SOCIAL ENGINEERING

THE LOGICAL CONSEQUENCES OF POOR DECISIONS

Michael Round

June 4, 2009

Individuals complain they are at a disadvantage purchasing health insurance, because they aren't afforded the same tax breaks as employees.  Businesses complain they can't be competitive in a global economy with the burden of providing substantial health benefits.  Employees feel locked in to their current job, because their insurance is not "portable".

Three (of many) gripes heard about health insurance.

Can they all derive from a single source?

What if I told you the origin of this problem is 60 years old?

WWII is coming to an end.  Inflation is a worry.  Roosevelt, worried, implements wage and price controls. 

Employers wanting to attract employees, but are limited via legislation from higher salaries.

What could they do?

They could offer employees health benefits.  At the time, such benefits were also treated as tax exempt, so the cost to the employer was tempered a bit.  This was later solidified in law.

Other employers, caught in the same conundrum, offered similar benefits.

The employer-sponsored health-care boom was under way.

The employer-sponsored health care boom is underway.  So what?  What are the consequences - the logical derivations?

If the employer-sponsored health-care boom is underway, and if Employer (and employee) contributions are tax exempt, then Individuals will be at a disadvantage trying to get their own insurance.  Try to get insurance on your own, and you'll see.

Additionally, If the employer-sponsored health-care boom is underway, then Employee insurance is tied to the business, and if that's the case, then Employees find it difficult to change jobs --- portability.  Try to leave a job and get insurance elsewhere, particularly when there's a waiting period.

Finally, If the employer-sponsored health-care boom is underway, and if Employer costs must be passed on to the consumer via higher costs, then, obviously, Employers are at a price disadvantage in a global economy.

That is:

All unintended - but expected - consequences of a poor policy.