Comment by myblake | Hacker News Reader

Comment by myblake | Hacker News Reader

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So yeah people totally lose their health care when they lose their job. Typically it runs through the month and then you’re on your own. You can by law keep buying the same plan at full price (employers typically pay between 50-80 and sometimes up to 100% of the premium).

However, when you get sick that rate doesn’t go up, so there’s no incentive from your employers standpoint to fire you when sick. Because of the “losing coverage” part it’s still extra shitty when they double up (cancer plus being fired sounds pretty awful).

Obamacare notably created markets for folks not receiving health insurance through work to purchase it directly (in addition to subsidies for low to middle income folks to do so, and several regulatory changes around other parts of the system), but that basic system wasn’t fundamentally altered and has been more or less how the US has done things since world war 2.

Fun bonus fact, employer based insurance was first offered as a workaround for world war 2 era wage controls.

Large employers typically self-insure, including a large majority of companies with over 500 employees [1]. You might see, say, Blue Cross on your card, but they’re just administering - the actual payments to doctors, etc. are in fact coming from your company. Sometimes the company will still show a percentage of “premium” that they are covering; it’s not a real premium in that case, just a percentage of the average care covered per employee.

This means there could be a strictly financial incentive to dismiss a sick employee. This is of course entirely illegal if that were the purpose. [1] https://www.shrm.org/resourcesandtools/hr-topics/benefits/pa...

> Fun bonus fact, employer based insurance was first offered as a workaround for world war 2 era wage controls.

Plus, its tax incentivized in three different ways.

- The employer can deduct it as a business expense, reducing corporate profits on which they have to pay income tax. In fairness, wages work the same way...

- ...but! The employer doesn't have to pay payroll tax on the amount it adds to their payroll.

- And while the employer puts it on the employee's W2, it doesn't contribute to their taxable income.

Dodging two kinds of income tax and payroll tax means that it works out to be way cheaper for a company to buy health insurance for their employees than it would be to raise their employees pay enough that they could buy the same insurance themselves, and that's before the company leverages its purchasing power to get good deals from insurance companies. It's an absurdly strongly incentivized system.

Companies big enough that "buy health insurance for their employees" is a thing pay insurance companies to administer the plans and they pay the medical costs as well. When an employee of such a company files a claim, the company ultimately pays the cost. I'm skeptical increased payroll taxes are more than these companies' cost to provide insurance. Also, payroll taxes themselves are also deductible.

> I'm skeptical increased payroll taxes are more than these companies' cost to provide insurance.

Doesn't seem unlikely to me, once you have enough employees, average cost per employee ends up being about the population average, skewed heavily by the fact that the company isn't employing very many people past retirement age where so much of total medical expense lies. Profit margins for health insurance companies aren't very high, so after administrative costs, what the average person/company pays in healthcare insurance is about what the average person accrues to their insurance in healthcare costs.

> Also, payroll taxes themselves are also deductible.

Shifting compensation to untaxed benefits brings the savings from corp_tax_rate * payroll_tax_rate to payroll_tax_rate.

> there’s no incentive from your employers standpoint to fire you when sick

except that if you get a severe illness and can't come to work, they can fire you for that

In California you can get 52 weeks of short term disability if you are not able to work due to illness.

"However, when you get sick that rate doesn’t go up, so there’s no incentive from your employers standpoint to fire you when sick."

Sorry but that's just wrong. Most large employers and even many smaller shops "self-insure" meaning they are footing the bill. Your health insurance company is just a front/conduit/paper pusher. In those cases, it is your employer who is ultimately deciding your prescription is not in the formulary, your jaw surgery is cosmetic even though you suffer from chronic headaches, etc. It is also your employer who sees that employee number 438 is costing them >> 1M/yr in covered medical bills (cuz cancer). They have every incentive to suddenly realize you are not working out for entirely unrelated (and fake) reasons.

In that case, maybe self-insuring needs to be made completely illegal, given the horrible incentives it creates.

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