I.R.S. Bars Employers From Dumping Workers Into Health Exchanges

[werepossum]

Except it's really not. Is there a practicable difference between an employer sponsoring a fully-insured group plan and the same employer paying an equal amount toward a bunch of individual plans?

One of the things I like about Obamacare is the move away from employer-provided health insurance and toward individual-provided health insurance. This appears to move in the opposite direction.

 

[Jhhnn]

One of the things I like about Obamacare is the move away from employer-provided health insurance and toward individual-provided health insurance. This appears to move in the opposite direction.

Except the ACA isn't a move in that direction at all. It provides group coverage through subsidized exchanges for people who lack employer sponsored plans.

 

[Jhhnn]

Except it's really not. Is there a practicable difference between an employer sponsoring a fully-insured group plan and the same employer paying an equal amount toward a bunch of individual plans?

Outside of the subsidized Exchanges, many employees will pay substantially more for individual plans than for employer sponsored group coverage. Otherwise, group plans would cease to exist.

It is fundamentally unfair to advocate that some Exchange members pay with pre-tax money when the rest must pay with after tax money, given that subsidies are based on taxable income.

"Fully sponsored" plans, where the employer pays the whole thing, are extremely rare & have no relevance to the discussion.

 

[sactoking]

Outside of the subsidized Exchanges, many employees will pay substantially more for individual plans than for employer sponsored group coverage. Otherwise, group plans would cease to exist.

It is fundamentally unfair to advocate that some Exchange members pay with pre-tax money when the rest must pay with after tax money, given that subsidies are based on taxable income.

"Fully sponsored" plans, where the employer pays the whole thing, are extremely rare & have no relevance to the discussion.

That's not what I asked. I asked if there was a practicable difference between sponsoring a fully-insured plan or paying your employees to buy individual insurance. There is not.

First, you must understand that I said "fully-insured" and not "fully sponsored". A fully insured plan is not one in which the employer pays the whole premium, it is one in which all of the morbidity risk is borne by a commercial insurer. In other words, there is no self-insured retention by the employer. This means that the entire plan is subject to commercial market regulation, just like an individual plan.

Second, you must understand that the discussion at hand is not whether employer-sponsored plans are inherently better or worse, either from a benefits standpoint or tax standpoint, than individual plans. The discussion is whether an employer sponsoring a group plan and paying the insurer a portion of the premium (using pre-tax money) is any different than the employer giving the employee pre-tax money to buy an individual plan. In my opinion it is not. In fact, it can be worse.

We know that one of the goals of the ACA was to increase the level of coverage in individual market plans. It did that through the EHB mechanism, which actually set benefits to identical (or near identical) levels as group plans. The result was an overall increase in individual market premiums. But those individual market premiums may just be lower than similar group premiums.

My state is kind enough to provide a rate lookup tool. I've used it to determine that an individual market silver premium (2nd lowest) in Las Vegas is ~$20 per month cheaper than a comparable small group plan. In Esmeralda county it's ~$40 per month cheaper.

Admittedly large group is not small group and there may be some variation, but it at least lets us know that individual and large group are in the ballpark.

So, to the employee, there's likely no discernible cost difference between the two options.

As far as benefits go, employees may be better off in the individual market. Why? Some of the ACA reforms don't apply to the large group market, or are applied differently.

Additionally, one of the reasons that large groups are historically cheaper than individuals is due to overall morbidity being better. If the premiums are now similar between the individual and large group markets but the large group morbidity is still better then large employers "dumping" people into the individual exchanges will make premiums even better as the overall risk pool (and resultant index rate) improve.

 

[Jhhnn]

That's not what I asked. I asked if there was a practicable difference between sponsoring a fully-insured plan or paying your employees to buy individual insurance. There is not.

First, you must understand that I said "fully-insured" and not "fully sponsored". A fully insured plan is not one in which the employer pays the whole premium, it is one in which all of the morbidity risk is borne by a commercial insurer. In other words, there is no self-insured retention by the employer. This means that the entire plan is subject to commercial market regulation, just like an individual plan.

Second, you must understand that the discussion at hand is not whether employer-sponsored plans are inherently better or worse, either from a benefits standpoint or tax standpoint, than individual plans. The discussion is whether an employer sponsoring a group plan and paying the insurer a portion of the premium (using pre-tax money) is any different than the employer giving the employee pre-tax money to buy an individual plan. In my opinion it is not. In fact, it can be worse.

We know that one of the goals of the ACA was to increase the level of coverage in individual market plans. It did that through the EHB mechanism, which actually set benefits to identical (or near identical) levels as group plans. The result was an overall increase in individual market premiums. But those individual market premiums may just be lower than similar group premiums.

My state is kind enough to provide a rate lookup tool. I've used it to determine that an individual market silver premium (2nd lowest) in Las Vegas is ~$20 per month cheaper than a comparable small group plan. In Esmeralda county it's ~$40 per month cheaper.

Admittedly large group is not small group and there may be some variation, but it at least lets us know that individual and large group are in the ballpark.

So, to the employee, there's likely no discernible cost difference between the two options.

As far as benefits go, employees may be better off in the individual market. Why? Some of the ACA reforms don't apply to the large group market, or are applied differently.

Additionally, one of the reasons that large groups are historically cheaper than individuals is due to overall morbidity being better. If the premiums are now similar between the individual and large group markets but the large group morbidity is still better then large employers "dumping" people into the individual exchanges will make premiums even better as the overall risk pool (and resultant index rate) improve.

Lots of if's & unwarranted assumptions. All of which obfuscates the fact that median families & below are likely better off getting the same money as a raise, paying taxes on it & getting a subsidized Exchange plan. Employers are worse off because they have to pay payroll taxes on the raise if they give one at all. Exchange subsidies are more honest because hidden non-taxable employer subsidies are not possible.

The only reason there's any carping abut the ruling is that it cuts off previously exploited weasel moves by employers, denies them new ones. Employers would obviously prefer to pay out some non-taxable cash while putting employees onto Exchange subsidies.

It's easier & more effective for the IRS to deal with it at the employer level rather than having people fall into the trap of trying to pay subsidized exchange rates with employer funding rightfully not eligible for that purpose.

 

[Cozarkian]

Exchange subsidies are more honest because hidden non-taxable employer subsidies are not possible.

The only reason there's any carping abut the ruling is that it cuts off previously exploited weasel moves by employers,

The exclusion from payroll tax is intended as an incentive to encourage employers to provide health insurance to employees. Otherwise, financially irresponsible employees might spend their income without properly saving for or insuring against potential medical expenses.

How are employers weasels for doing exactly what was intended?

Now that people are required to purchase health insurance as an unnatural obligation of being alive, there is no longer a reason to offer this employer incentive.

 

[sm625]

This is a good decision. For too long has the cost of health care been hidden from the employee. Get the true costs out into the open by forcing the employee to pay for this obamacrap using after-tax income. Then people will be able to see much more clearly the true costs involved here, and be frickin motivated to put an end to the blatant and utter corruption in the healthcare sector. It is time to drain the frickin swamp.

 

[Cozarkian]

This is a good decision. For too long has the cost of health care been hidden from the employee. Get the true costs out into the open by forcing the employee to pay for this obamacrap using after-tax income.

Is there some law that prevents employers from telling the employee hmuch they pay in payroll, UI, health insurance premiums, etc... If the employer wants to the employee to know, I'm pretty sure they can tell them. Heck, you could probably put it right on the wage statement if you wanted.

 

[Fern]

Is there some law that prevents employers from telling the employee hmuch they pay in payroll, UI, health insurance premiums, etc... If the employer wants to the employee to know, I'm pretty sure they can tell them. Heck, you could probably put it right on the wage statement if you wanted.

When I worked for large businesses we always received a pretty statement at year-end from HR telling us how much our benefits were, primarily the HI benefit.

I'm pretty sure employer contributions for each employee's HI are reported in box 12 of their W-2.

I suppose my real point would be that employees don't much care if somebody else (i.e., the employer) is paying for it. But when the employee must write the check themselves, well that's another matter.

Fern

 

[Cozarkian]

I suppose my real point would be that employees don't much care if somebody else (i.e., the employer) is paying for it. But when the employee must write the check themselves, well that's another matter.

Your real point is a better one.

 

[Jhhnn]

The exclusion from payroll tax is intended as an incentive to encourage employers to provide health insurance to employees. Otherwise, financially irresponsible employees might spend their income without properly saving for or insuring against potential medical expenses.

Employers may still do within the usual bounds of group insurance. Large employers are basically required to do so.

How are employers weasels for doing exactly what was intended?

Because it's not what is intended. The existence of subsidized exchanges alters the parameters.

Now that people are required to purchase health insurance as an unnatural obligation of being alive, there is no longer a reason to offer this employer incentive.

As pointed out, it's required of large employers & also serves as an enticement for gaining & holding employees. Hell, lots of people who would otherwise retire keep working to age 65 to maintain healthcare coverage. That's true for many people who would receive exchange subsidies where the bottom line is still not nearly as good as employer sponsored group coverage.

And, uhh, that unnatural obligation is the direct result of requiring providers to treat individuals who otherwise couldn't pay.

 

[Jhhnn]

When I worked for large businesses we always received a pretty statement at year-end from HR telling us how our benefits were, primarily the HI benefit.

I'm pretty sure employer contributions for each employee's HI are reported in box 12 of their W-2.

I suppose my real point would be that employees don't much care if somebody else (i.e., the employer) is paying for it. But when the employee must write the check themselves, well that's another matter.

Fern

That doesn't mean they'll care more when acting as a conduit for non-taxable employer cash, either, other than some downgrading to the lowest level of coverage possible, reducing their own out of pocket in a rather short-sighted fashion. Given the imposed standardization, there's little difference between carriers for the same level of protection.

 

[Fern]

Your real point is a better one.

The concept is similar to income taxes.

In the USA it's withheld with every paycheck and many people never write a check to Uncle Sam.

When I lived in France there was no withholding. Instead, you receive one lump sum bill for the entire year's worth of income taxes from the taxing authority and must write a big mofo'ing check.

If you don't think there's a difference psychologically, we'll just have to agree to disagree.

Fern

 

[Cozarkian]

And, uhh, that unnatural obligation is the direct result of requiring providers to treat individuals who otherwise couldn't pay.

It's most certainly not a direct result, although I agree it is used as the justification. However, government-mandated coverage and denying treatment to uninsured are not the only options. Here are some others:

1. Laws that improve the ability of medical providers to collect unpaid bills, such as wage-garnishment, liens and rules preventing discharge in bankruptcy.

2. Laws that provide tax deductions, or even a dollar-for-dollar non-reimbursable credit to medical service providers with uncollectible medical debt. (With recapture rules if the debt is subsequently paid).

3. Modification of the rules for conforming loans to require proof of medical insurance as a risk-reducing factor.

4. Make medical payments a tax credit with an income phase-out to make it easier to pay bills. Alternatively, make insurance premiums and/or medical expenses a tax credit subject with an income phase-out to encourage people to buy insurance.

5. Allow hospitals (possibly including for-profit hospitals) to solicit contributions for uncollected medical bills. Provide incentives for charitable contributions that are paid to fulfill the request.

6. Allow people to take tax deductions for medical payments paid on behalf of others, making it easier for families/friends to help out.

7. Create a government agency that pays unpaid bills and then collects it as a tax lien.

8. Create a box on Form 1040 that states "If you are a wealthy person who doesn't think the government taxes you enough and/or believes the government should guarantee medical care to all citizens, enter the amount you would like to contribute to the unpaid medical bill fund. This fund is distributed to medical providers in reimbursement who have been unable to collect payment for medical services provided to uninsured individuals in proportion to each hospitals portion of all such unpaid reported bills." - Okay, maybe put that in the instructions and make the box simpler.

I'm not saying all of the above are good ideas, constitutional ideas, or even better ideas than an individual mandate, but there are alternatives and they are at least worth exploring in the name of liberty.

 

[Cozarkian]

If you don't think there's a difference psychologically, we'll just have to agree to disagree.
Fern

Just to clarify, I agree people feel a different psychological impact when they have to write a check compared to when the company does so on their behalf.

I think I would disagree that we shouldn't withhold anything from pay checks, though, because far too many people wouldn't keep the money around to make the payment.