Why Would Anyone Not?

Why Would Anyone Not? November 9, 2011

I can’t understand any business not opting for this, but so far only about 33% have said they’d drop insurance coverage when the new National Insurance (Obamacare) begins … and this, my friend, will be the moment when America becomes a national health care country.

Three years before the new health care law takes full effect, a survey of employers has found 30 percent of them are thinking about dropping coverage, in part because most employees will have an alternative — government-subsidized insurance exchanges.

McKinsey & Company commissioned a survey of 1,329 private sector employers in February and found that three out of 10 respondents who said their companies offered employer-sponsored health insurance said they would “definitely” or “probably” drop coverage in the years following 2014, the year the Affordable Care Act takes full effect.

“The employer knows there’s no reason to provide private, expensive coverage if there’s free options available from the government,” said John Goodman, of the conservative National Center for Policy Analysis in Dallas.

Workers in the exchanges making all the way up to more than $90,000 in income would get generous federal subsidies. For lower-wage workers, the government would pay almost the entire cost of insurance.

“For a $12,000-dollar health insurance plan, if you make about $30,000 a year, the government pays about $11,000 of the premium,” Goodman said….

“The employer knows there’s no reason to provide private, expensive coverage if there’s free options available from the government,” said John Goodman, of the conservative National Center for Policy Analysis in Dallas.

Workers in the exchanges making all the way up to more than $90,000 in income would get generous federal subsidies. For lower-wage workers, the government would pay almost the entire cost of insurance.

“For a $12,000-dollar health insurance plan, if you make about $30,000 a year, the government pays about $11,000 of the premium,” Goodman said.

Here come the taxes.

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What Are Your Thoughts?leave a comment
  • dtbubba

    The reason we are not on board with the healthcare plan is because it doesn’t take care of the biggest need. There is already medicare and medicaid for the most vulnerable in our society. And if one responds with “they are broken” I ask “then tell me how the government will handle 350 million people in their healthcare plan. . . . But they didn’t take care of the incredible price americans pay for healthcare. It is ridiculous what a piece of plastic costs when it has “medical device” attached to its purpose. So the government is going to take over paying these enormous medical prices that for prescriptions and medical equipment when that is the root cause.

    Also, with many friends in the medical profession, I know the government is even paying their bills. So what will that mean when they are paying all of the medical bills in america? Our medical professionals will not have enough money to stay open, employ quality workers or maintain the cleanliness that is necessary for proper medical work. This plan is just bad, bad, bad. Our government does not have a proven track record for reliability in the area of medical provisions. Look at the VA Hospitals, Mental Health hospitals, and so on. We regularly hear how poorly the facilities are maintained which leaves poor conditions for patients to receive treatment and healing time.

    We also see what the government does when they have a surplus of cash reserves (i.e. social security and pensions). So the minute they get cash reserves built up they will “borrow” money for another purpose. At least private industry has accountability and can be brought to justice if they don’t meet up to standards. it is a lot more difficult to fight the government.

    That is why we are not buying into this program.

  • Robert Martin

    One word stands out there…”free”…um…to quote Heinlein, TANSTAAFL…somewhere, somehow, even the recipients of this “free” option will end up paying for it in increased costs…

  • JBL

    And don’t forget…. here comes the debt and the inflation to pay for the debt. We will all of us see higher prices for health care and a precipitous drop in quality, rationing, and ultimately a collapse of the system. Yeah socialism!

  • Joe Canner

    Funny, all we ever hear from the GOP is that “Obamacare” is a nuisance and is stifling small business.

  • ChrisB

    Given the tax breaks that are built into the current system for employers and the desires to not antagonize employees (by shoving them off into a crappy system) and not encourage the tax explosion that would certainly follow a national health system, I don’t think it’s all that surprising.

  • Ken

    Whenever it says “the government pays”… it means someone the government stole it from pays.

    Since we live in a lobbyistocracy where the government is influenced more by money than principle, those least able to afford lobbyists will pay.

    And because sinners in the grip of their own self destruction don’t care about their health, they’ll still get sick and die.

  • RobS

    I’ve seen some evidence of rationing for Medicaid (older & poor) people already. There is a real chance that as the ‘Baby Boomers’ move to retire, that will become more and more reality.

    Certainly some challenging ethical and financial events coming. Government has rarely used love or fiscal discipline in any of their methods, so it’s hard to imagine it would start now. Bureaucracy and vote-buying is more likely I fear.

  • Richard

    I love all the fear-mongering about taxes and socialism. I don’t mind paying higher taxes if I am provided a quality service in return. And we’ve been socialist since we started using national resources to deal with national problems. We just have a free market economy to go with it.

    This just means that healthcare coverage has become as important to us as public schools, national parks, and a military to guard the empire. That’ the only change here.

  • TJJ

    Hopefully, come a year from january, this will all, or mostly all, go away, and this discussion will be a moot point.

  • DRT

    I bet most of those businesses don’t understand the situation yet.

  • Albion

    Here come the taxes.

    So long as they’re not on job creators but on the people too lazy to do real work, I’m cool with that. Keep the meme alive!

  • Fish

    Single-payer health care is the gold standard in terms of efficiency and effectiveness, proven repeatedly throughout the world, but the road to get there will be bumpy.

    Still, at some point, our nation will realize that paying 30% off the top of our health care costs to insurance companies for the privilege of rationing our care is absurd. As long as we have that drain on the system, sucking off our health care costs to be spent on lobbying, marketing, million-dollar bonuses and corporate earnings, we’ll remain a second-class nation in terms of health care.

    It is a shame that American Exceptionalism provides a rationale to not only ignore our poor performance but also reject better systems because they weren’t invented here.

  • DLS

    This example provides further ammunition to those who believed back during the debate on this legislation that this was all designed to be implemented and fail (or be hugely unpopular) so that a single-payer system was the only remaining alternative.

    Hopefully this can be ruled unconstitutional by the Supreme Court or it can be repealed after next year’s election. If not, it will be too late.

  • Kyle J

    I believe there are penalties for employers with more than 50 employees who don’t provide health coverage to try to prevent this–although I don’t have the exact details.

    Long-term, we’d actually be better off moving health insurance away being employer based. So you’d either get the benefits of market competition (in exchanges as the limited population will be going to under the new law) or the efficiencies of a single-payer system. Ironically, many Republicans have signed on to this concept in the past (Wyden-Bennett, McCain’s proposal to eliminate tax exemption, etc.), but it would be much more disruptive to the status quo than anything in “Obamacare.”

  • Dan

    Kyle @13: yes, there are penalties for those employers with 50+ employees, unless, of course they have received waivers from the Administration.

    I wonder why some large companies like McDonalds, Pearson Candy Company, Bricklayers Local 1 of MD, VA and DC, the United Food and Commercial Workers Union in Mount Laurel, New Jersey, the Indiana Teamsters Health Benefits Fund, Service Employees International Union, etc. get waivers.

  • From The Week
    http://theweek.com/article/index/218567/will-employers-drop-health-care-coverage-in-2014

    “How much money could companies save by dropping coverage?
    The average annual premium for employer-sponsored family health coverage was $13,770 per worker last year, and companies paid most of it, according to the Kaiser Family Foundation and Health Research and Educational Trust. Of course, if companies stop offering coverage, they can’t just pocket that cash. Under the Affordable Care Act, businesses with more than 50 employees will face penalties of up to $3,000 per worker if they don’t offer health benefits.

    Is this the beginning of the end for employer-sponsored insurance?
    Some experts do predict a dramatic domino effect. “If one employer does it, others likely will follow,” said Paul Fronstin, director with the Employee Benefit Research Institute, as quoted by the Associated Press. But threatening to drop coverage and doing so are two different things, says former insurance executive Bob Laszewski. Companies might reconsider when they factor in the fines and tax headaches they’ll incur, plus the extra pay they’ll have to offer to prevent employees from walking out the door en masse. “Dropping coverage is going to be very difficult for these (companies) to do,” says Laszewski.”

    Also, from Forbes.com last Jan
    http://www.forbes.com/sites/rickungar/2011/01/06/more-small-businesses-offering-health-care-to-employees-thanks-to-obamacare/

    “The first statistics are coming in and, to the surprise of a great many, Obamacare might just be working to bring health care to working Americans precisely as promised. The major health insurance companies around the country are reporting a significant increase in small businesses offering health care benefits to their employees. Why?Because the tax cut created in the new health care reform law providing small businesses with an incentive to give health benefits to employees is working.”

  • ChrisB

    “I don’t mind paying higher taxes if I am provided a quality service in return.”

    Who ever said you’d get a quality service?

    It kills me that, as Europe is trying to move away from socialism, we’re trying hard to move toward it.

  • Kyle J

    @Dan

    It’s an imperfect law built through an imperfect process to fit on top of an imperfect existing system.

    What is the alternative that opponents of the law have in mind? Do they think the status quo is working? Do they want to blow up the whole thing and start over? If so, what would they replace it with? Do people think a completely free market system really works in health care? Where is the profit in providing health insurance coverage to people with pre-existing conditions? Should the government get out of the health care market altogether–eliminate Medicare/Medicaid, tell employers and health insurance companies they can discriminate against employees with chronic health conditions/risks?

    This whole debate is so stale because conservatives refuse to put a credible alternative on the table.

  • JBL

    @Richard(#7)

    You are right – healthcare has been elevated to the level of corruption of those other things you listed – schooling, national parks, and the military. If only people can get past the silly distraction of party politics. The establishment politicians are one party. Democrats and Republicans are just two ways to say the same thing. The Obamacare stuff is just away for politicians to buy campaign donations from corporations and buy votes from constituents.

  • JS

    Again that same story…
    The insurance companies are being profitable by taking care of the healthy workers and their families, while the government deals with the vulnerables, which requires more care and, of course, will never be profitable.
    Again, our country is choosing the worst of socialism (socialization of losses, risks) combined with perverted capitalism (privatization of profits for a minority): best of capitalism for the top 1 % and worst of socialism for the other 99 %.
    Do we prefer to insure all the population with a (“lazy”) minority taking advantage of the system or do we prefer to insure parts of the population with a minority taking advantage of the system? There is no perfect system, only some that might be less worse than others.
    And I don’t think that Europe is trying to move away from socialism, it is just trying to deal with the aging of the baby-boomers and with a bad economy.
    At the end, we have the same life expectancy as people in Cuba 😉

  • Robert A

    I think of a host of good reasons not to go with socialized medicine.

    The first is the smile of everyone living in Britian under their system.

    The second is, that this isn’t going to be law anyways. Anyone who thinks that Congress will underfund and decimate this system is fooling themselves. There’s a reason Republicans were giddy about voting this into law after the Obama Administration agreed to push out the adoption date to 2014. They’re gonna destroy it when they win the White House and Senate back…while not losing the House.

    Third, because we love our employees too much to force them into a barebones, government controlled mockery of a public service.

    Just being honest.

  • Dan

    Kyle @17, any ideas why large companies opt out?

    If this is such a great idea for everyone then why do you suppose everyone does not want to join in? Is it really that McDonalds and others are all run by those evil conservatives?

    The conversation might be stale to you because as time goes on and we start to understand what the Administration is pushing and more and more disagree with it. Good intentions are not enough.

  • Kenny Johnson

    I wonder if all those crying “Socialism” send their children to private schools?

  • @Kyle and @Dan,

    My understanding is that most of the companies trying to opt out have a large number of employees that are fairly low pay scales and do not now have insurance. So they are opting out because it is cheaper to pay the extra than to establish new health care options.

    Most large companies with relatively high salary workers already have health care systems and their employees would view it as a loss of income for the company to stop offering employer based health care. While the low income companies have nothing for the employees to lose. Different styles of compensation, different economics for why the companies will or will not opt out.

  • Dave

    The national health care mandate is a very serious mistake. It will bankrupt us (we are already there, this will take us much further down the path) and as a small business owner myself, I guarantee you the amount of taxes will skyrocket, which in turn will raise the prices of goods and services..well you get the point.

  • “government pays,” “generous federal subsidies,” “free,” “free,” “free,” etc.

    In the immortal words of Inigo Montoya to Vizzini, “You keep using that word. I don’t think it means what you think it means.”

    All I can say is, “Inconceivable.”

  • Kenny Johnson

    Dave,

    Did universal public education bankrupt us?

  • DLS

    “Did universal public education bankrupt us?

    – First and most importantly, we don’t have universal public education from cradle to grave. Public education ends when a person has lived roughly 1/4th of their life and doesn’t include the most expensive part. Second, yes, public education is extremely expensive. Third, public education is unquestionably worse than the private alternative. And fourth, public education is still a state and local issue.

  • Robin

    “Did universal public education bankrupt us?”

    I know I’m a little late to this conversation, so maybe I’m just talking to myself, but universal public education, combined with federal Medicaid mandates have most certainly “bankrupted us” to the extent that we are bankrupt.

    In Kentucky right now, at the state level, those 2 programs (just 2, out of the thousands of programs offered by the state) comprise 58% of all general fund appropriations. Think about everything that the general fund of a state government has to accomplish…think about the fact that we have faced budget shortfalls in the hundreds of millions of dollars in recent years…and then think about the fact that those two programs tkae in 58 cents of every tax dollar that comes into the state. 45 cents to education and 13 cents to Medicaid. And that doesn’t even count post-secondary education and money that schools get from lottery revenues. It also doesn’t count for the fact that the vast majority of local property taxes go to fund education.

    As I said, we have had to cut 100’s of millions of dollars in KY in the past 3 years, but because of federal requirements, and because of the power of the teacher’s unions here in Kentucky, we have been unable to cut the budgets of the Department of Education or Medicaid. The result is that 100% of the cuts have been borne by the 42% of the budget that isn’t education or Medicaid. Instead of having small budget cuts across the board, some departments have faced cuts of 40% and 50%, while Medicaid and Education have been held harmless.

    We might not be bankrupt, but I would say that a large majority of the current budgetary pressure states are facing is from these two programs, with the coming budgetary pressure due to pension shortfalls quickly approaching.

  • Robert A

    It is erroneous to equate health care with education.

    The two fields are markedly different. As it has been wisely mentioned we don’t have “universal education” that is similar to universal health care. We have preliminary education that is done once one hits 17/18. Health care is completely different.

    Also, I don’t think anyone really wants to use the public education system in the US as a model of anything good. And yes, my children go to private school.

  • Kyle J

    @Dan

    Large companies opt out because of the costs. The federal government has gone along with it (allowing them to offer very minimal coverage instead of true coverage required under the law) because it wants to avoid large short-term disruptions to the health insurance market (which we will eventually need, one way or the other).

    Again, what is your alternative? Do you want to stick with the status quo? Or if there a plan out there you like?

  • Fish

    One big reason we trail most developed countries in the creation of jobs by small business is health insurance. Anyone who would walk away from their company-paid health insurance to go it alone is crazy. It’s a primary reason I want to immigrate to Canada before launching mine.

    Our health care system costs us in many ways besides financially. It is crippling the development of new jobs — and hurting us morally. We have surrendered to the idea that a person’s life is worth the amount of profit they represent and made an idol of the free market, allowing it to be the literal voice of God.

  • DRT

    Fish#32, great. One side of the political debate feels that healthcare stops small business. That is very wrong.

    I threw it all in prior to the financial meltdown (brilliant timing) and started a business. Healthcare is a constant issue. One of the ways I look at it is that it is a form of leverage just like debt. In good times you can buy it and the costs don’t go up. In bad times the cost does not go down, it accentuates the swings. Very tough for small business.

  • DRT, maybe I am different. But I started my non-profit knowing that my wife had a solid government job with good insurance. Had I been reliant on my own income for insurance I would not have struck out on my own. I would have been paying as much for insurance as I do for my salary, probably more.

  • Rich

    Well, if you already have insurance and you’re able to manage the costs, then I would think that you would be inclined to take a wait-and-see approach unless the savings were substantial.

    Plus, the subsidies don’t seem to be much for many middle-class americans. Suppose you make $60k/yr, your insurance costs $1k/yr to you, and $12k/yr to your employer (that seems pretty common). If you are single the cutoff is something like $40k for any subsidy at all, so you’ll get zero in savings and end up paying the whole $13k – hardly “free.” If you’re closer to the poverty level I imagine the new plan will work well, but the subsidies aren’t nearly enough for employees who have an employer kicking in $10k/yr or more.

    Even if it were closer to break-even most people are going to stick with what they understand. If the new plans turn out to have good coverage and no horror stories of long wait times or declined procedures considered (by somebody) useful, then chances are people may switch. If there are lots of horror stories then people will be happy that they didn’t switch.

  • Joanie

    I really like reading this blog and what Dr. McKnight has to say on theology, but he loses me sometimes when he comments on politics. I work in policy, so I have a different perspective on these issues, and I feel Dr. McKnight sometimes comes off as a bit naive when he tries to delve into these complex issues. The subsidies in this law are incredibly complicated, and using the exchanges is an improvement over the current individual market, but I would vastly prefer that my employer provide my health benefits. And that’s exactly the point. In order to get good employees, businesses will offer health benefits because good employees want them. It is how they will get the best employees. All employers would drop health insurance if they could still hire the same caliber of employees, but because they cannot, they continue to offer it so they can attract good employees. The market drives this issue.

    I know this blog belongs to Dr. McKnight, and he can talk about whatever he likes. I just think that when he delves into issues he is not an expert in, it weakens the blog overall.