Thursday, May 6, 2010

Will big companies drop insurance benefits?

A story about some large corporations considering dropping health insurance plans and paying penalties that would accrue if their so-dropped employees got government subsidies in health exchanges. A couple of thoughts about this.

First, I don't believe them. Second, there is nothing to keep them from dropping coverage today, or last year. Third, I wouldn't mind if they did it, because getting rid of the tax exclusion of employer paid insurance is the next step toward having a chance to control health care costs. If all the employers agree to drop employer-based coverage, that is certainly a way to get rid of the tax exclusion! Fourth, it would be very dislocating if it happened, meaning it would change things. But, everyone says the system is messed up and it needs to be dislocated. Fifth, from a research standpoint, it would be fascinating to see some companies drop employer based cover while others did not. You could see what would happen to wages in the company dropping insurance coverage (because employees are mostly paying for the coverage now through lower wages). If employers drop coverage, wages will rise, and tax receipts will increase since wages are taxable while employer paid premiums are not. If all employers dropped cover simultaneously, maybe wages wouldn't rise as much since no company would have as much incentive to increase wages if no one else did...they could quietly collude. Even if that happened (employers dropped cover and didn't increase wages, in which case all econ text books would have to be re-written) then the businesses would have a huge infusion of 'extra cash' in the manner of lower expenses, which presumably would lead to increased hiring.

If FedEx dropped cover but UPS did not, then you would have a fascinating natural experiment.....the number of disserations done on that would be endless.....

Again, I don't believe it, and if it happened it would be a big change, but it is not so clear the change would be bad.


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  3. Don, Well, you are finally getting your wish. Big companies are actually dropping healthcare benefit packages. And no one's getting raises. Hmmm.

    You defined yourself to be an armchair social/political activist/observer and general rabble rouser. I expect your lab rat enthusiasm for encouraging people to jump into yet another unknown abyss and watching them squirm will be more than satisfied this go around. What's next on your weekend quarterback adjenda? AN