Employers Required to Pay 8% of Payroll as New Health Insurance Tax

The Obama and Democrat health insurance bills being considered in the Congress will put a new 8% payroll tax on companies which do not provide a health insurance plan meeting the as yet unannounced requirements of the federal government. There is good reason to believe that lobbyists for acupuncture, psychiatric, marriage counseling, vision and dental care, and many other services not always covered by health insurance policies will be added as requirements. The plan my company presently offers costs us $379 per employee per month or $4,548 per year. To meet the government requirements, which I am sure will escalate in time as the lobbyists work on the politicians with offers of campaign support, the cost of the company health insurance benefit will surely go up.

But, let us do a simple calculation to determine what average annual salary offered by a company will cause it to cost less to pay the 8% tax penalty than to offer a health insurance plan costing $379 per month. We simply divide $4,548 by 0.08 and get $56,850/yr. So, already, even before the cost of a reasonable private health insurance plan is increased by new government requirements, any company with an average employee salary of less than $56,850/yr. is better off dropping the company insurance plan and paying the penalty tax. Since the median male full-time employee income is well under this figure and the workers of many industries will be well below the median salary, there are clearly many companies which will choose to drop their health insurance plans for employees.

Note something else here. The rationale offered by the government for a government-run health insurance option and for forcing employers to either provide health insurance coverage themselves or pay a new anti-employment tax, was to help poor Americans who cannot afford health insurance. Remember that mythical figure of 47 million uninsured Americans, at least 10.2 million of whom are illegal aliens and 17.8 million of whom had family incomes greater than $50,000 per year, so they could afford health insurance if it were among their priorities. Then about one-third of those eligible for Medicaid have never applied for it and many others eligible for VA medical benefits have never applied for those benefits. But anyway, it is precisely those businesses and industries whose employees are compensated mostly at median and below wages and salaries that will stop offering health insurance for their employees!

So, the plan is to siphon off lower paid workers rapidly into the government health insurance option plan. These plans will save costs by underpaying doctors and hospitals just as Medicare and Medicaid presently do. The amount of underpayment will increase in time as the costs of subsidizing the government health insurance plan will increase and taxpayers rebel more and more against further tax increases. The doctors and hospitals will pass off more and more of the costs under the government health insurance plans to the smaller and smaller number of people covered by private health insurance. Early on, these plans will be offered more and more only to higher earners due to the 8% calculation effect, but then the costs of these private plans will skyrocket as doctors and hospitals turn to a smaller pool of people in private plans to cover their deficits. Soon, all such private plans will be abandoned.

At some point, the wealthy people left in them will realize that they are better off going on the government plan and then flying to an off-shore medical services haven when they need real medical care. Much as tax havens exist today in such places as small island nations, there will be Mayo Clinics and Cleveland Clinics in such Caribbean islands for the medical needs of the wealthy and the desperate.

But, most Americans will be stuck with a government run communist socialist medical system. I wish you all the best of luck on your health, because should it come into jeopardy down the road, many more of you will be goners. And do not forget that men and women of intelligence and good judgment are rarely going to want to work in a field in which they are micromanaged by government bureaucrats and smothered in very boring paperwork. The people who will stay in the health care industry and those who will go into it in the future will be difficult to differentiate from Soviet and Cuban doctors. Yes, we will all be playing Russian roulette on a regular basis. Every time the trigger is squeezed, give up your thanks to Obama and the Democrats.