Hacker News Reader

Comment by ygram | Hacker News Reader

I have never understood why health ensurance is handled by the employer in the US, why don't people buy private health insurance instead? It feels insane to put yourself in that kind of dependency on your employer.

View on HN

Around the Great Depression, in an effort to get control of inflation, the 1942 Stabilization Act was passed. Because employers could no longer attract new employees by offering higher pay, they started offering other things like health insurance. Since it was payed directly by the employer it wasn't taxable income and didn't fall under control of the Stabilization Act, and since then it just stuck.

Note: 1942 is the middle of ww2, not the great depression. The war effort dramatically reduced labor availability. (back of the napkin math says roughly 12% of the US population served in the military, disregarding the massive labor pool required to support the military industrial complex)

If I am not mistaken, WWII was a bigger driver for that legislation than the Great Depression.

If EMPLOYER pays you 10k and you want to buy a plan for 5k, you first have to pay taxes on the 10k, lets say 20%, so you have 8k - 5k = 3k left over.

The employer can just buy the 5k plan for you tax free, and pay you 5k instead. This means you have 4k left over after tax! This is because healthcare plans are not taxed if provided by the employer.

Incredibly retarded, yes, it is.

Employers also often get better pricing on insurance for their employees because the pool is less risky overall. Those buying health insurance on the private market are more likely to have health problems and need it. Lots of healthy, young employees with limited health problems at tech companies.

Why isn't this just tax deductible?

When McCain ran for President against Obama in 2008, there was talk about making employer provided health insurance taxable as a way to even this playing field. The idea was more employees would refuse employer coverage and buy their own for cheaper.

Then a lot more poor people could get insurance, not very 'merican.

Private health insurance can be extremely expensive, especially if you have a chronic illness, or are over age 40. I buy my own as a freelancer; the monthly premiums for even a basic plan are extortionate. There are government subsidies for lower income people, but many tech freelancers earn too much to qualify.

It started that way because it got around WWII-era wage caps and it remains advantageous because it gets paid for with pre-tax dollars. (Which isn't, I know, carved in stone. But that's the way it is atm.)

Employers cover a majority of the cost of insurance. In Boston, I pay maybe $70 every 2 weeks for health insurance, but on the private market I'd be paying 5-10x as much for worse coverage.

Do people ever try to negotiate higher salary instead of health endurance from employer and then have a private one instead?

A law called ERISA makes this unlikely. Companies must offer benefits like health insurance and retirement savings plans on the same terms to similarly situated employees.

I've never heard of that, it would cost you more than it would cost the employer since you first have to pay taxes on your income, and employers can often get better rates.

Most employers subsidize, in part or in whole, employee health insurance as a part of their benefits. Private health insurance is very expensive. [0]

[0]: https://www.ehealthinsurance.com/resources/individual-and-fa...

Private insurance can be thousands of dollars a month, so before Obamacare it was a pretty niche thing. It still kind of is, because for professional jobs the expectation is a massively subsidized health plan. Voluntarily paying an extra $1500/month for the independence of not relying on your employer is not a choice most people would make.

It is indeed a stupid system. Private insurance is very expensive compared to the premium you usually pay when you're covered by your employer's plan. Employers can negotiate better prices because they bring a pool of insured to the insurance carrier. An individual doesn't have the same leverage.

Reply on news.ycombinator.com