Entrepreneurs for Guaranteed Health Insurance
posted by Frank Pasquale
I know many people who would love to start small businesses. They’ve got great ideas, loads of creativity, and even some financing. But the one thing stopping them is fear of losing health benefits. They remain tied to their current jobs out of fear that an arbitrary and dysfunctional insurance market will wipe out whatever gains they make.
Are they too risk-averse? Well, consider this story from today’s NYT:
After a long bout with emphysema an employee at Varney’s, a family-owned business in Manhattan, Kan., died several years ago. But for Varney’s health insurer, her legacy lived on. The next year, 2002, the insurer raised Varney’s premiums by 28 percent — even though most of the other three dozen employees were significantly younger and healthier than their departed colleague, who had been in her mid-70’s. And Varney’s premiums continued to climb.
So the current health insurance market encourages small businesses to get rid of their sickest and oldest employees….exactly the people who most need coverage and the social network a job can provide. And many small businesses choose not to insure at all, driving away potential employees and exacerbating America’s bigness complex.
You might think this situation would at least satisfy larger businesses–those big enough to negotiate lower group rates should get a competitive advantage. But many of them are sick of it, too. A Safeway that pays health benefits is rightly upset by the competitive advantage WalMart gains by failing to do so–or by offering stripped down plans.
My hope is that the economics of spillover effects will help us realize what a drag the lack of fairly priced, guaranteed health insurance is on labor mobility and entrepreneurial endeavors. Busineses need water, roads, electricity, and enforceable contracts to run efficiently. Perhaps guaranteed health insurance should be considered part of that essential infrastructure.
May 5, 2007 at 10:08 am
Posted in: Health Law
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Responses (3)
Nate Oman - May 5, 2007 at 5:13 pm
Of course, the other side of the coin is that the current system allows employers to offer their employees a huge tax exempt benefit, thereby getting a de fact payroll subsidy. The value of the tax exemption, of course, varies depending on the tax liability of the employee. Hence, it provides a subsidy for business that employ higher wage workers, but not for workers who employ lower wage workers, which obviously has distorting effects.
On the other hand, if there was universal health insurance, employers would have to either give employees the value of health insurance in post-tax dollars (more expensive) or substitute into some other form of tax exempt compensation (401(k)?)
John - May 31, 2007 at 1:26 am
I agree with this completely, thanks for the post.
Insurance ratings - June 23, 2007 at 3:02 am
It makes more sense for a small company and/or group of employees to pool their money and make a cash deal with a doctor, dentist, and eye doctor. They create a fund, and when one of them needs service of a one of the doctors, then it is paid from the fund. The doctors don’t have to involve health insurers with their paperwork, and they can get down to business. I think is what we will see in the future of American health care; actual health care, not paper shuffling.
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