Understanding the Health Care Debate Part 2

One possible solution to respond to the problems would be a proposal by The Hamilton Project. The Hamilton Project details sound solutions for evolving beyond traditional employer-sponsored health insurance. The main tenants of their proposal include:

A. State established “insurance exchanges”
B. Shift employers traditional role as sponsor to facilitator of coverage
C. Reform of the tax laws to more fairly handle the needs of our needy

A. A state insurance exchange can be thought of as a stock exchange on Wall Street. Although the insurance exchange would not exist to make money, it would serve to bring together the major players in health care; insurance companies, regulators, and consumers. A series of state determined minimums could be established as the ground rules and those insurance carriers wanting participation can sign on to compete with their various products. Care must be taken not to create any new regulation, enlarging the already oversized bureaucracy and costs. A simple mandate that ERISA approved health plans would also meet exchange minimums should be enough.

B. Instead of employers, small to medium sized businesses in particular, sponsoring health insurance plans with their typically small risk pools and high premiums; they could act as facilitators as their employees gain access to their respective state health exchanges. The employee and his or her family may now have access to a wide array of health plan options which would be more likely to fit their unique health care needs. A younger couple may elect a high deductible cheaper policy while a single woman in her early 60’s may require a low deductible plan.

As facilitators, the employer would deduct the required premiums from their employee’s paychecks and transfer that to the health exchange, which in turn, would pay the respective insurance company direct. Employers are used to this role already when it comes to deducting taxes and other benefit elections for employees such as 401K contributions or health savings accounts.

As employees change jobs much more often in our postindustrial service economy, their health coverage would remain intact since their previous employer merely acted as a facilitator. If their new job participates in the insurance exchange of that state, it’s a simple administrative change for the continued collection of premiums. An individual or family without work could have premium payments deducted from state unemployment compensation or simply pay the exchange direct for continued or new coverage alike. Simple automatic deductions from a bank account or even a credit card could suffice as payment.

It was by accident that our health insurance became so rooted in our employers and bringing us a whole host of concerns for us to ponder before switching jobs or on termination:

1. Can we afford to lose our health insurance as we endure the new employers waiting period for another policy?
2. Can we afford the high cost of COBRA health insurance during the transition?
3. Will our trusted family physician be equally accessible on my new employers sponsored health plan?
4. Does my new employer even offer health insurance and if not how many months of COBRA continuation coverage can we afford?
5. Will a previous ailment be considered a preexisting condition with our next provider of care and therefore disqualify me for coverage altogether?

All these concerns would be eliminated by providing this alternative to employer sponsored health insurance. Larger firms may still desire to offer their ERISA approved health benefits and that would be just fine. As previously mentioned, how we became so heavily reliant on our employers for our health insurance when we handle most other insurance needs on our own was incidental. From The Hamilton Project’s report, page #7, Box #1:

Wage controls imposed during World War II, which gave employers the incentive to offer, and employees to accept, uncontrolled fringe benefits, including health coverage, because benefits were not subject to controls
A series of tax rulings, later codified in the landmark 1954 federal tax law, which exempted such benefits from taxation, providing a major tax advantage for employer-sponsored coverage
A 1948 ruling by the National Labor Relations Board that health benefits were a legitimate subject of collective bargaining, further spurring the growth of employment-based coverage, especially in unionized firms.
C. Tax laws presently favor employers and upper income earners because of the lack of any cap on an employer’s contributions to health plans. Employers receive a tax deduction for contributing to an employee’s health coverage costs. Unlike other employee compensation benefits, there is no limit on this exclusion. Therefore, the greater the coverage selected, the greater the tax break from Uncle Sam. The total revenue loss realized with this tax treatment in 2006 was said to be 208.6 billion dollars alone.

The bias in the disbursement of these 208 billion dollars exists because unless your employer offers coverage you can’t even touch the lucrative tax break. In addition, as stated above, the tax break is skewed to those in higher compensated jobs. The average annual tax subsidy for covered employees was $2778 in 2006. Low wage earners, those making less than $10.43 an hour, realized a subsidy of only $2268, while on the high-end, those earning more than $23.07 an hour, realized average subsidies of $3283. In essence, those who need the help the most don’t get it while those that seemingly need less aid receive the most tax benefit.

The Hamilton Project states the Federal government should cap the present tax exclusion for employer-sponsored insurance and create a refundable, advanceable, and assignable tax credit for lower-income families. A refundable tax credit would allow low-income families who likely have no federal tax liability to receive the credit before the April 15th filing deadline each year based on an estimated 0 tax liability. The assignability part comes into play whereby an individual is then allowed to allocate their credit towards the premiums due at the health exchange.

Here’s the least you need to know. Yes, our health care system is broken. Nearly 7 million citizens cannot afford to protect themselves or their families with health insurance. Still though, we do have the best health care system in the world. People who can afford a ticket to the United States come here all the time with health care needs that their own socialized or nonexistent systems fail adequately to address. Our technological advances in medicine alone have contributed not only to the high quality service available in the United States but to the cost of these services as well. To dummy down our medicine and procedures available would be a death sentence to millions all over our great nation and the world alike. Let’s not go backwards by devising such plans that will ultimately require rationing of health care. There is no reason our life expectancy should decline as we seek merely to counsel our seniors about alternative options rather than continue to provide for their needs. Rationing will more likely prescribe an early death sentence to our seniors than the medications they need to continue their long and we hope fruitful lives.

There is no liberal panacea that will adequately insure everyone, prevent rationing, and preserve the highest quality medical care this world knows. Medicare will be out of money by 2017 and Social Security will be bankrupt by 2035. Medicare Part D, the prescription drug plan that President George W. Bush signed into law in 2006 is way over budget already. This great nation became what it is by the selfless and hard work of millions of Americans. There’s just no substitute for everyone putting their best foot forward in hopes of keeping themselves out of the inevitable cracks that plague all free and competing societies.

Please feel free to comment below or pass this article along to friends and family so that we may spur this debate at home where it matters and not in Washington. When you arrive at your own decisions, be sure to pass them on to your Congressmen, Congresswomen, and Senators.