December 28, 2009
Roland Benjamin: Health Care Calculations
For those following the health care debate, this will come as little surprise. Linking the massive reform bill to practical, everyday application has largely been ignored by our lawmakers.
A recent non-partisan poll indicated that 91% of Americans with existing health coverage are at least somewhat satisfied with that coverage. The bill being debated in Washington does nothing to protect this.
Despite my business's currently competitive benefit package, the bill would penalize LFI, Inc., $750 per employee as the plan's design does not meet the new law's universal standard . The resulting choices would then be a) pay an approximately $53,000 fine/tax while paying $400,000 for the current plan structure, b) increase the current plan structure by $70,000 to $470,000 and avoid the fine, or c) discontinue offering health benefits and pay the $53,000 fine toward subsidies helping lower-income employees offset premiums they will be required by law to pay.
Thus, there is enormous pressure on employers to drop coverage. This is especially true when businesses pay into the subsidy pool regardless of whether they offer a health plan. These fines take effect in 2014, so preparations can be made. Some fines start sooner. The likelihood that LFI discontinues health benefits in 2014 is moderate, with hundreds of variables still unidentified.
Individuals will be required to buy a federal and state authorized plan. Consumer-directed plans enabling lower premiums will be dramatically restricted. By 2014, premiums for an authorized family plan will exceed $17,000 per year. Some will receive subsidies, but current language requires that individuals pay around 10% of household income toward their health plans (e.g., a two earner household with $70,000 in combined income will have to pay at least $7,000 in premiums before applying for federal subsidies). These subsidies phase out in households with combined earnings around $85,000. Anyone in that category will be required to pay the full premium. Additionally, because United Health and Tufts do not offer individual plans, most would have to buy a plan from Blue Cross Blue Shield under current regulations. This might change should a robust "exchange" emerge in the state. But it might not.
For employers, the reform offers an immediate and plausible exit option. Health care is one of the least controllable expenses we face and entails an immensely time-consuming process. I am forced to make decisions that must satisfy more than 50 families each year and explain to each why more dollars are diverted from their compensation toward unnaturally inflating health costs. This is not fun.
Once this law is enacted, annual renewals will see increasing pressure to drop coverage. Should reform perform some unintended miracle in trimming health care inflation, that pressure might ease. But the objective of the law is to expand coverage to the uninsured, not to tame the inflation in health care spending. Health care experts and economists around the country, including Rhode Island's own experts in a recent ProJo analysis, confirm that "Obamacare" does nothing to affect health care inflation. Within a few years, employer-provided coverage will erode until it is no longer a competitive advantage in the marketplace for new employees.
The decision to drop coverage would not be made lightly. But I would rather take the $400,000 now paid toward health premiums and divert some to employees while reinvesting the remainder in the business, knowing that those who need the most help will have a federal subsidy to buy coverage.
As an American, I am incensed by this, though. Today, the premium paid for by your employer is earned as part of your compensation. When forced to beg for a subsidy to offset health premiums, that sense of earning diminishes, and the independent spirit erodes with it. They are replaced with an unhealthy combination of entitlement and dependency that threatens the American experience.
Never in human history have the freedoms envisioned by our Founding Fathers been realized by so many. They recognized that liberty, having been endowed by our creator, could only be taken away by man and government, not enhanced. This unique American Experiment has enabled the broadest prosperity across an entire population ever known to mankind. And we have dragged the rest of the world forward with our innovations and generosities. Health care reform in its current state has the potential end this.
To prepare, pay close attention to your Health Savings Account. Should your employer discontinue health benefits after 2014, money in an HSA will be critical. Those dollars may be used to pay premiums and also may determine which plans you will be allowed to purchase by law. In other words, the greater the balance in your HSA, the more flexibility you will have.
There is still the possibility that this reform will be derailed. It faces several procedural hurdles. A Senate vote to advance the bill by Christmas was a political necessity for the Democrats, but the bill is extremely unpopular, with a significant majority of voters opposing it. Democrats want the bill out of the news as soon as possible. They hope the memories of the voting public are short. Republicans, with only 40 elected members in the Senate, do not have the numbers needed to continue the debate to make this reform right. Democrats, needing 60 Senators in lockstep, voted unanimously twice to cut off debate in order to meet the arbitrary Christmas deadline and then passed the bill with the same margin. Not a single Republican voted to end the debate or to pass the bill.
To get these 60 liberal Senators in line, the bill includes hundreds of millions of dollars to states like Louisiana, Connecticut, Vermont, Florida, Pennsylvania, and Nebraska. Because our Senators "drank the Kool-Aid" long ago, Rhode Island gets no "bacon" from Washington. Instead, we get Senator Whitehouse accusing concerned citizens of bigotry! The intellectual vacuum of his argument is an embarrassment to Rhode Islanders.
This health care bill is tyranny and is unconstitutional. Whitehouse showed quite clearly that liberals have lost the intellectual debate and resorted to slinging mud at the majority of Rhode Islanders uncomfortable with the bill. Pressure from everywhere can stop this reform. But it has the momentum to pass if nothing is done.