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  • Tim Lee / The (Raleigh) News & Observer

  • Daniel Weintraub

The Conversation: Take employers out of insurance business

Published: Sunday, Jul. 14, 2013 - 12:00 am | Page 1E

JOIN THE CONVERSATION: Should the mandate on employers to provide health coverage for workers be eliminated from the Affordable Care Act? Add your comment below. To write a letter, go to sacbee.com/sendletter. Or comment on our Facebook page at facebook.com/sacramentobee.

President Barack Obama's recent decision to delay enforcement of penalties on employers who don't provide health insurance for their workers is a move that Democrats and Republicans should applaud and voters should welcome as a step in the right direction.

The administration last month announced that it would postpone penalties of $2,000 per employee on companies with 50 or more workers who don't offer affordable insurance for their workforce. The official reason was that implementing the system on schedule Jan. 1 was going to be too complex for many employers to handle. The unofficial reason might be that Obama's advisers feared a major pushback from employers in a big congressional election year.

Obama says the delay will be for only one year, and critics say he doesn't have the power to postpone the fines without the approval of Congress. If not, Congress should give him that power, because this big change in federal health reform would probably improve the nation's health insurance system in the long run. And it would almost certainly be an improvement over the original health reform law Obama signed in 2010.

Health reform without a mandate on employers to provide coverage might sound unfair at first. But it's not. And it's an idea that should have bipartisan appeal.

Many Democrats favor a government-run health system like the one in Canada. Many Republicans say individuals should have more responsibility for their own health care. A system that cuts employers out of the equation turns out to be the perfect middle ground between these two ideological poles.

Remember that our employer-based system is an accident of history. During World War II, government controls on wages prevented employers from raising pay to attract and retain workers. Instead, more firms began offering health insurance benefits as an enticement. The fact that these benefits were tax-free, unlike regular income, added to their appeal. From that fluke our system evolved into one in which workers expected employers to provide health insurance as part of the job.

But that doesn't make it smart. For one thing, every employer is in business to make a product or offer a service, and managing health benefits distracts from that goal. Even if it didn't, having employers as the middleman between patients and their health providers – doctors, hospitals and the like – is not a good idea. It takes power – and responsibility – away from the patients and gives it to a third party, distorting a relationship that should be highly personal. Economists have said for years that this system also adds to costs because it makes health care seem much cheaper to consumers than it really is.

Recognizing this dysfunction, Democratic U.S. Sen. Ron Wyden of Oregon and Republican Rep. Paul Ryan of Wisconsin introduced legislation in 2011 – a year before Ryan appeared on the Republican presidential ticket with Mitt Romney – designed to ease employers out of the health care game.

Their goal was to create a system in which individuals – not employers – controlled the purse strings on health care. Employees in companies with 100 or fewer workers would have been allowed to take their employer's health care contribution and buy coverage in one of the new insurance exchanges created by the Affordable Care Act. If they found coverage that was cheaper than their employer was buying, they would get to keep the difference – as taxable income.

Democrats should like this idea because it creates an alternative system of managed competition in which individuals buy coverage from private insurers whose practices are regulated by the government. Those who can't afford coverage get subsidies. No one can be denied insurance based on pre-existing health conditions, or cut off from benefits if their medical bills get too high. And no one would be dependent on an employer for their insurance.

Republicans should like this idea because it preserves the private health care system and gives more power, and responsibility, to individuals. It gets employers out of a task they never should have taken on in the first place.

The Wyden-Ryan plan included a sweetener, a requirement that employers who provide health insurance now continue to give that money to their workers so that they could use it to buy their own coverage. It wasn't clear how the government was going to enforce such a mandate, but it really shouldn't matter.

Most workers may not realize it, but fringe benefits are really just wages in another form. Ending the fiction that they are two distinct forms of compensation would be healthy and more transparent. The bottom line is that every business still has to offer a compensation package – whether it be in cash or the equivalent – sufficient to attract and retain the workforce it needs. This is what every employer does now, and that wouldn't change if they stopped providing health insurance.

But if employers didn't pay for insurance, who would? Individuals would, just as they do today by forgoing higher wages. And for those who couldn't afford it, all taxpayers would chip in to pay for subsidies, just as they will under Obamacare. Requiring employers to manage health care is no more rational than mandating that they manage their workers' purchase of food, shelter or clothing, all of which are more essential to life than health insurance.

With any luck, Obama's one-year respite for employers will demonstrate how a system empowering individuals would be superior to the current one or the one that Obamacare envisions. Unfortunately, however, the president will probably have to live up to his pledge to make lifting the employer mandate temporary.

Democrats will insist that he not "let employers off the hook," even though most of them know that employers would be forced by the labor market to substitute higher pay for the insurance premiums they pay today. And Republicans seem committed to never doing anything to improve the Affordable Care Act, even if doing so would be consistent with their principles and supported by their constituents.

So we are probably stuck with a flawed, employer-based system, one that is worse than an alternative that both parties, if they were starting from scratch, would be more likely to support.

Most workers may not realize it, but fringe benefits are really just wages in another form. Ending the fiction that they are two distinct forms of compensation would be healthy and more transparent. Daniel Weintraub, who has covered California public policy for more than 25 years, is the editor of the California Health Report at www.healthycal.org.

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Daniel Weintraub



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