Friday, November 29, 2013

One Thing About Obamacare That Fiscal Conservatives Should Like

Since we fiscal conservatives believe that the less the government gets involved in the economy the better the economy will function, there is plenty about Obamacare to dislike.  However much we should like the rest of it to go away, there is one effect of Obamacare that we should rejoice in.  That is the beginning of the end of government encouragement of employer-based health insurance.  I have no disagreement with the idea of an employer voluntarily offering health insurance to its employees.  However, there is something wrong when most Americans and their families obtain their health insurance through an employer.  The major disadvantage of this situation is the insured person typically loses the health insurance when he or she loses the employment, and it is no longer common for an employee to work for decades for the same employer.  Therefore, periods of unemployment also become periods in which health insurance is lost.  The reason why most health insurance is obtained through employment is that the federal government does not tax money that he business spends to provide health insurance for its employees, but it does tax the money that most individuals would spend on purchasing health insurance on their own.

How did this situation come about?  It began during World War II when the federal government imposed wage and price controls at a time when it needed to support manufacturing of military goods while at the same time millions of men became unavailable to work in private industry because they were scattered around the world fighting the war.  This created a severe labor shortage in the domestic economy.  Since employers could not increase wages without violating the law, they had to provide increased compensation by other means to attract qualified workers.  The other means included offering benefits that did not violate the wage and price controls.  The facts that tax rates were high and money that an employer would spend to provide health insurance for its employees the health insurance a very popular benefit for employers to offer.  In my opinion, it would have been simpler and would have made much more sense to end the wage and price controls.  However, the federal government is not good at doing things that are simple and sensible.

Among the consequences, both intended and unintended, of Obamacare has been that it has caused many employers to abandon providing health insurance for their employees because many of the mandated additions to coverage have made it too expensive for many employers to continue to provide health insurance.  Unfortunately, those same mandates have also driven up the cost of health insurance policies sold to individuals.  When Obamacare finally collapses under its own weight, there are going to be many proposals for health insurance reforms to replace it.  Since Obamacare has already seriously disrupted the market for health insurance, there may be an opportunity to set things right.  Therefore, I propose that if the federal government must subsidize health insurance, it do so by providing tax breaks and/or direct subsidies to individuals to buy their own health insurance rather than by subsidizing employers to provide it for them. Individuals may also be able to obtain health insurance at reduce cost by getting group rates through an organization or association that is not tied to a specific employer.  That will make it less common for workers to lose their health insurance when they lose their employment.  Also, the absence of a perceived obligation to pay for health insurance coverage for employees with free up money that employers have available to hire new employees, retain all the employees, or to increase wages.  There would be simple and sensible, but given the history of the way the federal government works, the fact that something as simple and sensible may decrease its probability of happening.

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