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There are many things that started 70 years ago which have long since gone. So, there must be forces which sustain the US model, where the employer pays for me

There are many things that started 70 years ago which have long since gone. So, there must be forces which sustain the US model, where the employer pays for medical insurance. Also, I fail to see how employers offering medical insurance should make insurance for an individual any more expensive. So, while I appreciate the sentiment that something is clearly wrong, the two things that you mentioned are not the cause.

maxerickson 10y ago
A big one is that there is a tax deduction for employer provided health insurance. So offering a decent health plan is more compensation than just handing over the cost of the plan (which would be taxed). As far as how employer coverage can drive up individual costs, there are a couple of factors. One is that people with good health plans often don't pay attention to how much they cost, and often don't have much of a deductible, so they just use the medical system without paying too much attention to costs. That at least has the potential to drive medical prices up. The other is that people in the group insurance market tend to be somewhat healthier than the individual market. So the pool for individual insurance is more expensive to insure. Setting aside discussions about whether it is fair or not, it does result in higher costs for the individual market.
- james1071 10y ago
  The reasons that you have given might be part of the explanation, but on their own they do not explain it. Yes, it is true that there is a tax benefit to employers purchasing healthcare insurance, which is tax deductible, and providing it as a benefit in kind. However, it does not follow at all from that the insurers should benefit: their costs are not affected and in a competitive market, they would price at marginal cost. Yes, it is true that people in employer plans could be perceived as being a better risk than those who are do not have them. They would still be better risks (and 'deserving' of a lower premium) however they obtained their health insurance. So, as I said before, there must be something else going on. Similar arguments apply to your claim that employers are less price sensitive than consumers - that really is implausible, given their buying power and incentives to maximise profits.

maxerickson 10y ago

A big one is that there is a tax deduction for employer provided health insurance. So offering a decent health plan is more compensation than just handing over the cost of the plan (which would be taxed). As far as how employer coverage can drive up individual costs, there are a couple of factors. One is that people with good health plans often don't pay attention to how much they cost, and often don't have much of a deductible, so they just use the medical system without paying too much attention to costs. That at least has the potential to drive medical prices up. The other is that people in the group insurance market tend to be somewhat healthier than the individual market. So the pool for individual insurance is more expensive to insure. Setting aside discussions about whether it is fair or not, it does result in higher costs for the individual market.

james1071 10y ago
The reasons that you have given might be part of the explanation, but on their own they do not explain it. Yes, it is true that there is a tax benefit to employers purchasing healthcare insurance, which is tax deductible, and providing it as a benefit in kind. However, it does not follow at all from that the insurers should benefit: their costs are not affected and in a competitive market, they would price at marginal cost. Yes, it is true that people in employer plans could be perceived as being a better risk than those who are do not have them. They would still be better risks (and 'deserving' of a lower premium) however they obtained their health insurance. So, as I said before, there must be something else going on. Similar arguments apply to your claim that employers are less price sensitive than consumers - that really is implausible, given their buying power and incentives to maximise profits.