Health care costs are too high

first_imgGOV. Arnold Schwarzenegger and the state Legislature’s Democratic leadership are knee-deep in their special session on health care reform. And if the rhetoric on health care coming from Sacramento’s bigwigs is any indication, they aren’t just scrambling to re- arrange the deck chairs on the Titanic – they’re blowing holes in the ship’s hull in the absurd hope of getting the water to leak out faster. Both Schwarzenegger and the Democrats support a requirement that employers spend a fixed percentage of their payroll on health benefits for employees, or else pay additional taxes as punishment. Commonly called a “pay or play” law, this requirement is a totally misguided way to go about reforming health care. It would wreak havoc on California’s job market without solving the problem of the uninsured. This lunch isn’t free – it would cost somebody. And guess who that would be? AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREGame Center: Chargers at Kansas City Chiefs, Sunday, 10 a.m.In large part, it’s not businesses themselves, or government bureaucrats. It’s the worker – the little guy pay or play laws are supposed to help. Why’s that? Because employers have to pass insurance costs on to employees in order to stay afloat. Harvard economists Katherine Baicker and Amitabh Chandra recently estimated that for every 10 percent increase in insurance premiums, the average wages of employees who receive coverage through their employer drops by more than 3 percent. And even if employees have access to insurance through their employers, it’s of no use unless they can afford to cover their part of the premium, co-pays and deductible. But an increasingly large share of Californians – and Americans, in general – can’t do that. Insurance has simply become too expensive. According to the Kaiser Family Foundation, the cost of employer-sponsored health insurance has increased 78 percent since 2001, vastly outpacing inflation and wage growth. So if lawmakers are serious about reforming health care, they need to address the ever-increasing cost of health insurance. But a pay or play law doesn’t do that. In fact, it may actually have the counterproductive effect of increasing the number of uninsured by increasing the number of unemployed. Some employers won’t be able to offset all of the new costs by decreasing wages. They’ll have to take more “extreme” measures – handing out pink slips or closing up shop entirely. Economic data attest to this: Additional research from Baicker and Chandra shows that a 20 percent increase in insurance premiums reduces the probability of the average person being employed by 3 percentage points. And so does on-the-ground testimony from Californian employers. Bookstore owner Alzada Knickerbocker told Sacramento’s ABC7 news during the initial stages of Schwarzenegger’s health care crusade that “We’re already in basically a break-even situation. So you can’t simply add burdens to small business and expect that they can absorb them.” What’s a real way to cut health insurance costs and not just pass them around? Reduce the number of insurance mandates. Currently, any insurance plan sold in California has to cover (among other things) in-vitro fertilization, breast reconstruction, chiropractor visits and treatment for alcoholism. This “sweetening” of insurance packages makes them more expensive, as insurers raise prices to recoup the costs of each additional mandated service. The Council for Affordable Health Insurance estimates that California’s insurance mandates inflate the cost of a basic health care plan by as much as 50 percent. That means millions of Californians are getting priced out of the insurance market because the bells and whistles of a “standard” plan make it too expensive. And is it fair to, say, force a man to get coverage for breast reconstruction? Someone needs to remind Schwarzenegger that his movie “Junior” wasn’t a documentary. Even the public knows a bad deal when it sees one. Given the opportunity to reject a version of pay or play in 2004, the public voted no on Proposition 72. If lawmakers really want to do good, they’ll have to look elsewhere. Jill Jenkins is chief economist at the Employment Policies Institute.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img

Leave a Reply

Your email address will not be published. Required fields are marked *