One of the largest issues in our health care market today is the complete dominance of employer based health care plans. This poses a problem on at least five levels:
1. It reduces the incentives private health insurers have to create a variety of products that could be used by those who do not have group coverage through their employer
2. It creates a dependence of employees on the employer for health care. In the 21st century we want employers to be able to retain top talent but not manipulate them through certain programs that should be transferable regardless of the employer.
3. It creates a one-size fits all approach for the employees of the company.
4. It creates an ethical problem where an employee’s health is a form of compensation.
5. It means if you lose your job, you lose your health insurance.
Some of these points are so obviously wrong that they merit no more discussion than proving that matter exists. Although more on this topic will be discussed at a later time, it is important to note that this dominance of employer based health care has been created, in part, by the tax treatment employers receive for offering health care. This has to end.
Employers receive a tax deduction for every dollar they spend on contributions made toward health care. It also reduces the amount of payroll taxes as employee contributions are all pre-tax. For employers looking for a break from the nearly 40% corporate tax rate, this deduction appears to be a win-win. However, it is only a win in the short term. The long term consequences are those we are now experiencing: a dearth of options for those who are employed without employer based health care, almost no private market for the low-income or retired, no options for the unemployed, and large business plans at large business prices forced into small business operations. The model is unsustainable.
A model encouraged by the Government now becomes criticized by them. Regardless of where the blame lies, reform must be enacted to establish Justice in our health care system by ending the dominance of employer sponsored health plans.
To do this, the first thing that is needed is to end the tax deduction for employer contributions to an employer sponsored health plan. If an employer wishes to contribute to a private health plan, this is another topic that will be discussed at a later time.
The second thing that needs to take place is end the special pre-tax contribution an employee makes to their employer sponsored health insurance. This special type of tax treatment is only for employer sponsored plans – it discriminates against all other kinds of health insurance type products. Let all health insurance type products be tax deductible – no matter where they come from (footnote 1). The type of tax treatment I already discussed should be favored rather than the current exemptions.
Certainly this change would have to be implemented over time and would have to include other reform in the US Corporate Income Tax code to allow private industry a chance to adjust to a truly free market system. Nevertheless, this should be a welcome change for all - corporations and individuals.
Government manipulation in the private market has in part created the problem we are now facing. Ending this preferential tax treatment on employer sponsored health plans will help place the government in its proper role, end an employee’s health as part of their compensation, reform health care in America, create an incentive for the industry to begin furnishing competitive health care products to individuals based on their needs and health care goals, and allow individuals to no longer be completely dependent to an employer for something so important. This must be an integral part in any change that is to lead to a better America.
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Footnotes
1. http://healthcare.cato.org/free-market-approach-health-care-reform
1. It reduces the incentives private health insurers have to create a variety of products that could be used by those who do not have group coverage through their employer
2. It creates a dependence of employees on the employer for health care. In the 21st century we want employers to be able to retain top talent but not manipulate them through certain programs that should be transferable regardless of the employer.
3. It creates a one-size fits all approach for the employees of the company.
4. It creates an ethical problem where an employee’s health is a form of compensation.
5. It means if you lose your job, you lose your health insurance.
Some of these points are so obviously wrong that they merit no more discussion than proving that matter exists. Although more on this topic will be discussed at a later time, it is important to note that this dominance of employer based health care has been created, in part, by the tax treatment employers receive for offering health care. This has to end.
Employers receive a tax deduction for every dollar they spend on contributions made toward health care. It also reduces the amount of payroll taxes as employee contributions are all pre-tax. For employers looking for a break from the nearly 40% corporate tax rate, this deduction appears to be a win-win. However, it is only a win in the short term. The long term consequences are those we are now experiencing: a dearth of options for those who are employed without employer based health care, almost no private market for the low-income or retired, no options for the unemployed, and large business plans at large business prices forced into small business operations. The model is unsustainable.
A model encouraged by the Government now becomes criticized by them. Regardless of where the blame lies, reform must be enacted to establish Justice in our health care system by ending the dominance of employer sponsored health plans.
To do this, the first thing that is needed is to end the tax deduction for employer contributions to an employer sponsored health plan. If an employer wishes to contribute to a private health plan, this is another topic that will be discussed at a later time.
The second thing that needs to take place is end the special pre-tax contribution an employee makes to their employer sponsored health insurance. This special type of tax treatment is only for employer sponsored plans – it discriminates against all other kinds of health insurance type products. Let all health insurance type products be tax deductible – no matter where they come from (footnote 1). The type of tax treatment I already discussed should be favored rather than the current exemptions.
Certainly this change would have to be implemented over time and would have to include other reform in the US Corporate Income Tax code to allow private industry a chance to adjust to a truly free market system. Nevertheless, this should be a welcome change for all - corporations and individuals.
Government manipulation in the private market has in part created the problem we are now facing. Ending this preferential tax treatment on employer sponsored health plans will help place the government in its proper role, end an employee’s health as part of their compensation, reform health care in America, create an incentive for the industry to begin furnishing competitive health care products to individuals based on their needs and health care goals, and allow individuals to no longer be completely dependent to an employer for something so important. This must be an integral part in any change that is to lead to a better America.
_________________________________
Footnotes
1. http://healthcare.cato.org/free-market-approach-health-care-reform
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