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Employer provided Healthcare

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Employer provided Healthcare

Unread postby Ziner » Sat Oct 03, 2009 2:33 pm

So I started my MBA, and we have a case concerning employer provided healthcare. We are supposed to decide whether to advise the CEO of XYZ company on whether or not it would make sense to instead pay people more money so they can go out and get a plan that fits their specific needs.

I thought it would be interesting to post here, first because I would be interested in hearing everyones thoughts as I compile my research for this and second I thought it would be an interesting topic to discuss. Is employer healthcare helping to keep insurance costs high because the increase in costs do not directly come out of their paycheck? (at least typically) Would the system be more efficient if people got to specifically pick their plan after comparing multiple companies and plans. From first hand experience I have never had more than 3 or 4 choices for a plan. Anyways I figured posting this was worth a shot at getting some differing opinions. Any really great posts will be cited in my case using the APA guidelines ;-) ;) :wink:
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Re: Employer provided Healthcare

Unread postby hebner20 » Sat Oct 03, 2009 4:13 pm

Ziner wrote:So I started my MBA, and we have a case concerning employer provided healthcare. We are supposed to decide whether to advise the CEO of XYZ company on whether or not it would make sense to instead pay people more money so they can go out and get a plan that fits their specific needs.

I thought it would be interesting to post here, first because I would be interested in hearing everyones thoughts as I compile my research for this and second I thought it would be an interesting topic to discuss. Is employer healthcare helping to keep insurance costs high because the increase in costs do not directly come out of their paycheck? (at least typically) Would the system be more efficient if people got to specifically pick their plan after comparing multiple companies and plans. From first hand experience I have never had more than 3 or 4 choices for a plan. Anyways I figured posting this was worth a shot at getting some differing opinions. Any really great posts will be cited in my case using the APA guidelines ;-) ;) :wink:


I am not exactly sure what your assignment was but you brought up 2 points.

1) Have employers pay employees more money and then get their own health care
2) Is employer provided healthcare enabling the system to work in dysfunctional way

Regarding item 1 - Would I recommend a CEO to pay his employees more per month so that they could go out and get their own health care? No I would not because as you may already know under current tax laws that would take a fully tax deductible cost for the employer and a tax free benefit to the employee and make it taxable to the employee and add extra cost to the employer in the form of payroll taxes. (7.65% for SS & Medicare, 1-8% for workers comp and 401k match)

Regarding item 2 – Yes I believe employer provided healthcare is part of the problem with our system. We need to get to a consumer driven health care model that places an incentive in the hands of the person paying for and receiving the treatment to hold costs down. That is why Health Savings Accounts (HSA’s) have become popular recently.

In case you are not aware a HSA is a plan that allows for tax deductible contributions for medical care similar to a 401k. You can set aside 3,000 if single and 5,950 for family coverage. It is used in conjunction with a high deductible plan that has a deductible of at least 1,150 for single and 2,300 for family. Since it is a high deductible plan the premiums compared to a traditional plan are generally lower by as much as 20%. (The employer is rewarded with lower premiums for assuming some of the risk.)Typically an employer will provide some money to cover your deductible - as much as half of the deductible into your account. What makes this work is that the deductions that you make that are not used can be rolled over from year to year and belong to you and you can take the money with you even when you leave a company. The incentive to keep costs low is now in the hands of the consumer because he spends his money first (his deductible amount) and if he does not spend all his money he keeps it for later use while getting the tax advantage. What typically happens is that the consumer asks for the generic drug, does not ask for an unneeded test or refuses tests that are of questionable value just to practice defensive medicine to avoid a lawsuit, and by not going to the doctor for a hangnail etc.

This is a good way under the current tax laws to make the system work better. To really make things better the following changes that need to be made:

Tort reform - To stop the practice of defensive medicine to avoid massive lawsuits
Tax Equality – Offer consumers the same tax advantages as businesses
Consumer Choice – Widen consumer access to competitive insurance markets
Open Competition – Break up medical cartels and monopolies
Global Innovation – Liberalize the approval process for new treatments

I really need to get a life if i am doing this on a Saturday! :thumb up:
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