Door No. 1: Stay with the employer system, pay $9,585 in premiums.
Door No. 2: Employer drops coverage, pay $5,200 in premiums.
Door No. 3: Opt out, pay $1,200 in fines.
The health care bills moving through Congress include employer and individual penalties intended to dissuade free-riding or gaming the system. But the example above, like Monty Hall, seems to cry out: "Come on down!"
Gaming the system may not simply be a matter of choice, but a matter of necessity. While providing health insurance has long been an essential benefit for recruiting employees, it could become a disadvantage in competing for modest-income workers, who would be denied large new government subsidies to pay for coverage.
Come 2013, we might begin to see help wanted ads that emphasize the lack of employer-provided insurance as a perk.
The example above is adapted from this helpful analysis by the Urban-Brookings Tax Policy Center.
It reflects after-tax outlays for insurance premiums in 2016 for a family of four with compensation (including employer-provided health care) of $54,000, or 225% of the poverty level. The bottom line is that under the Senate Finance Committee bill such a family would save $4,385 if their employers did not provide coverage.
While the Tax Policy Center analysis looks at the disparity in subsidies for those who get tax-free coverage from an employer and those who buy it from the new subsidized exchange, it doesn't look behind Door No. 3. Opting out of coverage may also become a sensible option in a world where insurers are required to take all comers at a price that doesn't discriminate based on health status or lapsed coverage.
This table shows that families with compensation below $54,000 would be even more generously rewarded with government subsidies compared to their peers who are offered coverage through an employer. This unequal treatment is necessary to hold down the cost of health care reform, but is it sustainable? James Capretta, who served as the Bush administration's top health care budget official, doubts it.
The Urban Institute's Gene Steuerle argues that the unequal treatment "violates the fundamental principle of equal justice. People in similar circumstances should be treated similarly under the law."
He also says it will distort the labor market in ways that are difficult to predict, but here's one good bet: "Large employers will react by outsourcing more low- to middle-wage jobs and switch more workers from full-time to part-time employment. Such incentives toward a two-tiered labor market, partly segregated by income, aren't new, but they will expand under this type of reform."
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