This week's SCOTUS decision on whether the contraceptive mandate in the Affordable Care Act violated the constitutional rights of two family-owned companies has triggered an even more rabid debate over freedom of as well as from religion. However, what seems like an intractable disagreement could – and perhaps should – move us toward a day when health insurance is no longer associated with employers.
Employer sponsored insurance benefits have always had two advantages that served to make them far superior to individual plans. First, they are a tax deductible expense for the company that essentially allows them to divert some of the employee's compensation toward the cost of premiums, while also deducting their contributions on a pre-tax basis. Second, by making the plans available to all of their employees, employers pool together risk for the insurance companies, which allows them to offer much better benefits.
Individual plans are not tax deductible and the current tax code only allows individuals to deduct health care expenses (including premiums) for any portion that is over 10 percent of their income. That means that a person with an income of $50,000 a year has to go over $5,000 in qualified expenses and then can only deduct that portion which goes over. Making all healthcare costs tax deductible (or eligible for pre-tax health savings accounts) and then offsetting the cost by closing much less reasonable tax loopholes would make the tax advantage of employer-sponsored plans go away.
Of course the other advantage – better risk pooling through larger underwritings – is already being addressed by the exchanges. The individual mandate and state and federal insurance exchanges were created to basically pool all of the individual plans and spread their risk the same way large employers do, making individual plans cheaper, while allowing (and sometimes forcing) insurers to give the same sort of benefits they typically would on a group plan.
Once employee compensation is no longer diverted to health care benefits, wages should rise proportionately (and there may need to be some form of regulation to ensure that happens) giving workers more money to pay for premiums and co-insurance costs. The idea of whether corporations have religious rights or requiring certain health services violates them would be moot.
Otherwise, fixes would involve more complicated legislation at the hands of Congress who are unlikely to tackle such a controversial and emotional issue in earnest. Giving the money directly to employees can work in a way that it would not have before the exchanges, and a simple adjustment of the tax code seems much more doable than a legislative fix. Let's get health care out of the workplace and into the household budget so that it can be a private matter between patient and provider that doesn't have anything to do with your boss's (or your Congressman's) religious beliefs.
Dennis Maley's column appears every Thursday and Sunday in The Bradenton Times. He can be reached at firstname.lastname@example.org. Click here to visit his column archive. Click here to go to his bio page. You can also follow Dennis on Facebook.
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