Wednesday, August 26, 2009

Private insurance, competition and who pays

This is a very interesting post with many links, discussing the limits of the competition among insurers to hold down costs in a system in which so many people get employer provided health insurance. The argument goes like this: On the one hand, employers are not great purchasers/arrangers of health insurance because employees pay for insurance costs via lower wages, so employers aren't incentivized to try harder. On the other hand, because premiums paid by employers on behalf of their employees are excluded from taxation, this means that workers do not face the true costs of their insurance.

This means that neither of the purchasers (employers or employees) are properly incentivized to try and hold down costs.

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