It never occurred to me before that this is an option. That sounds like a good idea.
I also wonder why health insurance should be allowed as an employee benefit. How does it make any sense to tie my access to healthcare with my employment status?
How a big part of the reason the US healthcare system sucks is just a weird fluke of history!
The NYT has a nice overview [1], the relevant passages below. Wikipedia’s coverage [2] is excellent as well.
“In 1942, with so many eligible workers diverted to military service, the nation was facing a severe labor shortage. Economists feared that businesses would keep raising salaries to compete for workers, and that inflation would spiral out of control as the country came out of the Depression. To prevent this, President Roosevelt signed Executive Order 9250, establishing the Office of Economic Stabilization.
This froze wages. Businesses were not allowed to raise pay to attract workers.
Businesses were smart, though, and instead they began to use benefits to compete. Specifically, to offer more, and more generous, health care insurance.
Then, in 1943, the Internal Revenue Service decided that employer-based health insurance should be exempt from taxation. This made it cheaper to get health insurance through a job than by other means.”
[1]https://www.nytimes.com/2017/09/05/upshot/the-real-reason-th...
[2] https://en.m.wikipedia.org/wiki/Health_insurance_in_the_Unit...
It's an excellent way of reducing worker mobility.
The reason often cited for employer-based coverage is that it avoids some self-selection problems, but that's a different and complex topic.
>> A company signing up lots of their employees doesn't increase the size of the pool -- it just adds an intermediary.
I'm not exactly sure what you mean by that. For large group insurance plans, rates are determined by the risk (calculated by the insurance provider, with certain legal restrictions) of your individual employees. If you have 100 employees and 10 of them get a chronic illness, your rates will go up. Similarly, an employer with older employees will have higher rates than an employer with younger employees. The pricing is per group (employer), not based on the entire pool of the insurance provider's customers.
For very large employers, I believe it's common to self-insure, i.e. make a deal with an insurance provider to provide care to your employees at the rates negotiated between the insurance provider and health care providers, but the employer just pays out the total cost of delivered care rather than premiums. Then you get into stop-loss insurance and other interesting complications.
Economically speaking a 20-something will have fewer responsibilities than say a 40-something with a family and children.
So many startups have been funded by 20-somethings having the ability to couch surf and live off their parents health insurance -- likely because they're the only ones that can afford the risk.
For 1, it's just completely insane that all medical expenses aren't automatically tax-deductible. It's silly that it's advantageous to have my employer pay $200 a month for my insurance plan rather than just pay me an extra $200 and let me use that on whatever plan I want.
For 2, that may be a little trickier politically. Group insurance gets more efficient the larger the group, assuming there's a mechanism to prevent adverse selection. So obviously, we want to increase group size. That was one of the claimed justifications for the individual mandate.
If you're paying for insurance with after-tax dollars, you can deduct it as long as you're a) itemizing, and b) have total medical + premium expenses >7.5% of AGI, but given that people who pay for insurance with pre-tax dollars get that benefit regardless of those criteria, it seems like it'd only be sane to relax the rules so that people paying with post-tax dollars get the same break.
The preponderance of a given condition is not a function of having insurance (though complications thereof can certainly be increased by NOT having insurance). And has already been factored in by actuaries into policy pricing.
The biggest issue is that we see health insurance AS insurance, not amortized healthcare costing.
> There has to be some way that the insurance company can make money on the odds.
That's the thing, they see an opportunity to increase profit.
A few comments on that, as someone who has worked in the industry of developing software for health insurance claims management and benefit processing:
1) insurers are incentivized to deny claims, often talking about how "unfair" it might be for "them" to have to pay for a treatment. The irony is that "they" are not paying for anything - the risk pool is. Those premiums were calculated based on actuarial assessment, plus insurer overhead calculated in. What they mean by "them" having to pay out is that we cut into their profits, as they don't refund money to risk pools if the entirety of the pool is not used - they keep it, in addition to the admin overhead.
2) insurers have been known to be outright unethical, if not illegal in denying claims. Some prurient examples: denying Heli EMS for car accident victims from the scene to a trauma center because of "lack of pre-approval" (sorry, as a paramedic I am not "hold[ing] for a nurse consult" as I call an insurer to decide whether they are going to deign to pay for this patient's transport, and retroactively canceling coverage for "failure to disclose a pre-existing condition" that was actually unknown at the time of disclosure, i.e. "You were seeing a physician for maladies X, Y and Z. You had not been diagnosed with anything at that point, but later were, and maladies X, Y and Z were symptomatic of that. Ergo, you had that condition at that time, though you did not have a formal diagnosis, and failed to disclose that you had it. Accordingly we are voiding your coverage for breach of contract".
It should be illegal to drop a person's coverage if a clear diagnosis was not made prior to an incident that required medical intervention and cemented a diagnosis on paper.
Not sure these are "prurient". You may mean salient.
Employers now document their insurance costs for each employee on their W-2 forms, in case you want to see how much yours is paying for you.
I work for a Fortune 500 and my daughter has probably cost the insurance $1m. No big deal rates didn’t even raise.
Before I worked for a contractor and we cost THEM a million bucks, and they had to get rid of the low deductible plan, and boost insurance rates by $50 per WEEK per employee. We single-handedly destroyed their risk pool from three months of NICU stay, making it so they could no longer offer affordable insurance. Rather than accept the new rates we got cheaper plans on the Marketplace. Unfortunately though those aren’t tax deductible but we still came out ahead.
It’d make far more sense to just have a marketplace for everyone and make the risk pool the entire US population, rather than let giant corps get good rates while small companies get devastated when an employee or their children get sick.
Was this a large group insurance plan (usually 50+ or 100+ employees depending on the state)? If it were a small group insurance plan I don't believe your utilization would increase the rates, since AFAIK all the small groups in one state/region and insurance provider are combined.
If the employer was large enough to have a large group insurance plan, but still fairly small, I suppose one person's utilization could noticeably increase rates at the next plan negotiation. I believe this is why some companies that are too big for small group insurance plans utilize "professional employer organizations" to participate in a larger risk pool.
WWII wage-price controls:
https://www.npr.org/templates/story/story.php?storyId=114045...
How does this make sense, though?
> "The war economy is an entirely different ballgame," Thomasson says. The government rationed goods even as factories ramped up production and needed to attract workers. Factory owners needed a way to lure employees. She explains that the owners turned to fringe benefits, offering more and more generous health plans.
Why is a healthy plan better for employers than paying cash and letting employees buy their own health care / insurance?
The 1943 IRS ruling that health insurance is tax free, and the legislature failing to correct that, is more of a problem. This blatant failure isn't an "accident", it's bad lawmaking that biases toward business, against people.
Wage-price controls prohibited that.
and letting employees buy their own health care / insurance?
Risk-pooling, information asymmetries, "shoe-leather" frictions (having to shop around, individually, for everyone), bargaining power.
Healthcare markets poorly.