Obama likes to say that his plan does not kill private insurance. He likes to say that he is â€œadding choiceâ€. This is patently false, and you should be scared. If the Obama plan passes (currently in debate in the House!), you will eventually have no choices except the government choice.
The House plan allows employers to chose: either they can provide private insurance and pay nothing to the government plan, or they can simply pay 8% of payroll to the government and everyone gets the government plan.
Today, employers are already paying more than 8% of payroll for healthcare premiums. In fact, small businesses are paying between 11% and 14% of payroll to health insurance premiums. With medical costs rising, this figure is only going up.
So even if your employer doesnâ€™t switch to the government plan now, they eventually will. A reduction in wages by 6% can be achieved by switching your healthcare provider? What board of directors *wouldnâ€™t* switch?
Now you might, like Obama, believe that the health care insurers are making too much in profits, so the private insurers just need to reduce prices. Iâ€™m sure they will try to compete with the new taxpayer-funded pricing. Keep in mind, however, that while a cut from 14% of payroll to 8% of payroll is only a 6% savings for the company, that represents a 43% drop in revenues for the health insurer. These companies will need to cut costs to reflect the new pricing; which roughly translates to a 43% drop in covered care. Because of the reduced coverage, this will give employers all the more reason to switch the the simple, no-overhead plan â€“ the government plan. As more employers switch, more private insurers will go out of business. It is just a matter of time.
Oh â€“ and how did the government calculate the figure for an 8% payroll tax? Nobody knows! Should it be 9%? 7%? Nobody knows! It appears to be a number masterminded to drive Health Insurers out of business.
Obama is about taking away freedom and taking away choice. Government healthcare does improve healthcare for 10% of Americans, but it makes healthcare worse for 90% of Americans.
9 thoughts on “Why You Will Not Have Private Health Insurance If Obama Succeeds”
While I don’t disagree with most of what you said what I do disagree about is the improvement in health care for 10% of people vs. worse health care for 90%. Where did those numbers come from? If those percentages were reversed should we still be scared?
I know one example isn’t statistically significant but I wonder what kind of coverage someone would get for this 8% and how it would compare with the majority of plans out there now. What plans are out there now and how many people are on each of the plans? I mean, sure there are 100’s of plans but some cover 100% from the very first dollar and have little or no copays. Some cover only, say 70% or 80% of each incident to some max out of pocket amount (say, $5000). And then there are those scary high-deductible plans where there are a ton of exceptions and only coverage for major accidents.
And, sure, 8% is probably out of thin air . . . but what budget have you ever seen that wasn’t pretty much made up out of thin air? 🙂
To me the fear is that even after lots of people are on these plans the government can change that 8% to 9% . . . and if they don’t do that they change it from 90% to 85% covered . . . just like the same erosion that has happened to health care plans all across America these past few years.
Employer-provided health insurance came about out of a need to compete for talent. During WWII (if I remember correctly), the government capped wages to head off inflation, and workers were scarce because of the war effort. Companies in need of talent and unable to raise wages started to offer “benefits”, including health insurance, to attract employees.
Initially, yes, a lot of companies will choose the 8% government option. But I don’t think it’ll be long before many larger employers will re-introduce private options as a way of competing for talent. Even now, medical plans offered to employees vary greatly in quality and comprehensiveness.
Sure, a lot of small businesses will stick with the government plan. That’s certainly better than today’s situation where most small businesses offer no health insurance at all.
Today I’m more afraid of losing my job and therefore my insurance than the inability of private health insurance companies to compete with a government-run plan. If you truly fear the proposal, then let’s hear a better solution that allows everyone a chance at affordable health care. A single health crisis in a family is one of the biggest causes of personal bankruptcy. I don’t think a healthy economy can persist with so many in such a tenuous position.
The 10% number comes from Obama. He likes to say that there are 49million uninsured Americans. Thats about 15% of the population. However, there is a non-trivial segment of the population that doesn’t want insurance – just like there is a non-trivial set of people who don’t want jobs (and hence are not considered to be unemployed even though they don’t work). So I round it to 10%.
The 90% is simply 100% – 10% (above). Coverage will be worse for everyone. Just look at Canada, where you need to wait a year to even *see* a doctor; there are many examples of patients that needed treatment for cancer, but couldn’t get scheduled for their tests until the malignancy had spread so wide that the cancer was untreatable. There are no examples of state-run health care ON THE PLANET which do not suffer from comprimised care and lengthy lines.
And your point about raising the 8% to 9% is obviously true. BTW – the gov’t plan will have monthly copays similar to what you pay today as well.
Yes – corporate executives will get better health care through very expensive private plans. But what about the average Joe?
Obama is touting this plan as though it brings *great* care to everyone. But it doesn’t – it brings expensive, mediocre care to everyone.
The cost of private insurance is going to go through the roof. As companies switch to the basically free gov’t plan, there will be fewer customers for private insurance. This will drive rates even higher.
As such, there will be very very very few companies offering private insurance to large swaths of their employee base. (Any?) It will be something that people like Obama can afford (and he will buy it, I assure you), but most companies won’t.
The bill also does not allow for individuals to “opt out” of their company’s public healthcare plan. So, if your company only offers the gov’t plan to you, it pays 8% of your salary *on your behalf*. But, you won’t be able to use that money toward a private plan. If you want a private plan, that will be your expense. And unlike your company, which pays the 8% pre-tax, you’ll be paying post-tax dollars for it. So the cost of private insurance is soooo high, you won’t pay for it.
Mike said: “The cost of private insurance is going to go through the roof. As companies switch to the basically free govâ€™t plan, there will be fewer customers for private insurance. This will drive rates even higher.”
Um, if demand goes down, then prices go down–not up.
In the UK, there is a national healthcare plan, yet many companies still offer better plans to their employees. Do they do this out of altruism? No, they do it because it helps attract employees.
I also suspect we’ll see companies offering supplemental plans that help cover the costs not included in the public plan. Just as your spouse’s plan might pick up some of the uncovered expenses of your primary plan.
Adrian – in the case of insurance, I don’t think you are correct. All insurance companies survive only if they can avoid “adverse selection”. As the big companies pull out, those remaining in the private pool will be only the really sick. Prices will go up.
Your UK example is just false. Fewer than 8% of citizens in the UK use private insurance, the rest are on the “national plan”. If companies in the UK offer it at all, I bet it’s just the executive team that gets that perk.
So, sure, Adrian, if you want to optimize for a system where choice is offered to only 8% of Americans (whereas choice is available to 90% of Americans today), then go ahead with your Obama plan.
The facts are clear – we all want health care reform that reduces costs and covers 100% of Americans. But the Obama plan gives everyone bad coverage instead of just fixing the problem of covering everyone.
I am not sure I agree with your conclusions. It will just mean that there is more competition added to the private insurance companies – this is not necessarily a bad thing!
I would expect that private insurance will offer better treatment and employers will stay with private companies even if they have to pay a little more, because it will give them an advantage when hiring. At the same time private insurance companies will need to think about improving their price/benefits ratio.
At least this is how I have been seeing things happening in Europe, even though most countries started the other way around: there initially was government insurance only, and later government allowed private insurance into the market – and they are doing well!
So, experience here does not at all back your negative view on things.
I thought about you want I saw this: (These are all real employees)
You’re article is so full of wrong, I don’t even know where to start. But with regard to Canadian hospital scarecrow, there’s way more scarecrows in the US than in Canada, you’re just blind to it. 🙂
It always amaze me when I hear that someone needs to go to a “specific hospital brand” at the other side of the city even if he lives just in front of an hospital (of the wrong brand for his insurance) or an ex-colleague telling me she couldn’t go fix her ankle at the hospital because her insurance wouldn’t cover her anymore. Or another person that had an company-wide insurance plan … that was valid in CA only, and he lived in another state. And I’m talking about wealthy people here.
You also confuse wealth and being employed. The plan is designed (AFAIK) for the low-middle class, not the unemployed.
You forget we *do* have private insurance in Canada and they *are* a competitive advantage for employers. I even use my wife’s plan since the Google’s one is poor compared to hers. Insurances are additives, well at least in Canada.
Get over it Mike, nobody agree with you. 🙂
Hey Marc-Antoine –
You’re right – private insurance for medical care is only illegal in 6 of the 10 provinces of Canada. http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=80881
Here’s an example of long lines in Canada: http://www.azcentral.com/news/articles/2009/09/27/20090927health-canada0927-ON.html
As for my article here – it’s all true; and a majority of Americans agree that a public plan is not what we want. http://news.yahoo.com/s/ap/20090909/ap_on_go_pr_wh/us_ap_poll_health_care