Job-based in­sur­ance means your em­ployer pays — and the gov­ern­ment doesn’t.

The Washington Post Sunday - - OUTLOOK - Twit­ter: @alex­is­pozen

Al­though firms may boast about of­fer­ing gen­er­ous health-care ben­e­fits, the costs of cov­er­age are largely borne by em­ploy­ees, in the form of lower wages than a com­pet­i­tive mar­ket would oth­er­wise sup­port. That helps ex­plain why in­fla­tion-ad­justed wages have re­mained flat, even while pro­duc­tiv­ity has in­creased — it’s all go­ing to cover ris­ing health-care costs.

Also, the dis­tinc­tion be­tween the public and pri­vate in­sur­ance sec­tors is not so sharp as many peo­ple imag­ine. By ex­empt­ing em­ployee and em­ployer pre­mi­ums from in­come and pay­roll tax, the gov­ern­ment for­goes hun­dreds of bil­lions of dol­lars in tax rev­enue each year. In 2016, this sub­sidy was worth $275 bil­lion. (In con­trast, the to­tal sav­ings pro­jected from the ei­ther the House’s Amer­i­can Health Care Act or the Se­nate’s Bet­ter Care Rec­on­cil­i­a­tion Act, which in­clude sav­ings from cut­ting fed­eral cost­shar­ing sub­si­dies in the state mar­ket­places, do not ex­ceed this num­ber in any year.)

The gov­ern­ment sub­sidy is what ties em­ploy­ment to in­sur­ance. Tax­ing pre­mi­ums would break the link, al­low­ing in­di­vid­u­als to choose jobs based not on the avail­abil­ity of health in­sur­ance but on their skills and pref­er­ences. Fur­ther, sub­si­dies en­cour­age overly gen­er­ous poli­cies, which put up­ward pres­sure on prices. Elim­i­nat­ing sub­si­dies could help bring the costs of health-care pre­mi­ums down.

As with any pol­icy, there are dis­ad­van­tages to tax­ing health in­sur­ance. For ex­am­ple, it may dis­cour­age younger, health­ier work­ers from join­ing their job-based plans and prod them to seek in­sur­ance in the in­di­vid­ual mar­ket, where they would not be pooled with older and sicker co-work­ers. Pre­sum­ably, the ben­e­fit sav­ings would be passed on in the form of faster wage growth, but this tran­si­tion could be slow. Alexis Pozen is a pro­fes­sor of eco­nomics at CUNY School of Public Health and a co-author of the text­book “Nav­i­gat­ing Health In­sur­ance.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.