Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

"No matter how vast your knowledge or how modest, it is your own mind that has to acquire it." Ayn Rand

05 August 2009

Mandated Employer-Provided Health Insurance Discrimination

One of the provisions of the mandated employer-provided health insurance plans being considered by the Democrat Congress that I have been wondering about for some time pertains to the issue of how that mandate would treat individual versus family coverage requirements. My company pays 100% of the cost of the individual plan for everyone, but pays no more for family plans. For whatever reason, we historically have had few employees who needed family coverage and it did not seem fair to discriminate in their favor by providing them with benefits much higher than those for employees who either did not require coverage due to having a spouse covering that or who only needed individual coverage.

The National Federation of Independent Business (NFIB) says that employers must offer "qualified" individual and family coverage. They must also make a premium contribution of at least 72.5% for individual coverage and 65% for family coverage.

What does this mean in terms of compensation for the employee without the need to insure a family? In 2007, the average individual coverage plan cost was $4,708 a year. The average family plan coverage cost was $12,680 per year. 72.5% of $4,708 is $3,413.30, while 65% of $12,680 is $8242.00. The employee with a need for family coverage must be given $4,828.70 per year more than the employee without a need for family coverage.

Now, I love families, but not everyone has a family. Sometimes this is by choice and sometimes it is more a matter of misfortune. But whatever the cause, it is not necessarily the case that an employee with a family is worth more to a business than one without a family. This being the case, what business is it of the government to require a business to treat an employee with a family as though they are more valuable to the business? Nonetheless, the government is going to require that small businesses subsidize families.

This government mandate invites additional discrimination against hiring people with families or who might be likely to soon have a family. No doubt, the government will have anti-family discrimination laws on the books and police to visit small businesses to see if they have the expected ratio of employees with families to those without families.

Note also that whether the increased business expense is that of an individual plan or a family plan, the fixed price addition compared to pay is larger for lower paid employees. There will be an increased rate of job loss for low-paid employees. Companies will have a greater incentive to replace lower paid employees with machines and technology, or to outsource their jobs to India and China. This effect will be large for lower paid employees covered by individual plans, but it will be much larger for those covered by family plans. So, discrimination against lower paid employees will be particularly great for those with families.

The plan my company has has provisions for single coverage, for coverage of only a spouse, for coverage of a parent and one child, and for coverage of a family. Thus, there are two offerings of intermediate expense which employees can choose. Will the government be forcing anyone with the need to cover only one additional person, a spouse or a child, to buy a much more expensive family plan? If so, then both such an individual and his employer will be required to subsidize families with multiple children or with a husband and wife and a child. Is this fair?

Remember the old welfare policies such as Aid for Dependent-Mothers that caused many poor women to chase husbands away and raise children as single parents on welfare? Well, this mandated health insurance plan requirement that family plan premiums must be subsidized by small businesses may have something of a similar effect, except that employees will be in the position of fearing to have families at all since it might result in them losing their jobs!

2 comments:

Michael Mignogna said...

Perhaps you'll like this short story: http://fr-ls.blogspot.com/2009/08/health-care-lemonade-stand-short-story.html

Charles R. Anderson, Ph.D. said...

Michael,

I liked the story/analogy. HR 3200, to take a particular example of a bill being considered by Congress for health care "reform," will subsidize the government "qualified" insurance plans. It will take the subsidy money from companies not offering "qualified plans", from penalties levied against individuals without "qualified" health insurance plans, by monopoly price fixing in favor of government "qualified" plans, and from every taxpayer. Medicaid will be enlarged, which will result in further shortchanging hospitals and doctors, so that they will have to charge still more than they now do to any government independent plans, hastening their demise, with the help of the shortchanging "qualified" government insurance plans. In effect, the private insurance plans are already forced to be charitable organizations and this role will be greatly expanded until they die. If that were not enough, most large company insurance plans have to become "qualified" within 5 years.

There may be some room for those with enough money to continue to pay the very high rates for a government independent plan, but the Democrats mostly want equality in health care, so they will close off this option in time. Besides, only those whose plan never changes can keep an independent insurance plan, so the inevitable need for changes will eliminate this option in time.

This health care reform bill actually eliminates health insurance. Because people with pre-existing health problems will have to be added to the payment covered pool of people, it is no more insurance than a home fire insurance plan would be if it were required to pay out for every burned down home in the U.S. even though the homeowners had never previously paid any insurance premiums. The health insurance reform of HR 3200 is a huge fraud. It actually creates a system with many similarities to that great Ponzi scheme we call Social Security, though Social Security is a more transparent fraud than that of HR 3200.