Fortune reports that during the health care debate, AT&T, Verizon, Caterpillar, and John Deere all produced internal documents considering whether it made sense to stop providing health insurance and simply pay the fine:
AT&T produced a PowerPoint slide entitled “Medical Cost Versus No Coverage Penalty.” A document prepared for Verizon by consulting firm Hewitt Resources stated, “Even though the proposed assessments [on companies that do not provide health care] are material, they are modest when compared to the average cost of health care,” and that to avoid costs and regulations, “employers may consider exiting the health care market and send employees to the Exchanges.” . . .
Kenneth Huhn, vice president of labor relations at Deere, said in an internal email that his company should look at the alternatives to providing health benefits, which “would amount to denying coverage and just paying the penalty,” and that he felt he already had the ability to make this change under his company’s labor agreement. Caterpillar felt it would have to give “serious consideration” to the penalty option.
You might see these documents as posturing, whimsical make-work*, or simply good business planning. But I tend to think about this as an example of the Israeli day care problem: when you put prices on conduct that previously was enforced through social norms, you may increase its incidence.** This phenomenon, incidentally, would appear to be even more important when considering how to enforce the individual mandate .
*The whimsy story is supported by the unwillingness of the firms to stand behind their analysis today.
**Of course, you might object that employer-provided health insurance results from market incentives, not social practice, but I’m not so sure those concepts are easily segregated.