Ladas wrote:
Except the "plan" in place, if that was the goal there RD, does not actually support that move, since all the company is doing is trading the tax paid for health care for a penalty paid for not supplying health care. The worker receives nothing, with the money going to government coffers under either scenario.
Ok, just did some quick reading on this, and according to
this article, the size of the penalty is so low compared to the savings from canceling an employer health plan, that there's little doubt many employers will come out way ahead by canceling their plans and eating the penalty:
The New Yorker wrote:
Take a medium-sized firm that employs a hundred people earning $40,000 each—a private security firm based in Atlanta, say—and currently offers them health-care insurance worth $10,000 a year, of which the employees pay $2,500. This employer’s annual health-care costs are $750,000 (a hundred times $7,500). In the reformed system, the firm’s workers, if they didn’t have insurance, would be eligible for generous subsidies to buy private insurance. For example, a married forty-year-old security guard whose wife stayed home to raise two kids could enroll in a non-group plan for less than $1,400 a year, according to the Kaiser Health Reform Subsidy Calculator. (The subsidy from the government would be $8,058.)
In a situation like this, the firm has a strong financial incentive to junk its group coverage and dump its workers onto the taxpayer-subsidized plan. Under the new law, firms with more than fifty workers that don’t offer coverage would have to pay an annual fine of $2,000 for every worker they employ, excepting the first thirty. In this case, the security firm would incur a fine of $140,000 (seventy times two), but it would save $610,000 a year on health-care costs. If you owned this firm, what would you do? Unless you are unusually public spirited, you would take advantage of the free money that the government is giving out. Since your employees would see their own health-care contributions fall by more than $1,100 a year, or almost half, they would be unlikely to complain. And even if they did, you would be saving so much money you afford to buy their agreement with a pay raise of, say, $2,000 a year, and still come out well ahead.
Of that $610,000 savings to the company, at least some of it will eventually end up going to wages, and various liberal pundits argue that this is all an intended consequence of reform (which is what I said). Of course, if you read the whole article, you'll see that this analysis leads the author to conclude that this doesn't exactly square with the rhetoric coming from the Dems in Congress and the Administration about keeping costs under $1 trillion and people being able to keep their current insurance plans if they want:
The New Yorker wrote:
The designers of health-care reform and the C.B.O. are aware of this problem, but, in my view, they have greatly underestimated it....The C.B.O.’s analysis can’t be dismissed out of hand, but it is surely a best-case scenario....If economics has anything to say as a subject, it is that you can’t offer people or firms large financial rewards for doing something—in this case, dropping their group coverage—and not expect them to do it in large numbers. On this issue, I find myself in agreement with Tyler Cowen and other conservative economists. Over time, the “firewall” between the existing system of employer-provided group insurance and taxpayer-subsidized individual insurance is likely to break down, with more and more workers being shunted over to the public teat.
At that point, if it comes, politicians of both parties will be back close to where they began: searching for health-care reform that provides adequate coverage for all at a cost the country can afford. What would such a system look like? That is a topic for another post, but I don’t think it would look much like Romney-ObamaCare.
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