Massachusetts Employers Dropping Health Coverage, Berwick is Back, and a State that Outsources Everything
Massachusetts employers are dropping health coverage and sending employees to the exchange. Just as we predicted they would do.
A California city privatizes everything it does. Guess what? It works.
Re: Maywood, CA. Great article, I’m curious to see how the city moves forward; privatization has been more of a pipe dream in parts of Orange County, California, my home.
The newspaper article about Boston may have interesting anecdotes, but there was more rigorous study of the pay or play health care mandate in San Francisco, they found no evidence of employers dropping coverage.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1636648
I believe that the dropping of coverage is going to happen over time. After all, if the choice is to pay for a $15,000 family plan or pay a $2,000 fine this is a nobrainer. It may take employers a while to catch on, however.
Ken sez: ” choice is to pay for a $15,000 family plan or pay a $2,000 fine this is a nobrainer”
The current choice is pay $15,000 or pay nothing. The current situation is more of a no brainer.
artk, here is what you are missing. Today, if an employer “pays nothing” the employee gets nothing. But in the new system, the employee will qualify for free coverage under Medicaid (for families making up to about %30,000) or highly subsidized insurance in an exchange (at least if you have below average income).
Dumping employer plans is going to be a win-win for millions of employers and employees, even as it becomes a lose-lose for the taxpayers.
Human Resource executives often mistakenly believe that health coverage is a “general” cost of doing business — especially if you want to attract talented people. Economists (especially labor economists) see employee health plans not as a general business expect (like insurance for plant and equipment) but as a compensation expense. In other words, whether or not an employer provides health coverage is a function of how their workers want to be compensated. If the majority of workers at a firm want health coverage badly enough to forgo cash wages; and if their tax bracket is high enough that the tax exclusion is valuable to them, then employers tend to provide health coverage.
If, however, the worker can get a much bigger subsidy in the individual market (i.e. exchange), over time employers will begin dropping coverage, and paying worker higher cash wages. Workers will get highly subsidized coverage, which they purchase in the exchange. Thus, moderate-income workers will be much better off if their employer drops coverage, while their employer will be no worse off (and probably slightly better off). The real loser is taxpayers who will have to fund all the subsidized coverage sold through the exchange.