A Most Twisted Logic
Those of you who know me understand that I’ve held the position for years (actually decades) that the tax code favoring employee sponsored health insurance is the most unfair and discriminatory part of our tax code. In a word, it screws the working poor.
Today the president’s Councel of Economic Advisers issued a report that says that health care reform will go a long way to offset this injustice.
Obama released a study today by the White House Council of Economic Advisers that concluded that many of the nation’s 27 million small businesses don’t have the bargaining power of corporations and as a result pay as much as 18 percent more for employee health insurance plans.
While that’s true on its cover it completely avoids the underlying cause that the tax structure provides the incentive in the first place for employers to be involved providing health insurance and rewards companies (and those lucky enough to work for them) simply due to the size of the enterprise.
What confounds me more than anything is that, in the past, progressive egalitarians haven’t been screaming from the rafters that the tax code rewards big business (and big labor) at the expense of the working poor.
Hmm, your argument suggests that our progressive egalitarians don’t really care about our working poor. That sounds fairly hateful.
This isn’t about the “working poor.” It’s about blue collar workers and the lower middle class.
Get the big picture, guys. This push for government health coverage is the result of de-unionization. Back in the 1950s and 1960s, 30 to 40 percent of the workforce was unionized and therefore had gold-plated health coverage. You never heard about people demanding government health coverage back then right?
But since then the percentage of unionized workers has plummeted. All we’re seeing on a national scale is an attempt to reinstitute the coverage the unions lost when they priced themselves out of the labor market.
Put another way if unionization had increased over the years instead of decreased, you’d have half or more of the workforce unionized by now, and nobody would be howling about health coverage.
Budge- What are you suggesting? Allow all to deduct health insurance, tax individuals with employer insurance or disallow it as a business expense.
The small group issue is more than just comparative cost. I’ve been in the position where one sick employee (a large proportion of a small group) has almost forced me to cancel everybody’s insurance including my own due to the cost. Switching to a high deductible HSA allowed us to keep an insurance program. Most of my employees have little appreciation for what I pay to buy their insurance. At one time the contribution was only $20/month and even at that pittance I always had one or two that would not take it until life caught up with them via a visit to the emergency room.
I tend, policy wise, towards individual insurance plans so that people have more appreciation for the costs involved and can address their own personal needs. To be practical though it requires governmental standardization of plans so that consumers could actually comparative shop. Unless you are an actuarial, shopping for insurance is largely blind luck.
If I had my way I would disallow the exemption for employer paid health insurance and and replace it with a refundable tax credit – capped at some level – on the personal side and/or insurance vouchers for those on the public dole. I would combine that with some measures like provider price disclosure and, as you imply, standardized insurance benefits disclosure. There’s also some other things things that I think are necessary such as restricting insurance companies for canceling policies after a claim and rules regarding timely and adequate payment (but I don’t want to get too far into the weeds.)
The problem, of course, is how to manage a transition to such a plan. For example, how do we deal with pre-existing conditions for those that are currently in employer sponsored plans? One solution might be to create a catastrophic claims re-insurance system funded by an assessment on insurance carriers covering only those entering they system with pre-existing conditions over a defined transition time range.
There are many other complications that will need to be reckoned with. But starting here addresses some serious problems that have evolved from bad tax policy like portability, price discrimination, consumer choice, informed consent, etc.
But I don’t hold much hope because A) the status quo provides a competitive advantage to large corporations and B) trade unions have significant sway in labor law and the associated tax implications. That said, there’s a strong case to be made.
It is interesting the lengths you will go to to change the tax code to equalize treatment, but at the same time be stubbornly unwilling to address any deficiencies in the private for-profit insurance model. For instance, you would create a catastrophic reinsurance model to protect insurance companies from people with preexisting conditions. That’s a long walk around the park to avoid a guy with a poodle.
You simply cannot embrace the concept of a failed model.
Worse than that, you want eliminate the one reason why private insurers are in the workplace at all – the employees are pre-cherry picked. Smaller employers, as Wolfpack pointed out, are more vulnerable to catastrophic claims, and therefore cost more to insure. Do you want to throw everyone into the marketplace to buy individual policies? That will subject us all to the glaring failures of the for-profit model.
It’s much easier to a) eliminate the for-profit model. It doesn’t work. Since we can’t do that, we can b) regulate the daylights out of them, mandating minimum coverages, nondiscrimination, and (gulp) subsidizing them when people can’t afford their premiums. Once that is done, we have eliminated the reason they run to the work place to sell their products, and we can clean up the tax code.
Mark, I proposed that a reinsurance pool be paid for by the insurance industry. How does my proposal protect them? What is does is further spread the risk across the industry so businesses are not put out of business because we’re forcing than to assume more risk than what may be now built into their actuarial models. And I’ll take that beyond those that are now insured. The same model could be applied to those not currently insured with pre-existing conditions with the same mechanism.
Secondly, you’re not looking at this deeply enough. If we eliminate group plans and force place the higher risk into the individual market we haven’t changed the dynamics of risk – we’ve just transferred it across a bigger population.
I reject out of hand the elimination of the for profit model. I don;t think you’ve made the case in the face of the fact that the system is so out of balance now due to the public/private/heavily big business subsidized system we have in place. You can’t tell me that profit model has failed because we don;t have a system that it allows it to work efficiently.
But I did endorse your notion of increased regulation, subsidies and pre-existing conditions. Pay attention. But until we change tax code we will continue to screw the working poor – which as is my real point – you don’t care about since you think it’s only a secondary concern.
And there are other issues that dogmatic thinkers (like you) on the issue assume in this debate that would make the system much more efficient with modest up front costs. For example, the French have three primary insurers (with identical products) but several dozen carriers who provide supplemental policies. The one thing they have done is to standardize claims processing with a digital real time system. My conversations with doctors tells me that a huge inefficiency in our system is that there is no standard for claims processing (forms, protocol, etc.) and much of it is paper based (although I’ll admit that my information is a bit dated since I left the insurance industry several years ago.) I am sure, however, that we can make huge strides in administrative overhead by industry standardization.
Having said all of that, this post is about the tax code and health care. It’s incumbent on you to defend that if you really want to add to the subject at hand. I challenge you to defend it and tell me why it’s fair.
So, let’s see here: Dave is proposing reinsurance as a solution to the problem of preexisting conditions. Let me think … the business model requires that they avoid sick people and payment of claims. Spreading the risk out over a larger number of insurance companies would work … because insurance companies are willing to buy into a larger pool to cover risks that aren’t really risks, but more like certainties?
You make no sense. The insurance model does not work in health care because risk is close to 100% as people get older. It’s not a matter of risk and avoidance, but rather shared costs. Why on earth do you think that insurance companies won’t insure old people? (It has something to do with their getting sick.)
So let’s see: The private insurance model has been tried and failed all over the world, and every other industrial country has either outlawed it or regulated it to the point where it has no wiggle room. But here in the U.S., where it doesn’t work as well, Dave says it’s because of government.
Oh, yeah, and I forgot. I’m dogmatic.
I’m more convinced than ever that you can’t read.
Mark, au contraire. In fact certain events create opportunity. It is evident that you are out of your depth on this matter. Back when California had it’s last major quake, commercial quake coverage dried up. Warren Buffet came to the rescue with his Berkshire Hathaway group. http://everythingwarrenbuffett.blogspot.com/2009/06/motley-fool-berkshire-hathaway-research.html
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“A few facts about our exposure to California earthquakes – our largest risk – seem in order. The Northridge quake of 1994 laid homeowners’ losses on insurers that greatly exceeded what computer models had told them to expect. Yet the intensity of that quake was mild compared to the “worst-case” possibility for California. Understandably, insurers became – ahem – shaken and started contemplating a retreat from writing earthquake coverage into their homeowners’ policies.
“In a thoughtful response, Chuck Quackenbush, California’s insurance commissioner, designed a new residential earthquake policy to be written by a state-sponsored insurer, The California Earthquake Authority. This entity, which went into operation on December 1, 1996, needed large layers of reinsurance — and that’s where we came in. Berkshire’s layer of approximately $1 billion will be called upon if the Authority’s aggregate losses in the period ending March 31, 2001 exceed about $5 billion. (The press originally reported larger figures, but these would have applied only if all California insurers had entered into the arrangement; instead only 72% signed up.)
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I’m more convinced than ever that you can’t at the world around you and absorb its painfully obvious lessons because it interferes with your philosophy.
I have the advantage here – every other industrialized country has come to the conclusion that the private insurance model cannot work in health insurance. They have come up with better solutions.
You can’t deal with it! Your model has to work! Has to work. Why, if private insurers are avoiding sick people on a micro level, we’ll just take it up a step. They wont’ avoid them on a macro level. We’ll do reinsurance!
The problem is this, and it’s a slap in the face you wont’ even feel: If such a solution had any validity at all, if insurers had any ethics about them, any desire to actually assist in the provision of universal health care, they would have tried this.
In other words, you are, as my daughter’s instructor so wisely observed many years ago, supremely stupid. There is stupid, which we can all ferret out, but your brand is hidden under layers of wicky-wacky reasoning, supported and fostered by wealth, and therefore far more dangerous. People really suffer because of you and all the others who drink your Kool Aid. Real, actual, panful suffering. Going on right now. You can’t do a thing about it, you stuffbornly refuse to see it or its causes.
You are dangerous.
Are you going to address the issue of fairness in the tax code or are you going to continue to repeat your tired argument that isn’t relevant to the subject of this post? Like I said, I’m convinced you can’t read.
Mark calling people stupid makes you sound like Obama criticizing the police. I think you are better than that.
Reprinted below is a THE PLEDGE pertaining to health care reform that the two U.S. Senators from Virginia have been asked to sign. There’s not much chance that either of these Democrats — Senator Webb or Senator Warner — will actually take the pledge. However, if they refuse to do so, it will help sharpen the debate.
My Pledge to My Constituents on National Health Insurance
1. I will not vote to expand the bankrupt Medicare program unless and until
it is first placed on a sound actuarial basis.
2. I will not vote for any national health insurance legislation that includes a public plan unless I am prepared to enroll myself and my family in the public plan. If a national health insurance bill with a public plan passes the Senate with my vote in support, then I pledge to enroll myself and my family in that public plan.
Looks like Fact Check has called “bull” on Obama’s twisted logic: http://www.factcheck.org/politics/obamas_health_care_news_conference.html
Many “pants on fire” aspects to Obama’s claims.