone did crunch the numbers they would find that, like the Obama jobs programs, we could have just taken the money spent divided by the number of recipients, cut each of them a check and they (and we) would be better off than pouring all of this money down these utopian rat-holes.

  28. T

    Are you talking about the stimulus program? You are aware that about half of it was payroll tax cuts, maybe another 30% or so was giving states money for Medicaid (which states usually pay about half of)…more or less to let states either spend money on other things or lower taxes themselves…only a small portion was what most people would think of as ‘jobs programs’ meaning a mental picture of someone in a hard hat resurfacing a highway. If you divide the total cost by the # of highways dug up and redone you’ll get a high cost per pothole filled.

  29. The gov’t using HMO’s to just buy coverage for people directly has a mixed history. Some states do something like that with Medicaid, which does seem to achieve some savings (probably via #1 and #2 above). Medicare didn’t work so good, Medicare Advantage Plans cost about 125% of what the average medicare patient costs and the plans were probably ‘cherry picking’ healthier seniors out of the pool to give the taxpayer a double whammy.

  30. Boonton,

    I am agreeing with your initial statement and with your subsequent statement about cost per pothole. The point is that it would have been easier and probably more cost effective to simply cut checks to individuals than to go through the govt Kabuki of “stimulus programs.” Then again, doing that reduces the opportunity for graft and crony funding.

  31. T.

    Well a tax cut sounds like it is even more efficient than cutting a check since it simply entailed taking less money from people to begin with.

    The ‘pothole filling’ though, had two advantages:

    1. It actually forced money to be spent. In a bad recession there’s a very real danger any money sent out to people (either as tax cuts or checks) will simply get saved resulting in no additional spending when the economy needs more spending. Something like building a bridge actually spends the money.

    2. We actually did and do have plenty of ‘potholes’ that need filling. Since the economy needed spending (and still does), it makes sense to get some necessary projects and work out of the way.

    3. I think the estimates of ‘cost per job’ suffered greatly from undercounting the jobs. For example, I remember watching CNN briefly and they did a little hit segment on $1M spent on road signs (as in “this project cost $XXX”). The graphic on the report had something like “$1M spent, jobs 0”. Only problem, did the signs grow on trees? To make metal road signs you have to buy them from a sign company which has to use workers to actually make them. Trying to measure which job at a sign company was created is no doubt impossible since I’m sure it wasn’t a single sign company that printed all signs for all road projects, but dozens or hundreds of companies that got the work as it was subcontracted out. To claim it was zero is a huge stretch IMO.

  32. Boonton,

    You’re certainly correct that tax cuts are more efficient method of stimulus. Also about the “danger” that such money could be saved rather than spent, but in reality, that’s not been the trend of the American consumer, and it can’t be the trend at the lower economic levels.

    Still, a tax cut can be efficiently used to stimulate spending. The reduction in Social Security did put more money back in consumers pockets, but something like a sales tax holiday (I know, it’s a state tax) is even more effective at encouraging spending, especially for large costly items such as automobiles and appliances. A gift tax holiday could also do this, since it would encourage a transfer of wealth from older generations (which tend to save more than spend) to younger generations (which tend to spend more than save).

    So, it’s really how the tax cut is engineered that makes it economically advantageous, but in any case, as I mentioned above, it cuts down on the finagling room congress has to mess around with our taxpayer dollars.

  33. As for the road signs. It’s my understanding that most road signs are printed internally by a state’s various Dept of Transportation, which makes it more “busy work” than actualy economic incentivism; no (or very few) new people put to work, perhaps a little more overtime to create the increased number of signs. The crummy job-creation results of the Obama stimulus (many of them part-time) bear this out.

  34. It actually doesn’t really matter, work is work. If a sign shop (whether a private one or an internal one at some state DOT) gets work, then that’s fewer layoffs that have to happen even if they don’t hire a new person specifically for that particular sign. As you can see, though, if you insist on trying to count something like ‘jobs created’ you end up having a very, very rough time. (BTW, if the signs were all printed by DOT people who were on salary anyway then how would they cost $1M? They would essentially be free since all the work and materials were just hanging around anyway. In that case you might be right that job creation for that piece was 0, but then the cost estimate of $1M is horribly wrong, it is $0 (no doubt the cost estimate was probably created by getting a price on what it would take to print a single metal sign and then multiplying that by the # of signs rather than trying to track down an invoice or timesheet for every single sign).

    As for the ‘danger of increased savings’, the savings rate did indeed spike after 2007. Spending pulled back and debt repayment and consolidation increased. In that environment there is a danger that lots of tax cuts do end up just getting saved. I do think, however, the payroll tax cut and unemployment extensions for the most part put money in the hands of people who spent it almost as fast as it came in. Something like a 6 month payroll tax holiday would, IMO, have made an excellent addition to the stimulus package and would have helped foster a more robust recovery.

  35. Boonton,

    You last post is fraught with false premises.

    First of all, nothing is “Free;” someone, somewhere, somehow has payed for, is paying for, or will pay for those supplies just “hanging around.” Secondly, overtime does not put additional people to work, it just overworks the existing work force. It’s also a more profitable way to utilize labor than new hires because while an agency might payout more in wages, they do not pay out more in benefits. So overtime doesn’t affect the unemployment rate, but does contribute to more profitable companies by maximizing a workforce yet minimizing costs.

    Savings? Yes the savings rate grew, but the American populace, even with that increased rate, is nowhere near a savings rate that could be described as healthy or necessary, much less frugal and avaricious, so encouraging the savings rate is essentially a non-issue and just doesn’t factor in your argument.

    BTW, there was a payroll tax holiday which Obama demanded be rescinded starting in January 2013. So all around Obama’s stimulus packages were not simply the “Stimuli that Weren’t”, they were the “Stimuli that Never Could Be.”

  36. All these policy debates are a number of raw numbers most people will tune out.

    What will be important is not policy but whether the leader decides slavery is necessary or not. If you don’t agree with them, they will enslave you.

    Whether you go thumbs up or down on that idea is what separates the various camps in America, not the policy differences.

  37. T

    First of all, nothing is “Free;” someone, somewhere, somehow has payed for, is paying for, or will pay for those supplies just “hanging around.”

    You speculated that the signs were created by DOT departments who were already there. In that case they are ‘free’. Imagine, you already have a sign maker, every day you pay him to come in but there are no signs for him to make. One day you ask him to make 20 signs for various road projects and he does. It is indeed ‘free’ since you were paying him anyway. You said there was little or no overtime and no one was hired just to make the signs. In that case the estimate of $1M for the signs is simply wrong.

    Now if it requires overtime to make the signs, then they aren’t free. But hours worked is indeed part of employment and anything that increases hours worked increases employment. The unemployment rate is just one ‘top down’ metric. And increase in overtime hours reduces layoffs and increases the possibility of new hires.

    “BTW, there was a payroll tax holiday which Obama demanded be rescinded starting in January 2013.”

    Demanded rescinded? I don’t think so, the desire was to continue the holiday beyond but he couldn’t get that through Congress. By ‘tax holiday’, though, I mean something a bit more dramatic like eliminating all payroll taxes for 6 months or tying payroll taxes to the unemployment rate.

  38. Boonton,

    One can only have a rational discussion with someone whose argument is based upon reason. Your “logic’ only appears logical because it springs from the false premises to which you tenaciously cling.

    I repeat: Nothing is free. For progressives to insist that something is free, and then consistently argue that the economy is a zero-sum game is the height of hypocrisy and irrationality.

  39. T

    Let’s say you pay your kid to clean your house every day. But he never does anything….so you pay him for nothing.

    One day you get sick of this and say to him “clean the house today or else!”. He does.

    Before you had an uncleaned house. Today you have a clean house. You got the clean house for free because you essentially tapped an idle resource (your deadbeat kid).

    You alleged that sign makers were sitting around on payroll doing nothing. When the order came in to make signs they made them hence no additional hours were worked by anything to make the signs. Well that means the signs were free (ok I suppose the metal and wear and tear on the sign making machines had some marginal cost but let’s ignore that for now).

    The only way this isn’t true is if you’re operating on the premise that the economy is always at full employment and periods of unemployment aren’t recessions but just workers opting to choose leisure over work.

  40. You simply do not know whereof you speak.

    “You got the clean house for free . . . .”

    Free? You are providing that child with room and board, clothing, pizza money, movie money, perhaps paying for tuition, etc.. If you don’t think it costs money to raise a child, you live in an alternate universe. (You implicitly admit to this cost by referring to the child as “your deadbeat kid.”)

    Yet again, faulty logic from a faulty premise.

    NOTHING IS FREE.

  41. Oh, and Boonton,

    You write: “. . . you pay your kid to clean your house every day. But he never does anything . . . .”

    So you threaten him to clean the house—what happened to all those payments for which you received nothing? We call them COSTS. The “free” service of the clean house is, at the very least, the cost of all the past payments you made which resulted in no service whatsoever.

    This directly evinces my charge above. You contradict yourself. You know not whereof you speak.

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