Why Employee Benefits Will Become Irrelevant | Hacker News Reader

Why Employee Benefits Will Become Irrelevant

blogs.wsj.com

16 pointsprostoalex28 comments

>> giving way to an alternative where employers simply pay employees in full for services rendered, and employees are left to make their own decisions –for better or worse–about where and how to allocate those dollars for their needs.

That is so completely disingenuous. I think we can assume that blog writers at the WSJ are aware that wages have been stagnant for the majority of workers for over two decades, despite significant gains in productivity. So, really, what they meant to say was "giving way to an alternative where employers stop paying for benefits."

Yep. If anything like this actually happens, there isn't a chance in hell that money's getting funneled into the pockets of the employees.

Currently employers get better rates for their benefits then an individual can on the open market. As such this will open the flood gates for even higher insurance premiums, seems like a wind fall to the insurance providers.

This is similar to the push away from pensions to 401k's in the 70's and 80's. It was supposed to be great for the individuals, more flexibility and control, can take it from job to job. Yet instead it was great for the financial services industry as they got to charge a higher service fees on their mutual funds to more people. The only people to lose out where the employees as the companies got reduced liabilities and payouts and the financial services sector go a large bump in service fees....

Could employees of different companies form a group that could get better rates? One of the problems with 401ks is that they are still related to your employer.

Yes - it's called a government. Pretty much all other countries already have such healthcare plans in place.

Would that not be similar to a Union?

Yeah there's also no mention about the tax implications of this stuff which is nontrivial, I suspect the example of paying $50,000 and benefits vs. $57,500 and no benefits ignores the tax implications in a way that doesn't help the employee but perhaps does the business.

Eh, the article is focusing on the trends. If the trend continues, that's where we could well end up. Of course, right now, it's a "tell us which government-approved program you want us to contribute to," in the same way that my alcoholic father refused to pay his child support, but would instead paternalistically pay my mom's rent. But eventually as the burden to understand social insurance gets shifted over to employees, it could easily go that way.

People will look up and say, well we have this huge 'benefits' apparatus whose only real purpose is to manage the social costs of health care when it looks like people are managing just fine without it.

You and I might look at the apparatus as overbearing, but the reality of it is, most people just don't have the time, patience, or inclination to care about their health, and it imposes huge social costs. When Grandma starts losing the little quality-of-life she has left, rather than an honest discussion, we have people saying, "keep her alive at all costs!" A big part of the health care infrastructure we have is structurally set up to deal with people making irrational demands of it.

Once people start to understand health and how to think about it and pay for it, there's no reason why things like the individual mandate can't go the way of the dodo.

Yeah, it really is the employers cutting benefits to avoid cutting the headline salary numbers that the vast majority of people focus on when they negotiate.

>employers stop paying for benefits.

I'm curious if the majority frame it that way. To me, employers never really paid for benefits. It was the employees wages that was converted into health insurance as a loophole to circumvent WWII wage controls.

Using this "employee's-total-compensation" frame of reference, the real value add from the employer was having a Human Resources staff handling the administrative headaches of benefit plans. The "employer's health insurance" has always been the "employee's money" that was preallocated.

Today, employers providing health insurance is a voluntary arrangement. Employers do it to stay competitive in attracting job applicants. If employers are voluntarily providing insurance, and if the employer insurance component goes away, it seems logical that they will also voluntarily adjust wages offered in the marketplace for employees-DIY-insurance (because WWII wage controls are no longer preventing it.)

As an analogy, when Amazon or other retailer says they offer "free shipping", does that really mean they pay shipping? Isn't it really us, the customers that pay that free shipping? Therefore, "free shipping" is just a synonym for "the shipping cost you paid is baked into the price and through Orwellian doublespeak, we restate it back to you as free shipping."

Isn't "free shipping" frame-of-references similar to "employer provided insurance"?

It doesn't really matter. It's a pretty simple equation: the WSJ is describing a model where benefits are being reduced while at the same time employees are being "paid in full" as an alternative. I don't think I am reading between the lines there. To follow your analogy, I think it's clear to most people that if a retailer does away with free shipping and does not reduce the price of the product, no mutually beneficial exchange of value is taking place. The cost is going up. So the WSJ is being dishonest in attempting to characterize this as a trade-off.

>the WSJ is describing a model where benefits are being reduced while at the same time employees are being "paid in full" as an alternative. I don't think I am reading between the lines there.

I think you're misinterpreting what WSJ wrote.

The "paid in full" in this context means wages are adjusted up. (I'm not saying that in real life, the businesses will do this. I'm just emphasizing what "paid in full" means mathematically as WSJ wrote it.) If you read the later paragraph[1], you'll see that they mean for the total monetary compensation to be adjusted up (via the dollar contribution.)

This is in contrast to the current situation we have. If we use WSJ's phrasing, ever since WW2 wage controls, we've been "paid partially" in dollars.

today: compensation "paid partially in dollars" + employer insurance

possible future: compensation "paid in full as dollars" (DIY insurance)

Again, the above is just the interpretation of the text.

As to whether or not things will play out that way, that's more of speculation about economics and politics. The journalist and we readers can't predict the future and know for sure if businesses will use it as an opportunity to "trick" employees by never adjusting wages or actually readjust wages to stay competitive in recruiting.

In my opinion, a possible future includes ABC Inc offering $50k-with-employer-insurance and XYZ Inc offering $60k-with-DIY-insurance.

[1]from the article: ... employers consider whether the “best” option is simply to give employees a certain “defined contribution” dollar amount toward their monthly health insurance, ...

Author doesn't seem to have a clue about how benefits are taxed or that an employer can buy insurance or other benefits for 1000 people cheaper than any of the individuals can.

And are not Employer DC pensions better because that contributions on both sides are pre tax - let alone if you go in for sacrifice schemes where you can save the NI (social security) as well.

and this guys supposed to be a partner reads like some summer interns work to me

> an employer can buy insurance or other benefits for 1000 people cheaper than any of the individuals can.

Does that still hold true with the exchanges, which in large states supposedly pool millions of individuals?

I think so, and here is why it makes sense. Maintaining a steady employment is a pretty strong indicator of not having debilitating health problems and of having enough income to avoid poverty-driven health problems. The employee pool of a major corporation is probably a healthier pool than the one exchanges serve.

Yes a Company with 1000's of employees can drive a better bargain than a single individual.

Only because employers are buying benefits for 1000 people.

I would love a world where the only thing we get from an employer is pay and experience, and where there are no tax breaks for anything except being a poor human.

So there would be no incentive for people to save into a pension or take equity over $

If you tax income and capita gains the same there is NO incentive to invest in equity as there is no risk premium.

Yes, people would still save out of necessity.

And maybe people wouldn't take equity over dollars, or maybe they would, but it would be done for reasons other than tax policy. The market would have to work harder to prove that it's a good investment.

Income vs capital gains taxation: again, the market would have to work harder to prove that it's a good investment.

Or to put it another way: "there is NO incentive to invest in equity [without preferential tax treatment]." Then maybe investment in equity isn't actually a good investment in and of itself.

Obviously I wish we lived in a world where health care wasn't coupled to employment, but I don't think the USA is adopting single payer any time soon so I don't really have high hopes.

However, one practical thing that I find infuriating is the 401k/IRA system. It's absurd to me that if your employer doesn't offer a 401k there's a whole category of tax advantaged retirement saving that's off limits to you, and you're stuck to the IRA contribution limits (and income limits).

If done well, this could empower employees to decouple critical life needs (health insurance, retirement) from their employers. If done poorly (i.e. the non-employer options and tax benefits are not good), then it will just create a 2-tier system where you have a class of workers with great benefits, and those with terrible ones... Oh wait, that's what we have now, right?

Take away the tax incentives and let the market readjust. Imagine if employers provided our food directly and all the issues that would result from that. And then imagine what would happen if someone suggested ending that - we'd hear about how employers can buy food at a bulk discount, tax breaks, everyone's going to starve, etc.

Getting employers out of the health insurance game also conveniently dispenses with controversies like the HHS contraception mandate/Hobby Lobby etc.

Employee benefits will become irrelevant if and only if (1) the government removes the tax advantage of providing certain benefits to employees over providing the value of those benefits to employees in cash, and (2) the government resolves the market failures innate to certain types of insurance. The ACA went a long way to resolving (2) for health insurance, but similar forces are at play in the life insurance and disability insurance markets.

> All it really means is that instead of an employer paying $X on behalf of an employee for a certain benefit, the employer pays the employee that same dollar amount and allows him/her to use the dollars as desired toward their own selection of benefits, from retirement to health insurance and more.

This money is usually pre-tax. Let's say an office worker is making $80k/year + benefits and pays about 25% to taxes. If those benefits amount to $10k (feasible between 401k matching, insurance and other things) the employer needs to come up with an extra $3.33k to pay the employee to compensate for the tax owed on the extra income.

Could health care payments be tax deductible?

"If you paid your health insurance premiums with your own after-tax money, they’re deductible."

http://healthinsurance.about.com/od/savingmoneyonhealthcare/...

With a bunch of caveats, of course.

Ah, thanks. This would still be an issue with some other benefits unless they also are tax deductible or made tax deductible for individuals. My 5% matching on my 401(k), in particular, would be an issue without increasing the tax deduction limits on 401(k)s.

It does make sense for the government to (a) allow for insurance premiums to be paid out of flexible spending accounts, (b) decouple pre-tax FSAs from employment and make them available to anybody.

Not sure why it's not part of the ACA, perhaps there are some unintended consequences (a) would cause.

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