Making health insurance less
dependent on employment could induce workers to retire earlier or
change jobs more often, says a new report analyzing the implications
of various health care reforms.
In its 196-page study published this month, the Congressional
Budget Office analyzed the possible effects that health policy
proposals might have on the federal budget, the economy, spending on
health
care and the number of people with health insurance. The report
also attempted to predict how employers might respond to certain
changes in health care policy.
While the administration of President-elect Barack
Obama has made health care reform a top policy priority for
2009, Obama made a campaign promise to leave intact the
employer-based system, which provides health insurance for 160
million people—75 percent of whom are not considered elderly.
Despite the promises, proposals are being considered that could
change
the employer-based system. The congressional report estimates
the impact of changes to the employer-based system, particularly
laws requiring employers to provide coverage to employees.
Such a law, known as an employer mandate, could lead workers to
retire early or change jobs. It could also lead firms to hire fewer
low-wage workers, since their total compensation would be greater
than their value to an employer, the report says.
The Congressional Budget Office said employer-based health
insurance depresses wages, since the cost of providing health
insurance ultimately leaves less money for wages. American companies
that provide health insurance therefore are not at a competitive
disadvantage against those that do not, since the company pays for
health insurance by reducing wages.
Three approaches to expanding coverage include subsidizing health
insurance premiums through tax breaks or spending programs;
mandating coverage by requiring individuals to obtain insurance or
employers to provide it; and automatically enrolling individuals in
health plans, which would be harder to accomplish in a setting other
than the workplace or a government-run program.
Any of the changes could increase costs for employers, which
would pass that cost on to workers through lower wages. Lower wages
would ultimately mean lower tax revenue for the federal government,
the report says.
Currently, money spent by employers and employees on health
insurance is not taxed.
The loss to federal coffers was estimated in 2007 to be $246
billion, more than the cost of Medicaid, which totaled $195 billion
that year. But forcing employers to pay taxes on health care would
not necessarily mean a windfall in taxes for the federal government,
the report says, since people could itemize health insurance
expenses on their tax forms.
The Congressional Budget Office concedes that one option, which
wasnft discussed in the report, for subsidizing the cost of health
insurance without having to change the tax code or making it easier
for people to receive government-sponsored health insurance would be
a federal reinsurance program. Such a program would bring premiums
down by subsidizing the cost of catastrophic illness to
employers.
To read the entire report, go to http://www.cbo.gov/doc.cfm?index=9924.
—Jeremy
Smerd
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