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Critical Condition

NRO’s health-care blog.

Employer-Based Health Benefits: The Death Spiral Is Nigh



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There can be little doubt that employers will move quickly to socialize the costs of health “reform” by dropping health benefits and sacrificing their employees to the new government-run health plan. The Baucus bill proposes to levy a fine of $1,900 on individuals who do not buy qualifying insurance, and maybe even send them to jail. Nor is it clear that employees will mind being dropped, as long as employers increase their cash wages by more than the amount of the fine.

Let’s presume that the government isn’t actually going to jail anyone for not buying health insurance. Considering the health-insurance “reforms” that will require insurers to cover anyone, regardless of pre-existing conditions, the rational course of action for anyone is to drop coverage, pay the fine, and then re-enrol in a health plan once you need medical care, which is what happened in Massachusetts. [Currently, the Health Insurance Portability & Accountability Act (HIPAA) of 1996 already requires insurers to cover pre-existing conditions, but the individual has to maintain continuous coverage, in order to prevent this obviously bad incentive.]

Anyway, we don’t have to rely on policy-wonks to arrive at this conclusion: Less than half of employers intend to continue health benefits if the cost of paying the fine is less than the cost of health benefits, according to Towers Perrin (p. 9, exhibit 13).

— John R. Graham is director of Health Care Studies at the Pacific Research Institute.



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