Separating Healthcare from Employment

I’m thrilled that lawmakers seem to finally be dealing with, or talking about dealing with, or at least planning on talking about dealing with the issue of healthcare costs and separating them from employment. Utah’s own Mike Leavitt spoke last Wednesday on the White House’s new ideas about healthcare. While I’m not sure I like the proposal, I do like the fact it’s being discussed and change seems to be in the air. I’ve never seen the reason for healthcare being an employer expense, other than that it’s good for the healthcare providers. On the other hand, there are plenty of reasons for it not to be linked to employment.

First of all, the current structure is unfair. Not just slightly unfair, but wildly unfair. If your employer pays your health insurance premiums then that is compensation, but this compensation isn’t taxed. However, if you are self-employed or your employer doesn’t give you health benefits and you go and buy them yourself, you don’t get any tax break.

Second, people sometimes lose their employment because they can’t work due to health related reasons, and if their benefits are tied to employment then they lose their benefits at the time when they need them most.

Third, tying health benefits to employment creates an incentive for employers to hire young, healthy, single males. Why? Because their premiums are lower. If I hire a husband and father of four, I’m going to pay four or five times as much in premiums as I will for a YHSM. That can easily add up to $9,000 per year extra for hiring the family man and therefore puts him at a disadvantage when it comes to getting a job. I don’t usually think about this because it’s more important to me to have the right person for the job and I have a small company so the total cost doesn’t seem that big, but if you think people aren’t discriminated against in the workplace based on their cost to the company then you’re living an illusion. A company of 100 could save almost a million dollars per year by hiring single males instead of married males with children. That’s tough for an employer to ignore.

Breaking the bond between employment and health care would stimulate entrepreneurship. For every four or five employees to whom I now provide health benefits I could hire one more employee if I didn’t have to pay for their benefits. It would benefit working families and an aging population since the cost of their premiums relative to a younger workforce would no longer be an issue.

Again, I’m not sure what the ideal plan is. I don’t think it’s the one being proposed by Mr. Leavitt’s employer, and it may or may not be the plan Mitt Romney enacted in MA, but I’m pretty sure it’s not the plan we’ve got right now.

http://www.smoothharold.com Blake Snow

“However, if you are self-employed or your employer doesn’t give you health benefits and you go and buy them yourself, you don’t get any tax break.”

False, Josh. I deduct health insurance premiums at the 1040 level (self-employement itemization).
http://www.mwi.com Joshua Steimle

You are correct sir, at least partially. Can those who aren’t self-employed but purchase their own insurance get a tax deduction for it? Either way, that’s the last time I trust Mike Leavitt and Robert Reich to give me my information. From the article referenced above:

“Currently, Americans who get health insurance through their employer pay no tax on the value of the insurance while those who buy insurance on their own get no tax break and pay for insurance with after tax dollars.”

And from a Marketplace radio piece – “The [current] system doesn’t cover the self-employed, the largest and fastest-growing category of worker.”

I’ve reread these pieces to see if I’m misunderstanding something or taking them out of context, but they truly appear to be misinformed or misinforming.

Not that any of this changes the point of it all, but accuracy is good. Thanks for the correction Blake.
http://www.smoothharold.com Blake Snow

Interesting. I understand you can’t deduct health premiums at the company level for owners, only employees. Since I’m only an owner in my company, a tax professional advised me to buy and deduct health premiums at the individual level as a self-employement itemization thus having the same net affect on my personal earnings.
http://www.mwi.com Joshua Steimle

I wouldn’t know, I can’t afford my own benefits so I’ve pushed the expense off to my wife who works for the state by getting on her plan. I save $500/month or more by sticking it to the taxpayer, plus I get a plan that’s better than anything I could buy myself unless I wanted to pay $1,200 per month.
http://smoothharold.com Blake Snow

Yeah, I pay $290/month for very good coverage for a family of three. However, the value of that $290 is huge in the eyes of a very supportive wife, so it’s money very well spent. And deductible to boot.
http://www.carolynnduncan.com Carolynn Duncan

Besides all of the that, there’s the practicality that people switch jobs so often, but their health needs and risks remain constant. And to boot, there’s always the 30/60/90 day wait period, etc.

Why should car insurance be mandated and provided at such a “cheap” rate (in comparison), whereas health care is ridiculously priced and tied to an extremely finicky workplace where people change jobs as easily as their socks?
http://www.simplehealthquote.com Jared Echols

I think employer based insurance isn’t a very good idea, so I agree with the author in that regard. We would be better off if individuals were required to purchase a health insurance policy. They would be more apt to shop for the plan that makes the most sense to them, employers wouldn’t have to be discriminatory, and those who can’t afford it could get medicaid.

Related posts:

Categories