Liberals Want to Repeal & Replace Obamacare too… with Free Care

InsFormSmallI recently watched Senator Ted Cruz debate Bernie Sanders on the Future of the Affordable Care Act. Cruz was in top form, while Sanders was congenial but still deluded that we can all have free health care paid for with other peoples’ money. The audience was from all around the country and presumably stacked with invitees from both sides. The moderators would call on audience members to ask pointed questions to specific candidates.

I’ve written about one of the audiance participants for Town Hall in “Obamacare Is a Job-Killer: Here’s the Proof.” LaRonda Hunter is a hair salon entrepreneur form Forth Worth, Texas. She began buying Fantastic Sam’s family hair salon franchises about a dozen years ago. She now owns four salons but would like to open one or two more locations. Ms. Hunter explained her dilemma to Sanders. She employs something like 45 people and expansion would push her past the 49 worker threshold where Obamacare requires her to provide health coverage.

To his credit, Bernie Sanders did not back down and try to sugarcoat his response. He thinks an employer like Hunter has a moral obligation to buy each worker a health insurance policy, costing, say, $4,000. Of course doing so would wipe out her profits and ultimately put her out of business. That’s fine with Sanders; he considers not offering health coverage an unfair advantage that makes it harder for Ms. Hunter’s competitors to offer coverage. He was being honest, even though his response was naïve. Many of the women who work for Hunter are likely lower skilled/lower-paid workers, most of whom cannot afford to spend $4,000 on health coverage.

Health coverage through work is not merely a cost of doing business like Sanders’ thinks it should be. Health coverage is a non-cash portion of employee compensation. Absent Obamacare, Hunter would not care whether her workers would collectively trade $4,000 in health coverage for $4,000 in pre-tax wages. The problem is: her workers are not indifferent to whether she pays them less cash and buys them health insurance. They presumably would refuse to work for her. The large payroll processing firm ADP has noticed that about $45,000 per year is the threshold below which few workers take up employee health benefits.

The point Hunter should have made to Sanders is the decision to not have coverage is not her choice; it’s her workers’ collective choices. Because she wants to expand, Hunter would prefer her workers willingly enroll in coverage. But Hunter also knows if her workers refuse to (indirectly) pay for coverage by accepting lower take home pay, she would be stuck paying for it. Sanders fails to appreciate that while self-destructive benevolence may be common in Congress, it is less common in the real world where entrepreneurs have to meet payroll.

Another audience member who was a nursing student pregnant with her second child. She wanted to make sure any Republican replacement plan would not force her and her husband to pay for their own prenatal, labor and delivery charges. I don’t recall Senator Cruz’s answer, but he should have said she would be covered if she maintained continuous coverage. What he could not say is: why should the rest of us subsidize a $15,000 free medical benefit for her choices if she chooses not to maintain coverage?

Another audience member was a women with Multiple Sclerosis, who had moved from Texas to Maryland in order to qualify for expanded Medicaid coverage. She pointedly asked Cruz twice if “he would promise” that he would not take Medicaid. She did not say this but her annual medical care likely costs more than the median household income. To say the least her case is one where politicians fear to tread. How can you reassure people who lost the genetic lottery they will not slip through the cracks? Cruz did his best to explain how Medicaid is a poor quality health plan but his response did not suit her. She wanted his personal guarantee — in a legally-nonbinding way that would haunt his political career for years to come.

If there was a common theme it was that there are a lot of people whose lifestyles would be much improved if only other people would subsidize the cost of their health care. This gets back to a dirty little secret in the health policy community on willingness to pay for health care. The answer: “nothing!”  Many people would prefer to pay nothing if left to their own devices. Many would go years without care — even primary care — until something bad happens. The liberal public health community is desperately grasping at straws trying to find the Holy Grail: perfect health literacy, great health care, provided cheaply on someone else’s dime. That is impossible, which is why Obamacare is so hard to repeal.

Comments (152)

Trackback URL | Comments RSS Feed

  1. Lee Benham says:

    I watched the same debit and it was incredibly painful to watch. It appeared to me that nether one of them had the slightest idea of how health insurance actual works and why people buy it in the first place. Why can’t we ever get a politician to actually explain republican health care reform?
    Both of them think employer based insurance is the good stuff. Bernie thinks it should be a cost of doing business and Cruz doesn’t want to upset the market (whatever the hell that means).
    Rand Paul is running around saying unlimited funds into HSA’s and allow individuals to pool together to get better rates. Sorry to say Mr. Paul but most individual plans sold in America before the ACA was tied to an association. What kind of idiot would take money out of an HSA that is growing tax free to pay for premiums? You put money in the HSA and take the tax deduction on the deposit but you don’t spend money that’s growing tax free unless you have to! Selling across state lines is just ridicules. Like an insurance company will charge the same rate in Beverly Hills as it does in Podunk Mississippi.
    The politicians are so bad at explaining ideas it’s not surprising people have no idea what is actually going on.

  2. Ron Greiner says:

    The debate was fingernails on a blackboard, just disgusting that Cruz doesn’t know Republican Health Care Reform any better than that.

    Cruz should have said, “Right now all of her employees qualify for Obamacare tax credits on the exchange and can get low-cost HMOs, with skinny networks, in Texas after subsidies. If she hires a couple of employees and is hit with the Obamacare employer mandate she will only pay for 1/2 of the employees’ insurance and nothing for their families so they will have to purchase on the exchange with AFTER-TAX-DOLLARS, because of the crazy glitch, which will be even more expensive.

    Trump’s children, multi-billionaires, don’t pay taxes on their employer-based insurance but these broke Texas hair cutters and their broke little children must because of you voting for Obamacare Bernie. Bernie it is all your fault you crazy socialist. Bernie, do you hate children?

    Bernie loves billionaires!!!”

    That’s better than what you wrote at Town Hall Devon. Lee and I have told you a thousand times. Why can’t you repeat it? Lee, draw these people a picture.

  3. Devon Herrick says:

    Half of families cannot afford to spend $4,000 apiece for health insurance (while paying for their care out of pocket). The families who can pay $4,000 cannot afford to pay $8,000 per member to subsidize lower-income families. We’re on an unsustainable path. There is no way to reform health insurance regulations alone to make our health care affordable.

    We have to do something about the cost curve. As an economist, I do not believe you bend the cost curve by increasing cross-subsidies. We will only bend it when we reduce cross-subsidies.

    Apple did not make iPhones affordable by convincing the government that everyone needed a $10,000 subsidy so they could afford a piece of technology 100 times more powerful than the space shuttle used 30 years ago. Apple made the iPhone where it could be sold for $600.

    • Ron Greiner says:

      Devon, I didn’t say increase the subsidy. I said if she hires a couple more employees they will lose their current tax relief and have to purchase their families insurance with after tax dollars and rich economists like you Devon don’t pay taxes on your health insurance.

      And it’s all because of that goofball Democratic Socialist named Bernie Sanders who must love rich economists and hates poor Texas children, the jerk.

  4. Ron Greiner says:

    Devon, you write, “If there was a common theme it was that there are a lot of people whose lifestyles would be much improved if only other people would subsidize the cost of their health care.”

    You brag about being an economist so answer this. When you write off your NCPA employer-based health insurance are the rest of us taxpayers subsidizing you? Same with the multi-billionaire Trump children’s’ employer-based insurance?

    Why do you get so upset when poor children in Texas get any kind of tax relief that you and the Trump children have always enjoyed?

  5. Bart I says:

    This gets back to a dirty little secret in the health policy community on willingness to pay for health care. The answer: “nothing!”

    This brings me back to a question I’ve asked more than once, but never had answered. What is purpose of the proposed universal tax credit? Is there some economic of philosophial requirement for this, or is it merely to attract political support?

    If a tax credit can be used to pay for underwritten coverage or deposited entirely in a pretax HSA, isn’t this the same as offering free health care (at least for people with low health costs)?

    • Devon Herrick says:

      I suppose that depends on if everyone gets the tax credit or if those with employer coverage forfeit it in favor of the tax exclusion. A tax credit or a tax exclusion are both an attempt by government to 1) draw political support and 2) encourage a behavior beneficial to society.

      It’s a whole other debate, however, whether the tax exclusion has ultimately been beneficial to society.

      • Allan says:

        This is the problem with the federal government being so deeply involved in each person’s personal health. Government picks winners and losers along with upsetting the marketplace causing inumerable marketplace distortions that are only partially and temporarily lessened with Band Aids that are piled so high no one is able to see the problem below.

        That best solution would be to end all tax benefits involved with healthcare. In essence most of the programs being tried are attemting to mimic that solution. Almost all are failures. Since the best idea is not palatable to the American population we have to focus on a second best idea that most closely mimics the best.

        This does not mean that regulation is non existent or that government at any level can’t help those who fall through the cracks. Government can, but that aid should have the least possible effect upon the marketplace.

        • Ron Greiner says:

          Allan, a doc emailed me this last night, “..the lunatic Twilight Zone system that has evolved as govt. has gotten deeper and deeper in command and control healthcare diktat is crazy. It’s not just ACA, but insane coding rules going back decades (thanks AMA), the EMR as part of stimulus HITECH in ’09, the Nazi-esque CMS regulatory system for docs and hospitals. The crazy idea of mandating the “innovations” in reimbursement, P4P, MIPPS, MACRA, PQRS, and all the other “prove you’re worth it” schemes, instead of heavily involving patients in the market…..they will quickly find value much more efficiently than ACO’s, cost sharing, etc. etc.”

          I’m a guest on his 100,000 watt radio show on Saturday. Like I told him, “Who are you going to believe, a lying politician or your trusted family doctor?” (That’s Dr. Annis”)

          • Allan says:

            I assume you read the book by Annis, Code Blue.

            Review: “As a former president of the American Medical Association and the World Medical Association, Annis here issues a hospital-like Code Blue alarm at what he considers the threat of socialized medicine posed by Clinton’s national health care reform plans–which, he charges, ignore the social ills that underlie many poverty-associated problems, i.e., drugs, sexual promiscuity and violence. Annis attributes these conditions largely to our welfare economy. He also blames the prospect of socialized medicine for the closing of hundreds of hospitals, and for the financial crises of thousands more. Advocating a return to a market economy, as opposed to the third-party government- and employer-associated insurance system envisioned by “managed competition” (the approach touted by the Clinton administration), the author argues that health maintenance organizations would restrict patients’ choice of doctors and make specialists available only through primary-care physicians. In his lobbying polemic, Annis refers favorably to plans by the National Center for Policy Analysis and the Heritage Foundation, both of which “put the patient back in the driver’s seat.”

            An excellent read that will offend any socialist.

  6. Paul Nelson says:

    It seems that the excessive cost of our nation’s healthcare is really the recurring catch underlying our need for a ‘Universal Health Insurance’ plan as a newly permanent “cluster of benefits” for our nation’s COMMON GOOD. So far, there really doesn’t seem to be any focused concept as a means to achieve a sustainable strategy for healthcare reform, especially its cost as a portion of our national economy. Only then will health insurance be a realistic subject of discussion.
    The National Academy of Medicine was given the privilege by JAMA to use its entire October 25, 2016 edition for a discussion of recommendations for change. It comprised 19 essays with 2 Editorials. In their discussion of important issues, I don’t recall any mention of our nation’s maternal health. We represent the only developed nation of the world with a worsening maternal mortality ratio for at least 40 years. It is the most important attribute demonstrating how well we value responsive accessibility as an important attribute of health care.
    It is unlikely that healthcare reform, as we currently know it, will do anything but cost more money and a great deal of angst at the front lines of healthcare. The National Academy of Medicine no doubt represents the agreed-upon consensus that healthcare reform will get better, if we just try harder.

    • Ron Greiner says:

      Paul, you say, “our need for a ‘Universal Health Insurance’ plan”.

      You MDs for Socialized Medicine should take a deep breath and understand that you voted for Hillary and she lost. President Trump and the American voters don’t want you in charge so stop asking for socialism. Move to Cuba and then you will have a Universal Health Plan.

      Why would a pediatrics doctor in Omaha repeat over and over, “We represent the only developed nation of the world with a worsening maternal mortality ratio for at least 40 years.”??

      • Allan says:

        Ron, I think Paul N misrepresents the cause of maternal mortality forgetting that healthcare is a small piece of what contributes to such mortality. It’s like a doctor removing an appendix after the gall bladder ruptures and then forgetting that the gall bladder was the underlying cause of the pain and the appendix just another avenue of potential pain.

        Many on the left used to quote infant mortality to prove our system of healthcare was poor. That claim has been debunked so maybe they have decided to move on to maternal mortality.

  7. Bob Hertz says:

    Bart, in my opinion the primary purpose of the tax credits is the same primary purpose of the ACA subsidies.

    And this purpose is to help those Americans who do not receive any employer coverage.

    A worker with employer coverage might make $40,000 a year and get a $5,000 health policy either free or at half price.

    A worker doing the same job without health coverage will also earn $40,000 (or even less sometimes due to low bargaining power), but until the ACA this worker had to come up with the $5,000 premium solely on his own.
    Persons who are self-employed faced the same dilemma.

    These 20-30 million workers and entrepreneurs are in a way the only Americans who did NOT get a subsidy for buying health insurance. Between the 150 million persons with employer coverage, 50 million plus on Medicare, 60 million plus on Medicaid, plus those in prison or in the military, darn near everyone else in on the take if you will.

    The ACA subsidies may be causing a lot of new problems, but one can I think understand why subsidies and tax credits are popular solutions.

    • Bart I says:

      But the ACA subsidies have an obvious purpose– to subsidize people with low to low-middle income, and nothing more. It doesn’t help all Americans without employer coverage, only those with low income.

      If the tax credit is intended to provide parity for those without employer coverage, then it needs to be conditional on type of coverage purchased.

      If the coverage is comparable to employer coverage (e.g. ACA- or HIPAA- compliant coverage, or COBRA) a fixed- or age-based- or percentage-of-premium-credit might provide reasonable parity.

      For individual underwritten coverage, parity might require picking up the added cost above base premium for people with up-rated premiums (or else provide below-cost subsidized risk pool coverage for these people).

      For people like Jimbino who don’t believe in insurance, parity might be a tax credit to reimburse catastrophic expenses above a certain amount).

      It seems to me that to provide a single blanket tax credit to all of the above situations would be to undermine some while providing an unneeded windfall to others. People seem to have their own ideas of “fairness” that only work if you don’t look too closely.

    • Bart I says:

      Anyway I can see why the general public thinks they might be entitled to tax breaks. I guess I’m specifically asking why politicians and policy experts think it’s needed for healthy people with underwritten coverage.

      In the case of politicians I guess it’s the same for those who promote “across state lines” or “single payer” or whatever other magic fix is out there.

      • Ron Greiner says:

        1. Why are you entitled to tax breaks on health insurance Bart?

        2. Should everybody get the same tax break as you Bart?

        • Bart I says:

          1. Why are you entitled to tax breaks on health insurance Bart?

          That’s what I’ve been asking. The employer exclusion is the status quo for whatever historical reasons, but it has evolved into what amounts to a risk pool subsidy for high cost employees. Low cost employees see little if any benefit from the tax exclusion.

          The follow up question might be “why then are older and sicker people entitled to subsidized health care?”

          I don’t know that they are, but society seems to have accepted it so it seems to have taken on a status analogous to a legal precedent. Plus both political parties have apparently committed some sort of coverage for preexisting conditions, which amounts to the same thing– using taxpayer dollars to subsidize high cost individuals.

          2. Should everybody get the same tax break as you Bart?

          And which tax break would that be? The value of the tax break varies between employees in the same company. For most it has little or no value; for the minority of older, sicker employees it has great value. Which employee is your gold standard for determining the amount of tax break everyone else should get?

          Some people get to collect a welfare or Social Security or Disability check. Do you think everyone else is entitled to the same? Where is the money going to come from?

          • Ron Greiner says:

            Bart, please, you are talking out of both sides of your mouth. I asked, “Why are you entitled to tax breaks on health insurance Bart? YOU answer, “That’s what I’ve been asking.”

            Then I ask you, “Should everybody get the same tax break as you Bart? Then YOU answer, “And which tax break would that be?

            Bart, you don’t pay Federal or State income tax on your health insurance. Plus, you don’t pay Payroll tax on your insurance so the Feds lose 15.3% on every employee. You say most employees this has no value – WRONG. Every single parent mother is paying payroll tax on every dollar earned.

            So Bart I will ask again – Should everybody get the same tax break as you Bart?

          • Bart I says:

            I asked, “Why are you entitled to tax breaks on health insurance Bart? YOU answer, “That’s what I’ve been asking.”

            To put it another way, I don’t think I am entitled.

            Why are you entitled to a tax credit?

            So Bart I will ask again – Should everybody get the same tax break as you Bart?

            Of course not. Some should get more, others should get less, depending on some rational definition of “need”. Or else there should be no tax breaks at all. I could live with either.

            I think we can agree on the marginal tax rates– 15.3 percent on low wage earners, 40 or 43 percent on most higher earners. Where we differ is on the value of insurance for employees.

            Since you seem to get frustrated easily with abstraction arguments, let me repost a more concrete example: A company has 10 employees who average $40K/year gross pay. The company spends $45K per year on health insurance.

            Eight of the 10 employees are healthy and would be able to find (pre-ACA) underwritten coverage for $3K per year. The remaining two have pre-existing conditions and would have to spend $10,500 per year if they could find coverage at all.

            An ignorant person might look at the company’s $45 expenditure and think that each employee is receiving a $4500 insurance benefit. But it should be obvious that the healthy employees’ coverage can’t be worth more than the market price of $3000.

            Likewise for the high cost employees. If we can’t find a comparable underwritten policy, we can deduce the value of their coverage by subtracting the healthy employees’ cost from the employer’s $45K. So $45000 – (8 x $3000) is $21,000, or $10.5K each for the two high-cost employees.

            So when calculating the value of an employee’s tax break, which insurance cost do you base it on? $3000, $4500, or $10500? The $4500 figure is clearly inaccurate, and HIPAA regulations preclude us from knowing whether a given employee is in the $3000 or the $10,500 category.

            Assuming a 40% marginal rate, the pre-tax cash equivalents for $3K and $10.5K are $5K and $17.5, respectively. So each employee is receiving a tax break of either $2K or $7K, but we can’t know which.

            Now suppose wages are more-or-less fixed, say by union contract. Since individual employees’ healthcare costs are not available, the employer pays for the coverage by reducing all salaries by the average $4.5K, resulting in an after-tax pay decrease of $2.7K.

            This means the healthy employees are giving up $2.7K in real dollars in exchange for coverage they could have purchased for $3K, so the real benefit taking wage reduction into account is only $300, not $2000.

            But the high-cost employees are giving up the same $2.7 after-tax in exchange for coverage worth $10.5, so they come out $7.8K ahead overall, cash-wise.

            So in this case, the employees are either $300 or $7800 better off as a result of employer coverage and the tax exclusion, depending on their health status. Most of the money is going toward a virtual risk-pool subsidy for the high-cost employees; the rest see virtually no benefit from the employer exclusion.

            • Bob Hertz says:

              Thanks Bart.

              The healthy employees are probably better off because of the employer’s money….regardless of tax treatment.
              If they declined health insurance, the employer would probably not give them higher wages to substitute for health insurance.

              • John Fembup says:

                “the employer would probably not give them higher wages to substitute for health insurance.”

                Bob the word “probably” does not belong in that sentence.

                You should know that.

                • Ron Greiner says:

                  Small business is a family affair. Are you sure the employer father would not give higher wages to his own employee son and his family, the employer’s own grandchildren?

                  The truth is it is illegal but its happening coast to coast currently whatever these 3 stooges say. The employer says, “Here is $200 extra each month now go buy your own heath insurance.” I could tell you the massive IRS fine for this but I will let Lee tell you.

                  • John Fembup says:

                    Senator, I suppose you’re correct about mom-and pop small businesses. You (and Bob) would not be correct about other businesses.

                    Over my working years, I asked four separate employers for a higher wage in return for not signing up for the company medical plan. All I got was a hearty laugh in response – then a most serious “no”.

                    My opinion – that’s the same response the huge majority of employees receive if / when they ask the same question. So i think it’s not a “probability” – it’s a near certainty. Outside the mom-and pop businesses, anyway.

                    • Ron Greiner says:

                      John, when the owner of the restaurant gathers 30 employees together and says, “I am going to pay you all $100 extra each month and you folks go buy your own health insurance.”

                      1. The owner is a fool

                      2. The IRS can FINE this employer $1 Million/year

                      3. It is happening all over the country

                    • Barry Carol says:

                      John — The point you raise is a completely different issue. I’m pretty sure that if the employer tax preference disappeared and employees now had to pay both income and payroll taxes on the value of their health insurance as reported on Box 12-c of their W-2 form, many employers would stop offering heath insurance and raise wages instead. Basic competition for workers would likely ensure that total compensation remained about the same as it was before the elimination of the tax preference for employer provided health insurance.

              • Bart I says:

                Bob: “The healthy employees are probably better off because of the employer’s money….regardless of tax treatment.”

                Thanks for the reply, but I don’t think I understand this statement. The healthy employees aren’t that much better off– did you mean the unhealthy employees?
                Anyway I don’t know why it would be because of the employer’s money– I don’t think an employer would pay more than needed to attract employees.

                If there were no tax advantages, wouldn’t the healthy employees be worse off? The high-cost employees might still come out ahead on the group plan, but only if it didn’t cease to exist.

                If they declined health insurance, the employer would probably not give them higher wages to substitute for health insurance.

                That’s probably true in most cases, but it wouldn’t change my basic argument. The employees are still free to price outside plans in order to determine whether their overall pay and benefit package is competitive.

              • Allan says:

                The marketplace determines the salary as the employment pool shifts from one place to the other. Therefore the *value* (to both employee and employer) of the total benefit package likely remains equal whether insurance is offered or not. In any specific instance one could not be sure. But, the employer generally has a reasonable idea of value so he might give that specific employee something extra, though in larger businesses it might be too much of a task.

                This demonstrates one of the reasons the tax deduction is such an insidious rule. It makes it difficult for older people to find a job. Their total benefit package can significantly alter the per person benefit package of all other employees. That means the older worker and the sick worker are pushed into the self insured group making everyone in that group appear sicker than they actually are causing them much higher premiums that become unaffordable when they are ill (especially when it is hard to find a job). That plus the fact that employer sponsored health insurance helped to increase over all prices we end up with a bigger problem than necessary resulting in a greater need for high risk pools some complain about, but are actually in great part are the ones advocating the policies that have exacerbated the problem.

                Bart, great explanation.

                • Ron Greiner says:

                  Allan, you are entirely too correct. Corporate America likes to hire the 28-year-old because their health insurance costs are low. Dangerous employer-based insurance makes it impossible for Americans over 50-years-old to remain employed or get hired.

                  Thank you Allan, I knew that but I quit saying it when it is so important.

                  • Allan says:

                    Thanks Ron. We have to end total control of the tax deduction by the employer and give it to the employee who can have the option of giving it to the employer or buying his own coverage. There are those that don’t think this to be important, but IMO employer sponsored health insurance is perhaps the biggest reason for our healthcare system being so dysfunctional.

                    It causes prices to rise and severly injures the private insurance markets that ends up with a lot of sick people paying a lot more than would otherwise have been needed. We then try to solve that problem with more government intervention such as high risk pools and complain they don’t work when it was government that caused so many of the problems in the first place.

                    We can only afford so much healthcare. If the government subsidizes healthcare by a Trillion dollars then healthcare costs rise to a max of that Trillion dollars.

                  • Unlikely. The late middle-aged person’s wages adjust downward to compensate for health costs.

                    • Allan says:

                      That is interesting and I believe there is some downward adjustment, but I wonder if that downward adjustment places the older worker in a neutral position. On the otherhand while the young have greater unemployment once a job is lost the older worker has substantial difficulty finding a job very much due to their higher health care costs from employer-sponsored healthcare. Do you dispute that?

            • Barry Carol says:

              Great comment Bart. Even if the employer raised every employee’s pretax pay by $4,500 per year and stopped providing health insurance, it shows that the healthy people don’t benefit much from the employer tax preference and could easily live without it while the sick people need a very large subsidy to afford health insurance, most likely through a high risk pool. The problem is that the history of pre-ACA high risk pools is abysmal.

              • Barry Carol says:

                Ron — You like to cite extreme cases. Only a tiny percentage of the population has health insurance that cost the employer $30K per year and virtually all of those are in the public sector. Even within the public sector, a couple of relatives of mine who work for the federal government have Blue Cross family coverage that costs a bit less than $16K per year and they contribute 25% of that amount themselves. Average health insurance costs among large employers is about $5-$6K per year per covered life. Teachers and police are outliers.

                • Ron Greiner says:

                  Barry, OK use $20,000 a year. If these employees were sent a bill for 15% Federal Income tax + 6% State Income tax + 7.65% Payroll tax or 28.65% total that is a bill of $5,730. YOU say, “it shows that the healthy people don’t benefit much from the employer tax preference and could easily live without it.”

                  Barry saying that healthy employees in the low 15% Federal Income tax bracket could easily write out a check for $5,730 for their current huge tax dodge might be wrong.

                  • Barry Carol says:

                    He wouldn’t have to write a check for $5,730, Ron. The money would be withheld from his wages which the $20K would become once the employer stopped offering health insurance. Then, with the extra $14,270 in take home pay, I’m sure you could find that person an underwritten family plan for $9,000 or so (3X the cost of single coverage). The healthy person would then be $5,270 ahead of the game and not only could live without the tax preference but would be net better off. If he needs a high risk pool, though, that’s a different matter.

                • Ron Greiner says:

                  Barry, you say, “Ron — You like to cite extreme cases.” Then in the next thread you say someone needs $1.6 million of Rx a month and that will cost $10 million in 6 months.

                  That sounds extreme to me Barry. Maybe someday with brain transplant medication but we are not there yet.

                • Ron Greiner says:

                  Barry, Devon and Allan, DonanldTrumpHSA when VP Pence was talking about Obamacare Replacement at CPAC I was on WHO Radio, the Reagan Station, explaining TrumpCare and the IOWANS went crazy with happiness. I really smashed the FAKE NEWS in America for not reporting the TRUTH so politicians would know how easy it is to explain TrumpCare and EMPOWERING the American people with FREEDOM. Jan, the host, came out of retirement for the show after his stroke. At the end I messed up when the callers were asking if they can do TrumpCare NOW and I should have said, “NO – TrumpCare is not passed yet.” – but I didn’t – live and learn. Here is the short show:


                  • Allan says:

                    Ron, you did a good job. I am not in love with the Price plan and would support it only as a compromise and a way to get rid of Obamacare. However, you did make it sound appealing. One could freeze the credits and let inflation get rid of them.

  8. Barry Carol says:

    Most people want more from government (taxpayers) than they are willing to pay for themselves. Healthcare and health insurance are no different. What else is new?

    Bernie Sanders, and President Obama for that matter, never met a payroll. If they had, they might have some appreciation for the realities inherent in economics and markets. It’s easy to talk about fairness and social justice but talk is cheap. The force of idealism is lost when it fails to recognize the reality of things.

  9. Lee Benham says:

    Holy crap! It’s 65 in mid February in Nebraska and I agree with what Barry just wrote. Not sure if this means there is hope in the world or Armageddon is around the corner 😱

  10. John Fembup says:

    CMS projects National Medical Expenditures for 2017 will be $3.55 trillion, based on its trend estimates applied to 2015 expenditures of $3.2 trillion.

    Meanwhile, total federal revenues for 2017 are projected to be $3.64 trillion.

    These sources suggest 2017 Medical expenditures will amount to 98% of the federales’ 2017 total revenues.

    It’s my understanding about half of U.S.medical expenditures are already financed by taxpayers via Medicare, Medicaid, VHA, the federal employees’ plan, and other federal insurance programs including Obamacare subsidies.

    Still, it would appear to me the federales are in no position to provide the country much more of anything “free”, especially not medical care, without a stunning increase in taxation.

    I think that remains a political non-starter and would have been even if Madame Flutterby had been elected in November.

  11. Bob Hertz says:

    Bernie Sanders kind of lives in a northern European world, and he has noticed that Germany and Denmark and France and Sweden do in fact force every business to pay large social insurance taxes for health care, family leave, pensions, et al.

    The effect of this over these is no different than it would be over here….namely, the prices for consumer goods go up a lot, so that the employer can pay a living wage plus benefits to all the workers.

    The logical consequence is the number of restaurants and hairdressing and retail firms in those nations goes down, and these sectors no longer provide as many jobs.

    But here is where it gets interesting.

    These nations do not seem to mind, and there is no crisis, because they do not have a surplus of uneducated young people anywhere near the size of America’s surplus.

    It is sad but true that even the modest reforms in America, such as minimum wage laws, have caused a great deal of unemployment in black ghettos.

    • Barry Carol says:

      It’s also true that many middle class younger people graduate from college unable to find career track jobs largely because of strict rules against laying people off. So they wind up going from one short term contract job to another if they can find them.

      In addition, the solidarity / collective culture that prevails in much of Western Europe makes most of the population very accepting of high taxes that pay for a strong and comprehensive social safety net. The underlying tradeoff is more security and less inequality in exchange for slower economic growth and less longer term opportunity, especially for younger people. They also live in tiny houses and drive tiny cars or ride mopeds and bicycles but they’re fine with that too. We aren’t.

      There are plenty of immigrant communities in France and the UK especially where many of the people are poor and not very well assimilated into the society. They have their issues with poverty too but ours are probably worse, especially in the inner cities and some of the more rural areas that the economy left behind especially as the agricultural sector continues its long term consolidation.

      • John Fembup says:

        Let’s also not forget who took a very significant role in the defense of Western Europe since 1945 – allowing those countries to spend money on social services rather than obliging them to supply more of their own defense. It’s worth watching to see the adjustments if / when US begins to ramp down its NATO support.

        • John Fembup says:

          Barry, we ran out of room in a previous string. I wanted to add another comment so decided to put it here.

          You said “I’m pretty sure that if the employer tax preference disappeared and employees had to pay both income and payroll taxes on the value of their health insurance . . . many employers would stop offering heath insurance and raise wages instead.”

          Yes, I’m pretty sure of that, too. Eliminating tax-favored treatment of employee benefits would fundamentally change the (WWII-era) employers’ incentive to provide group insurance in the first place. And after all medical insurance is compensation. Present law makes one part of an employee’s compensation (wages) subject to taxes, while leaving another part (medical benefits) not subject to taxes. That tax policy is illogical – just as doing it the other way around – taxing benefits, but not wages – would be illogical.

          My earlier comment was only to observe that, as matters now stand, and in my own experience, very few employers -excepting maybe mom-and-pop operations – will agree to pay higher wages in return for not enrolling in the employers medical insurance. The present tax incentive works the other way.

          • Ron Greiner says:

            John, good morning. A client of mine, Dr. Lee Hieb, has an article this morning that you should read. You can tell I influence her and she is the past President of the American Association of Physicians and Surgeons (AAPS), their lawsuit stopped HillaryCare in the 1994.

            Dr Heib writes, “The first thing, is to understand what real insurance is. Real insurance (think your house or car) is owned by the individual. It is therefore portable. It is purchased early in life when you are healthy, and the insurance is therefore affordable.”

            Dr. Hieb has a 4 point plan to replace Obamacare and here is her #2 point.

            2. Set a time for the phasing out employer-based health insurance. Like dealing with any bad business plan or bad debt, there is no pain-free solution to come out of the problem. Your employer doesn’t own your car insurance, and he should not own your health insurance. Personalized insurance you can tailor to your needs can be 50 percent cheaper than what you are having deducted from your paycheck. Everyone will shriek, “How can that possibly work?” The answer is that a real free market manages to price things so people can afford them. Governments make everything artificially more expensive.

            Before Obamacare a young healthy person could get individual health insurance for $60-70 a month. An employer might pay $200-300 for the same person’s coverage. By linking health insurance to employment we have created a large group of people in their 50s who cannot quit their jobs without losing their health insurance and because of their age would become uninsurable. These people must be transitioned to either private insurance or to a Medicare type product, whichever they choose.

            She also ends with my advice – Make America Great Again!


            • Ron Greiner says:

              My comment to the good Dr. Hieb is:

              Dr. Hieb is correct and when we lift the burden of health insurance off the backs of American employers the economy will soar like never before. Also, all products and services will drop in price because they currently are embedded with the high cost of dangerous, over-priced employer-based health insurance. Every American deserves the security of personal, portable and permanent Individual Medical (IM) insurance.

              Every FAKE NEWS newspaper in America is selling dangerous insurance to their own employees that they lose if they get ovarian cancer and get too sick to work. Trust me, losing your insurance 18 months (COBRA) into your cancer is depressing at best and deadly at worst. Who are you going to believe, these lying politicians or your trusted family doctor? Dr. Tom Price’s (HHS) Republican Health Care Reform will “Make America Great Again!”

            • Allan says:

              “How can that possibly work?” The answer is that a real free market manages to price things so people can afford them. Governments make everything artificially more expensive.”

              That splits the subscribers on this list into two parts. Those that wish real change away from government control and those that wish to obstruct such change.

            • Bob Hertz says:

              Thanks for posting, Dr Heib has some good points.

              She is honest and correct that some version of Medicare will have to be maintained for persons over 50 who lose employer based coverage. I have been saying this for years and have drafted a model law to do this, if anyone is interested.

              This will cost tax money, at least one or two per cent of payroll. That must be faced. The Paul Ryans of the world are so far too afraid of Grover Norquist to admit this.

              Second, and this is not a major point, Dr Heib does not understand Medicaid. Its largest expenses are for dual eligible poor old persons, not the recent younger additions, and this will not be easy to fix.

              • Ron Greiner says:

                Bob, 1/3 of Californians are on over-priced Medicaid that has very low payments to doctors so many docs won’t take them. Medicaid is a cash cow for the Medicaid issuers, the medical mafia, and she understands this and Bob you can’t say that 1/3 of all Californians are dual eligibles on Medicare because that would be wrong.

                She spends her life cutting up Medicare patients and billing the government so she might understand the problems better than you might think.

                • Bob Hertz says:

                  Per this Kaiser study, 63% of Medicaid spending is on the aged and disabled…………


                  I know that California has a huge Medicaid bloc.

                  • Ron Greiner says:

                    I don’t trust left wing Kaiser because they just spin numbers for liberals.

                    Bob, just post the Kaiser research on the number of sick employees that lose their employer-based health insurance after they get too sick to work. I’m sure Kaiser has stats on that.

                  • Yes, because they are expensive. Children and mothers are generally inexpensive. Yet, the media get all excited about how many more people got enrolled in Medicaid.

                    • Allan says:

                      Did the ACA gear up Medicaid so it could handle the millions of enrollees? I don’t think so. That meant those already on
                      Medicaid and in most need got less care.

                  • John Fembup says:

                    Bob, never forget that Medicaid also covers “Long-Term Care Assistance”. That’s not medical, it’s custodial.

                    Scroll down in your Kaiser source, you’ll see that the LTC cost was more than 28% of Medicaid’s total expenditures in 2011.

                    It’s reasonable to assume virtually all of the custodial care was for the aged and disabled. That would make custodial care more than 44% % of Medicaid’s total 2011 expenditure on the aged and disabled.

          • Bob Hertz says:

            Good points, John. Here are some additional perspectives:

            1. Even if employer-paid premiums were taxable, some employers would still offer insurance and some employees would still accept it.

            In cases where employers are competing for scarce labor, the employer will offer to help cover the taxes, in other words they will gross up the salary so the employee comes out close to even.

            I grant that is more of a Goldman Sachs/Google approach, but it will happen.

            Also, some employees will prefer employer coverage even if it is taxed. One reason is convenience –the employer still makes that large payment to the insurer each month, and all I have to do is to adjust my withholding.
            If the employer gave me a raise and I had to buy my own health insurance, I might be late with the premium or spend the money on something else.

            Granted this is a factor for employees without good money skills….but that is not a small group.

            Thirdly, employees know that if they are healthy today, they might get very sick tomorrow. They prefer the relative security of employer coverage, to the insecurity of the individual market.

            (The ACA removed some of that insecurity in terms of underwriting, but now the whole ACA is insecure. The individual market has been unreliable for 50 years and may stay that way.)

          • Barry Carol says:

            Yes, smaller employers and privately owned companies have much more flexibility in how to structure and customize compensation than larger firms which often have rigid rules and procedures.

  12. Lee Benham says:

    Bob if you are going to compare the united states health care then compare it to every country. I would say the US is doing a wonderful job of providing a safety net compared to other countries.

    Two-thirds of the world’s poorest people live in just five countries, according to a new World Bank study. Poverty is on the decline globally and those who are subsisting on less than $1.25 a day are concentrated in five areas — India, China, Nigeria, Bangladesh and the Democratic Republic of Congo.

    Move to India and be rich!

  13. Ron Greiner says:

    In 2005 FORTIS was buying up the hospitals in India left and right. They were the 18 largest company in the world.

    FORTIS – Latin for Steadfast

    today FORTIS means – here today, gone tomorrow

    • Bart I says:

      Reminds me of the Stephen King short story about a writer who ended every manuscript with the line “Fornit some fornis.”

  14. Bob Hertz says:

    Lee is right. Even in the days of full underwriting and pre-existing conditions, the American safety net was better than the fully insured care in many other countries.

    In Anerica, the uninsured got more actual care than the average resident of other countries. Granted, our uninsured got this care somewhat randomly and sometimes late and sometimes accompanied by bill collectors…..but they got the care.

    The ACA’s reforms of the individual market may have spent more money and more social capital to fix a problem which
    (by international standards) was not so horrible.

    • Ron Greiner says:

      Lee, who is really smart on Life Insurance too should suggest that Individual Medical (IM) medically underwritten is still way too expensive. In the future people could get normal IM underwritten insurance where they answer 20 questions but also they should be able to take an underwritten physical and drop their premiums another 20% like Lee does with Life Insurance.

      I’m waiting for Lee to suggest that. After all, in the land of the free, what law should stop that?

      20% savings over a lifetime is a mountain-of-money (MOM).

    • Allan says:

      “the American safety net was better than the fully insured care in many other countries.”

      Bob, you are correct, but then you say, “sometimes accompanied by bill collectors”.

      Again I ask, what is wrong with paying one’s own bill? Don’t bring up the catastrophic bill that could never be paid because that same person could have pooled his money and bought catastrophic insurance.

      “was not so horrible.”

      The ACA was helping to kill an economy. We get more of almost everything because of our economy. The ACA was in part bringing us down to the level of the rest of the world.

  15. Lee Benham says:

    My suggestion would be that all subsidies are removed from insurance no tax advantages. Insurance products that have first dollar coverage would be limited to no more than $5000 per person per year. Insurance products that cover greater than the $5,000 would have a $5,000 deductible that would have to be met.

    If people want first dollar coverage like most plans today then they buy 2 policies. Both plans are fully underwritten. people who can not pass underwriting qualify for means tested Medicaid.

    Problem solved,

    But then how do we pay for all the riots?

  16. Ron Greiner says:

    Communicating for America, Inc. (CA) is a nationwide nonprofit, nonpartisan organization for small businesses, self-employed and agricultural members across America (bunch of crazy farmers)

    This organization put out a press release this week to stop the coast to coast prohibition of Short Term Medical in just days. [I got the only story in the nation’s newspapers on Tuesday.] Not one PHD in all of the think tanks has said a word so what does that tell you?

    I did get this email from Micheal Cannon of the CATO this week:

    You reminded me of something very important, Ron. The Obama administration’s illegal ban on short term health insurance policies. Rescinding that ban should’ve been one of the things I told the Trump administration to do in a recent oped I published at national review online. But I forgot. Thank you for the reminder.

    Tyrannis delenda est.

    And Micheal doesn’t even have a PHD.

  17. Bart I says:

    My point earlier was not that the current system is fair. I think everyone here agrees that the employer exemption is unfair and full of unintended consequences. It’s just that one of those unintended consequences is that tens of millions of “uninsurable” people (employees or their dependents) are covered at something close to a healthy person’s underwritten cost and have come to see this as normal and natural.

    The fact that healthy employees may come out a few hundred dollars ahead per year is trivial. The real unfairness is that their higher-cost colleagues enjoy a safety net worth tens of thousands per year at taxpayer expense, which others don’t have access to.

    I’m sure we all would like to see employer-sponsored health insurance go away. Where we differ is what replaces it and how to get there.

    I just don’t see how you throw 156 million people, 30 or 40 million of whom are uninsurable by pre-ACA standards, off of their employer coverage with no plan for replacement, or even a consensus on how that replacement should look.

    • Allan says:

      Bart, you might not see how, but one thing is pretty certain, employer sponsored healthcare (due to the favorable tax treatment) is here to haunt us until it is gone and dead. Today we are covering the costs of those people you mention at a much higher price than necessary. Therefore, the money exists, but those in power have demonstrated little backbone to do what is needed.

    • Bart I says:

      What I do see is that the Obamacare exchanges are collapsing before our eyes, and the only thing the libertarians here can think about is “fixing” employer-sponsored insurance.

      The ACA collapse is a once-in-a-lifetime opportunity to do something about the individual markets with almost no chance of screwing them up more than they already are.

      Right now ESI is a virtual safe haven from the chaos in the rest of the marketplace. It’d be a lot easier to change it after a healthy individual sector is up and running and begins attracting low-tax-margin employees.

      • Allan says:

        “the only thing the libertarians here can think about is “fixing” employer-sponsored insurance.”

        I don’t think that is true, but employer-sponsored health insurance due to our tax policy is one of the major reasons our healthcare system failed. I don’t think we can create a long term success unless ESHI is fixed. …And don’t forget, one way or the other we pay for those sick individuals that are covered by ESHI.

        Your concern is of the known problems which is a fraction of the unknown problems both equally needy. Additionally some of those known problems end up losing their jobs because of their illness and that complicates all those that are not covered with insurance by their jobs.

        • And those folks drive Obamacare premiums up when they fall into the exchanges. You have identified a real problem.

          • Ron Greiner says:

            John, we have been telling you that for years. When the NCPA terminates their sick employees, when they get too sick to work, they go to the Individual Medical (IM) market and us fools pay all of your sick employee’s medical bills and the NCPA and BLUE CROSS laugh all the way to the bank.

            You should write a post about it because we all have been waiting forever. I will email it to Micheal Cannon at the CATO who is trying to save employer-based health insurance with every bone in his body with his propaganda in the Nation’s press. What a traitor.

          • Allan says:

            That is one of the reasons employer-sponsored healthcare is so dangerous. It leads to higher rates for those not covered by their employers. They are considered suspicious and that also leads to difficulty in purchasing insurance.

            I saw a good number of those in my practice. They paid for 30 years, virtually never seeing physicians and then all of a sudden lost their jobs and were unable to afford maintaining insurance through the Cobra provision. That insurance was higher than the actuarial rate they should have been carrying.

    • Barry Carol says:

      Your last paragraph is the crux of the issue, Bart. It could easily cost $15-$20K each to cover those 30-40 million people who are uninsurable by pre-ACA standards. That’s $450 billion to $800 billion per year. Where does that money come from and who will bear that tax burden? At the upper end of that estimated cost range, it would take as much as a 10% VAT that’s as broadly based as most of those in Europe to cover the bill on top of all the other taxes we already pay. That’s one heck of a bill for a high risk pool and it doesn’t even include the uninsurable folks who lack ESI today,

      • I am getting a little more comfortable with high-risk pools, if only because the dollar figures are debated openly and would be appropriated in an orderly manner, not like Medicare, Medicaid, or Obamacare.

        • Allan says:

          There is no reason not to be as comfortable with high risk pools as any other government creation. I think high risk pools were poorly run. Many of those in high risk pools should have been integrated into the regular insurance pool where risk was used by insurers to determine the premium. Rather than a separate pool for many of them there should have been cost sharing placing a great responsibility on the high risk individual. Some in the high risk pool probably should have been on Medicaid. If they had adequate personal income or wealth they could pay a premium. If they could find more they could pay to buy out of Medicaid.

          Our goal should be one plan with many insurers. One way, not necessarily the best, Medicaid could be a type of default that one could buy out of entering the insurance market where risk determines premium and cost sharing exists outside of Medicaid, only where necessary for a limited time period.

      • Bart I says:

        Barry, I don’t think it can cost more to insure them in a risk pool than it already does in ESI. But if the bulk of the tax exclusion is going toward this same 30-40 million people, then your lower figure is might not be too far from the upper boundary.

        I would expect individual costs to range from 1.5x or 2x of the base rating (depending on the risk pool premium) on up to millions, with the bulk of them near the lower end of the range.

      • Bart I says:

        Still, whatever happened to the idea of a pilot program? I’d like to see evidence of the Ayn Rand utopia actually working before the grand cut-over.

        • Allan says:

          I’ve read Rand’s books. What do you think Rand’s healthcare proposal would look like or alternately what they would look like if she were here today under present circumstances formulating a bill?

        • John Fembup says:

          I’ve read her books and admire them. But one thing always bothered me.

          There are no children.

          Children almost by definition require the efforts of someone else to support them – which, almost be definition, is anathema to Randian, logical positivist thought.

          Not a biggie – just a bother.

          • Allan says:

            Rand’s philosophy did not exclude children though you are right she didn’t mention children very much.

            However, what Rand advocates in her philosophy and her books is quite different from what Milton Friedman promoted. By the way for anyone that is interested his entire Free to Choose TV series is available for free on the Internet along with comments from some pretty interesting people that discussed what he said in each chapter.

            Bart, I don’t think it is at all that difficult to follow most of what Milton Friedman advocated except for the fact that the socialists would loudly complain. If you have a specific point that Friedman made that is impossible to follow in a free society can you repeat that point or points here?

            • John Fembup says:

              “If you have a specific point that Friedman made that is impossible to follow in a free society can you repeat that point or points here?”

              Allan, are you asking me? If so, why?

              “his entire Free to Choose TV series is available for free on the Internet”

              The book is one of my favorites. I bought it in 1984 in, of all places the Detroit Airport. I’ve re-read it every 3-4 years since.

              btw, it is no coincidence that, on its cover, Dr. Friedman is holding a pencil.

              • Allan says:

                I addressed my question to Bart “Bart, I don’t think…”, not you. Bart had a specific opinion of Friedman that I do not agree with. Yes, I-Pencil draws a very clear picture. I’ve read other books of his and he was quite prescient.

                I have bought the book many times since it first came out because I keep giving it away. That reminds me that I need a new copy once again. I often wonder how many of the Liberals I gave the book to actually bothered to even open it one time. From now on I am giving them the web address of the Free to Chose series.

            • Bart I says:

              If you have a specific point that Friedman made that is impossible to follow in a free society can you repeat that point or points here?

              No, my point was that some people take these ideas and extrapolate to absurdity or twist them to their own agendas.

              I’ve been a regular contributor to the Friedman Foundation since the nineties, when the Friedmans were still with us and the Foundations flagship voucher success was Milwaukee and not much else. Friedman never advocated dismantling the public school system or giving out vouchers in such as way as to undercut public schools or leave them unable to support e.g. special needs kids. In fact the Foundation goes out of its way to point out that in existing voucher markets, the public schools are actually better off (better scores and potentially more available tax revenue) than before the vouchers were instituted. Interestingly, the Foundation recently changed its name to, dropping the Friedman name after a set time at the founders’ request.

              • Bart I says:

                …presumably to keep emphasis on the foundation’s purpose and not its founders.

              • Allan says:

                “No, my point was that some people take these ideas and extrapolate to absurdity or twist them to their own agendas”

                That is fine, but Friedman’s words are quite clear along with being convincing to one who cherishes liberty. There are those that think they believe in liberty but really don’t because they don’t accept personal responsibility. One can’t have one without the other.

            • Bart I says:

              The great Kenneth Arrow, who passed away this week, is another example. The so-called instant runoff/ranked-choice voting groups continually mischaracterize his work, saying he “proved there is no perfect system”, while at the same time making claims in direct contradiction to what he did prove, e.g. “instant runoff eliminates spoilers.”

              More relevant to this blog, his work is often used to insinuate that markets have no place in health care.

        • Bart I says:

          I think of Rand the same as I think of Milton Friedman and others. I pretty much agree with all that they say, but think people get carried away trying to follow them.

  18. Bob Hertz says:

    Here is what I see happening in actual workplaces….based on many phone calls from workers/customers in my agency…..

    Our hypothetical Joe Smith might have two job choices:

    – Job #1 pays a salary of $40,000 and also offers a tax free health policy worth $5,000;

    – Job #2 pays a salary of $35,000 with no health insurance.

    That is because employers who do not offer health insurance are 98% wesker financially, so their entire wage package is smaller.

    Joe only takes Job #2 if he is desperate. If he gets a Job #1 offer he is gone in a minute.

    OK now let’s talk taxes. A change in the law makes his $5,000 employer premium into taxable income. His taxes go up by at least $1,500, maybe $2,000 depending on family circumstances and what state he lives in.

    If he accepts this change, he in effect makes $38,000 plus health insurance. This is still better than Job #2.
    The employer insurance practice survives.

    • Bart I says:

      The employer might make a go of it, but it seems to me this puts the employers on the same footing as the Obamacare exchanges.

      In general I would expect that low-paying jobs are less likely to have insurance because those workers are less interested in insurance, in part because their lower tax rates reduce the tax incentive, and in part because they are more cash-strapped.

      Your example seems arbitrary. But suppose two identical companies are competing in the same industry and for the same employees. The tax law changes and the tax exclusion goes away. Employer A decides to drop health insurance and instead pays a higher salary.

      The younger employees are happy with the cash, and go out and buy lower-cost coverage. The older employees start sending out resumes and try to get on at company B, which still offers insurance. At the same time company A starts poaching younger employees from company B.

      Eventually company A has mostly young, highly paid employees (essentially consultants) and company B has mostly older, sicker, expensive-to-insure employees. Soon the insurer starts jacking up rates. Which company ends up weaker financially?

    • But it would not become taxable in any plausible scenario for the short or medium term. There might be a cap on the exclusion but it would not be at $5,000 per individual. And Congress would likely only impose it in exchange for a tax credit.

  19. Bob Hertz says:

    excuse me, I meant to say that employers who do not offer health insurance are weaker financially 98% of the time.

    • Ron Greiner says:

      Bob, employer-based health insurance a big reason employers right-size or fire employees who are 50-years-old and older. Then employers don’t want to hire older workers because that will make their health insurance costs increase.

      Bob, it is the employer-based insurance agents that tell these employers your costs go up because of your claims experience and they will continue to rise if you don’t fire these 4 employees. This is sad for sick employees and older employees but you can’t stop these agents from ratting them out.

      Employer-based insurance is really bad for older employee because they can’t keep their jobs or get hired again when they lose their jobs. It’s just heart breaking when employers throw you aside like an old worn out shoe.

      • The employment data show it is the young who are having trouble finding employment.

        • Ron Greiner says:

          Dr. Graham, are you saying corporate America doesn’t care about hiring older more expensive employees for health insurance? Are you suggesting that corporate America is not terminating their older and sicker employees so they won’t have their claims experience increase their insurance costs?

          If I were you I would not answer these questions.

          Corporate America prefers older sicker employees indeed, not.

  20. Lee Benham says:

    Anything the government does will be a death spiral for employer based insurance.
    If we go with age based tax credits and a high risk pool like the republicans are proposing. How will the market adapt? What kind of insurance will people want and what risk will they be transferring?
    If we have a high risk pools that are guaranteed issues then all the people will have to do is insure themselves to get to this high risk pool and the cost of the high risk pool.
    Healthy People will use the tax credits to purchase insurance plans to cover them to the next enrolment in the high risk pools allowing as much money as possible to accumulate in their HSA accounts. They will purchase Life insurance with living benefits and disability benefits to help pay for the cost of the high risk pools if they become sick and need to utilize them.
    Healthy employees will jump at the refundable tax credit leaving only the sick on employer based plans.
    The individual market will explode and price will drop because they are only covering the healthy.
    As insurance companies churn their clients by issuing new policy forms they will weed out the sick and forcing them into high risk pools.
    Employers will respond by utilizing the Individual tax credits and setting up Premium only HRA plans along with funding employee HSA accounts.
    The bottom line is nothing can be done to save employer based insurance. The public just doesn’t know it yet.

    • Ron Greiner says:

      Lee, you are correct that the public is totally uninformed about the coming destruction of employer-based health insurance. I think some here though are starting to understand after we have beat it into their beady little heads over and over again, like Barry.

      BUT, there are some others that know and that would be the fat-cat CEOs of the employer-based health insurance companies who are currently sweating bullets. Trust me, those who are going to lose billions of dollars know that very soon they will be just a bad memory of the pea-picking-past. Sell your United Health Care stock NOW at $157 a share before it drops to ZERO!

      • A frontal assault on employer-based benefits, although exciting, would have zero chance of success.

        • Ron Greiner says:

          John, no matter how much you want to save employer-based health insurance you my good buddy will have ZERO chance at success. That is what Lee is telling you. This is not polling that you can spin this is called MATH.

          Republican age-based tax credits will suck the healthy out of the over-priced dangerous employer groups which leaves them those lovable sickos. Fine, tell people not to sell their United Health Care stock and lose the opportunity to save their wealth. I don’t care but even you John will figure it out soon. Lee says he is going to draw you a picture with crayons.

        • Bart I says:

          I agree, John.

          But the main point I have been trying to make for the past few years is that a tax credit for healthy people– one that has the effect of nullifying the employer exclusion– is tantamount to a frontal assault on employer-based benefits.

          But it doesn’t seem that difficult to design a tax break that doesn’t directly undercut employer benefits, one that would still allow an alternative system to grow.

          • Bart I says:

            Actually “nullifying” was the wrong word for that sentence as constructed. I should have said something like, “one that nullifies the risk pool function of the employer exclusion.”

          • Barry Carol says:

            From what I’ve read so far, people with employer coverage will not be eligible for age-based tax credits. They will only be available to those who must buy health insurance in the individual market because they don’t have access to ESI. We will need high risk pools plus additional subsidies to take care of individual market buyers who can’t pass underwriting. Those who lose employer coverage because they get too sick to work or, more likely, get laid off or fired, will be eligible for high risk p0ols, age-based tax credits and additional subsidies if they can’t pass underwriting. I think that’s about as much as the individual market can realistically expect to get through the political process.

            • Bart I says:

              If you have underwriting + subsidized risk pools, then there’s no need for tax credits, age-based or otherwise. Unless they are used only for the risk pools and comprise part or all of the riskpool subsidy.

              • Ron Greiner says:

                Bart, please. Age-based tax credits are available for personal, portable and permanent Individual Medical (IM) insurance and High Risk Pools. Plus the High Risk Pools are going to need additional funding too.

                The High Risk Pools are meant to keep the cost down for the majority on low-cost IM.

            • Bart I says:

              But I understand, you’re probably talking about what you’ve seen in the various proposals.

            • Ron Greiner says:

              Barry, are you saying if an employer offers health insurance for the employee’s spouse and child that costs $1,213 a month they are disqualified for Republican age-based tax credits exactly like the nightmare of Obamacare?

              I read Dr. Tom Price’s plan and he says the citizen has a choice to take employer-based insurance or the age-based tax credits but not both. That is what Lee and I have been trying to tell you and that is the reason you have decided to start voting Republican if you remember.

              • Barry Carol says:

                “Barry, are you saying if an employer offers health insurance for the employee’s spouse and child that costs $1,213 a month they are disqualified for Republican age-based tax credits exactly like the nightmare of Obamacare?”

                No I’m not saying that, Ron. I assume that there would be some reasonable definition of what constitutes AFFORDABLE access to employer coverage. If the out-of-pocket contribution toward the premium for individual and / or family coverage exceeds a certain percentage of pretax income, it would be deemed unaffordable and the individual and / or family would be eligible for age-based tax credits.

                At the same time, I also assume that there would be some minimum actuarial value that gets defined as qualifying ESI coverage. If it’s a bare bones plan with an actuarial value of less than, say, 40 to 50, the employee can take his age-based tax credit into the IM market if he wants to.

                Giving all people with ESI coverage a choice between sticking with ESI and taking the age-based tax credit probably will run afoul of CBO budget scoring and how to pay for it. That’s why I predict that, in the end, most people with ESI coverage will not qualify for an age-based tax credit unless they qualify for one of the exception tests listed above.

                • Lee Benham says:

                  Barry, Let’s assume you are correct and people with access to employer based plans will not qualify for age based tax credits.
                  If that is the case then any Employer who offers insurance is being financially irresponsible to the employees and breaching their fiduciary duty to work in the best interest of the employee.
                  Employers who offer coverage would be disqualifying every employee from their personal tax credit along with the employee’s family.
                  Employers will cancel group plans allowing the employees to claim their individual tax credits and then subsidies with premium only HRA plans and fix dollar deposits into employees HSA accounts.
                  Like I said there is no way to save employer based insurance.

                  • Barry Carol says:

                    Lee, corporations (employers) do not have a fiduciary duty to work in the best interests of their employees in terms of compensation. They have a fiduciary duty to their shareholders first to offer products and services that customers want to buy and do that at a competitive cost so investors can earn an adequate risk-adjusted return on their capital.

                    I also don’t think HRA plans and fixed dollar deposits into an HSA account will pass muster in terms of qualifying for the age-based tax credit. The only thing that will pass muster is canceling ESI and replacing it with a fully taxable wage increase or with nothing at all if the employer thinks it can get away with that. That’s my prediction, again, mainly because of the realities of budget considerations, especially when we already have a large federal deficit.

                    • Allan says:

                      “and replacing it with a fully taxable wage increase or with nothing at all”

                      Barry, that is one thought. I wonder if with all the road blocks to sensible insurance in part created by the ACA and Employer-sponsored healthcare it would be possible to gradually reduce the tax benefits and add tax credits to the rest that do not rise with inflation. We keep applying band-aids that provide deeper holes to dig out of. We need a long term solution that reduces complexity.

                      That could leave the employer with the responsibility of paying the residual tax due slowly so the employer gradually changes his mechanism of insuring his employees.

                    • Barry Carol says:

                      If politicians debating ACA repeal and replace or broad based tax reform determined that it was too heavy a lift to get rid of the ESI tax preference all at once, there is no reason why it couldn’t be phased out over five or even ten years instead. Age-based tax credits could be phased in over a similar schedule.

                      The same concept of a gradual phase out of the home mortgage deduction or the charitable deduction over a period of years could also be considered as an alternative to immediate elimination.

                    • Allan says:

                      Barry you should have stopped before “Age-based tax credits could be phased in over a similar schedule.”

                      Why would a millionaire need a tax credit?

                      Why do we have to make healthcare legislation so complicated with so much government intervention? That doubles the price of healthcare which is a greater amount than any benefit provided to the vast majority of the population.

                    • Lee Benham says:

                      Barry you are incorrect .
                      I suggest you study ERISA


                    • Lee Benham says:

                      Employers will drop there sponcered plans because it makes financial sense. They will replace what they used to pay in premiums with HRA and HSA contributions.

                      Employers based benefits are dead. Nothing can stop there demise . Just like that astroid that killed the dinosaurs

  21. Lee Benham says:


    This has nothing to do with a frontal assault. It will happen over the next 5 years . Small employers will be the early adapters. Followed by mid size companies and then large companies. Employer plans will be in a death spiral as soon as individual age based tax credits become law. There is nothing anyone can do to stop its demise.

    • Ron Greiner says:

      Lee, get your crayons out please. You have to make it even more simple for some people.

      • Lee Benham says:

        Crayons are out.
        I would like to amend my answer and agree with John. The employer based market will not meet its demise because of a death spiral. Employer based plans will not survive long enough to enter a death spiral because the healthy and young employees will leave and employer based plans will cancel because of participation requirements. This will happen long before they enter the death spiral.
        John, take out you NCPA policy and look at the eligibility clauses that Ron talks about and then look at the participation section. Tell us what is it? 70%-80%? Soon insurance companies will mandate 90% then 100% to delay the death spiral.
        If you like your plan you won’t be able to keep your plan because the young and healthy will bail.

        • Ron Greiner says:

          I bet it is 70% participation requirement.

          These employers will be begging, “Don’t take those Republican age-based tax credits and getting that free health insurance. Keep paying $1,000 a month to add your family to the company’s plan because you have to for the team here. Don’t you care about the other workers? I know you could save enough to buy a new Cadillac and a new boat but that is not important!”

  22. Bob Hertz says:

    “The individual market will explode and price will drop because they are only covering the healthy. As insurance companies churn their clients by issuing new policy forms they will weed out the sick and forcing them into high risk pools.”

    Lee, this is a very dramatic couple of sentences. It might be a very good thing.

    My question is, who is going to make this happen? Do the Republicans have the nerve to return us all to indvidual underwriting? I do not think that most of them even understand it.

    None of the current alternatives even come close to this.

    • Ron Greiner says:

      Bob, none of the politicians understand this. All they have to do is age-based tax credits and the healthy are gone from the employer groups leaving employers the sickos. Lee is correct and it is all to simple.

      Lee’s problem is he is across the river from Blue Cross of Iowa and the old policy form is their trick to dump their liabilities or the sick. Blue Cross trained their customer service people to say, “You are in an old pool. Would you like to apply for a new Blue Cross plan?”

      The people of Iowa say, “I’m in an old pool.” I kid you not Bob.

    • Lee Benham says:


      why do we need high risk pools if we are not going back to underwritten policies? You don’t need continues coverage or guaranteed issue if we have high risk pools. You have one or the other but not both.

      • Barry Carol says:

        What happens if you pass underwriting but then your insurer later goes out of business or withdraws from your state or region. Don’t you need continuous coverage to go to another carrier if you got sick while you were insured with the original carrier and can’t pass underwriting now? Or, even though you bought underwritten, guaranteed renewable insurance from the first carrier, is it reasonable to force you into a high risk pool now as the only insurance option available to you? That doesn’t feel right to me.

        • Lee Benham says:


          It doesn’t matter. Insurance companies will churn there business and issue new policies forms that healthy people will qualify for and the sick ones wont. The rate increases on the old policy forms will drive people to the high risk pools because that is what they are for. Once you become uninsurable you will go to a high risk pool. That is how the insurance business works. You will never see a home or auto insurance company buying damaged property so why would a health insurance company want damaged goods?

          • Barry Carol says:

            So we should just let insurers cover healthy people and as soon as they get sick then dump them into a high risk pool largely paid for by taxpayers. Great.

            At least Medicare Advantage insurers have to take all comers and CMS pays them a premium based on a combination of their bid and each individual’s risk score. That sounds like a more reasonable approach to me but all of part A costs and 75% of Part B are paid for by taxpayers plus the small number of high income folks who have to pay the IRMAA surcharge.

          • Bart I says:

            Most people who advocate underwritten IM point to guaranteed renewal. This just calls into question the usefulness of guaranteed renewal.

          • Bart I says:

            Not saying it’s good or bad, only that the guarantee is not really a guarantee.

            • Lee Benham says:


              Every individual policy I ever sold was guaranteed renewable until obamacare made them illegal , now plans are one year plans. Insurance companies are in the business to make money not to pay people’s bills. Every insurance Company uses new policy forms to get rid of higher risk clients. Home,auto ,health,life,Medicare supp, they all do it. That’s why clients should shop every few years for better rates .

              Guaranteed issue reminds me of the tommy boy movie .
              I can crap in a box and mark it guaranteed but all you end up with is a guranteed peace of 💩

              • Bart I says:

                You mean guaranteed renewal? Same idea I guess.

              • Barry Carol says:

                But Lee, the guaranteed renewable right is only as good as the insurer staying in business and continuing to sell policies where the member lives. If coverage is lost because the carrier is no longer in business or withdraws from that region, the member will be subject to underwriting by the new carrier which is may not be able to pass. Even that might be OK if high risk pools are available at reasonable out-of-pocket cost with the rest of the premium subsidized by taxpayers. However, as noted many times, the history of high risk pools is abysmal. During their heyday, they never covered more than 200,000 people at any given time and most of them weren’t covered very well and at quite high cost to boot.

                • Lee benham says:

                  Why is that any different than how employer sponsored plans operate now?
                  If a company goes out of business the insurance does not continue. If the company providing the coverage goes out of business so does the coverage. Why should the individual market be held to higher standers especially when in the deck is stacked against the IM market?

                  • Barry Carol says:

                    Two reasons. First, insurers are SELLING health insurance and claiming that it’s guaranteed renewable as long as you pass underwriting when you first sign up. Employers are PROVIDING health insurance on a community rated basis without underwriting for either the employee or family members. The prospective employee just has to pass a physical showing he can do the job and is not abusing drugs. If he gets laid off and has one or more sick family members, he can usually still find another job that comes with health insurance.

                    • Lee Benham says:

                      Oh Barry, No.
                      I don’t know where to start.

                      Insurance companies are selling guaranteed renewable but the price is not guaranteed and never will be. Just like group insurance.

                      Employers are not providing insurance. Its part of the employees compensation and the employee is paying the entire costs. The employer sponsored plans also have eligibility requirements and participation requirements along with experience ratings. I’m sorry my friend you can not be more wrong on this issue.

                      Bottom line is major changes are coming quickly. Trillions of dollars are at stake with the replacing of the ACA.

                      Selling insurance across state lines is going to complete disrupt the markets in the 7 states that I call communist states that have always had guaranteed issue health insurance. The number one state that will be attacked is New York. New York has never in my 30 year carrier had an affordable individual health insurance plan available because it has always been a guaranteed issue state. allowing a Midwest policy to be sold in that state will cause havoc.

                      The demise of employer based plans is happening and can not be stopped. It would have already happened if Obama would not have made HRA plans illegal. Now that they have been made legal again in the under 50 employee market all we need is a repeal of the ACA so an insurance company can design an affordable individual plan. The small groups will be gone in a short couple of years.

                      90% of the population works in the small group market. We are currently experiencing a paradigm shift on where the public will purchase health insurance.

                    • Bart I says:

                      Guaranteed renewable prices are guaranteed– to rise, as the pool closes and new clients go elsewhere. Employers don’t typically spin off new companies every few years to take their younger employees.

                      It would be hard to maintain a polite serious expression if someone told me face-to-face that ESI would have been long since supplanted with HRAs if not for Obamacare. How would one even argue that? It’s true that HSA’s are more common and deductibles are higher, but that’s happening everywhere.

                    • Bart I says:

                      Regarding high risk pools, I don’t know about other states but California used to have both a high-risk pool and HIPAA continuation coverage. Both were subsidized and served a similar purpose.

                      The main difference was that HIPAA continuation coverage was limited to people who have maintained creditable coverage and who have exhausted any COBRA rights. The risk pools as I recall were restricted by number of available openings. The HIPAA plans I looked at were decent, comparable to small employer COBRA (but maybe 40-50% more expensive). I don’t know about the risk pools.

                      Both have since been supplanted by Obamacare.

                      The point is that when talking about risk pool functionality and what it was like in the past, you really need to consider both of these. People that lost their “dangerous employer coverage” and exhausted COBRA didn’t go onto risk-pool waitlists, they went on HIPAA (if they could afford it).

                    • HIPAA continuation coverage was subsidized by state?

                • Allan says:

                  Barry, if you are unhappy with high risk pools put them in Medicaid and make them pay a premium that is affordable. Your love of Obamacare put enough people that formerly had good insurance into Medicaid so you should have no complaint.

                  There are ways of guaranteeing renewability when an insurer goes under or leaves.

                  • Bob Hertz says:

                    Lee, it is true that if the residents of New York could buy cheap, underwritten health insurance, the existing large carriers would be in a world of hurt. They would be left with only their sicker customers, and either quit the market or have stupendous rate increases.

                    The state regulators would see this coming and take some action, probably focused on banning the multistate underwritten products.

                    I do not know how this will end, your comments welcome.

                    Incidentally the same scenario could happen in quite a few other states.

                    • Allan says:

                      Bob, remember that insurers earn their profit by insuring. If they stop serving customers they die. Therefore, the insurer has the best incentive to compete in the marketplace on cost, quality and price.

        • The state mandates a reinsurance pool or guarantee fund.

      • I understand the Republican idea is to continue to forbid underwriting for those who have maintained continuous coverage. This means if you drop coverage for a period (probably like HIPAA) you will be subject to underwriting and you will go to high-risk pool if you are sick. The challenge is if the high-risk pool is “fully funded” (whatever that means) and has the same access to care as among the continuously insured, why would anyone remain continuously insured?

  23. Ron Greiner says:

    This just out from The Wharton School on Republican Reform of Obamacare. These crazy economists are lost. They interview a Socialist babe from Robert Wood Johnson Foundation and she says about Republican age-based tax credits:

    –…”particularly those who are 26 or 27 years old who have just moved on from their parents’ policies — who will not be able to afford [coverage] and we will lose them from the market,” she said. She saw an “inherent unfairness” in lower-income younger people not getting much in the way of subsidies, while older people who are quite wealthy would qualify for them.”—

    What a LIE. A 22-year-old should take the credit and get on personal, portable and permanent Individual Medical (IM) insurance. What happens if they get MS at 24 like my daughter. Employers may charge $500 a month for a child and then their insurance TERMINATES at 26-years-old. The Republican tax credit is $1,200 a year for insurance would pay 100% of the premium with the right deductible. These people are lucky I wasn’t interviewing them to stop their LIES. (it’s on radio too – listen to it and laugh)

  24. Bob Hertz says:

    Ron, you are right on about Blue Cross of Iowa, but the mass movement out of employer plans will only happen if someone restores full underwriting in the individual market.

    My question to Lee was “who is that someone?” And how will this someone or group of someones get past bitter opposition from Democrats.

    Michael Cannon does talk about going back to underwriting, but man he seems alone in this as far as nationally known voices are concerned.

    • Ron Greiner says:

      Blue Cross of Iowa is sneaky and smart. Nobody is going to jump into Individual Medical (IM) without medical underwriting because they are afraid of the alcoholic that needs an $800,000 liver. If we want 100 companies competing in 10 years we must have medical underwriting.

  25. Bart I says:

    John, Devon,

    It seems the idea of killing employer health insurance is surprisingly popular. You should probably add “Eliminate Employer-paid Health Benefits within Five Years” to your home page and to any future policy proposals.

    I’m sure your D.C. contacts will be eager for a new banner proposal as well.


  26. Bob Hertz says:

    I absolutely agree with Ron that if we want to have multiple health insurance companies, we need to allow medical underwriting.
    When states like Washington and Kentucky went to guaranteed issue in the 1990’s, they went from 18 carriers to none in less than 2 years.
    This is happening with the ACA, only more slowly due to subsidies.
    The only way to stop this slide would be a massive federal reinsurance program, I mean like a surcharge on every single employer insurance policy including self funded plans. This would be a bear of a tax to collect.
    In the countries that have both guaranteed issue and multiple private insurers, the reinsurance and risk adjustment taxes are visible and substantial.

    • Bart I says:

      How many of those examples included a personal tax subsidy to compensate for the added cost? None.

      Of course “guaranteed issue” is a problem, you can’t just let people join whenever they want even if partially subsidized.

    • Bart I says:

      My preference would be to allow underwritten coverage though. The community-rated offerings if used (I wouldn’t call them “guaranteed issue” because there needs to be some sort of restriction on people jumping in and out) would fill the same role as risk pool coverage– it might be possible to have something that would morph between the two.

      The community-rated / risk pool entity would have to be subsidized, either directly or with subscriber tax credits. I see no need for subsidies or tax credits for underwritten pools though, except maybe for means-tested subsidies.