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Get Bosses Out of Health Insurance Altogether

July 9, 2014 in Economics

By Michael D. Tanner

Michael D. Tanner

The Supreme Court’s decision last week in Burwell v. Hobby Lobby has pushed all the buttons that could be expected when sex and religion intersect. Many on the right are celebrating because they value religious expression and feel rather less excited about sex, especially of the non-procreative variety. And much of the Left is outraged because religion is generally considered of far less import while sexual freedom has a high priority. But both sides are missing the point.

It is true that your boss shouldn’t be deciding whether or not your insurance plan includes contraceptives. It is also true that your boss shouldn’t have to pay for your contraceptives if it violates his or her religious beliefs. But why is this debate limited to employers with certain clearly defined religious beliefs, or for that matter to contraception?

The bigger question should be: Why is some woman arguing with her boss about what benefits are included in her insurance plan in the first place?

There’s no good answer. The entire concept that our boss should provide our insurance is an anomaly that grew out of unique historical circumstances during World War II. At the time of a significant labor shortage, President Roosevelt imposed wage (and price) controls, preventing employers from competing for available workers by raising salaries. In an effort to circumvent the regulations and attract workers, employers began to offer non-wage benefits, among them health insurance.

In 1953, the IRS compounded the problem by holding that employer-provided health insurance was not part of wage compensation for tax purposes. This means that if a worker is paid $40,000 and their employer also provides an insurance policy worth $16,000, the worker pays taxes on just the $40,000 in wages. If, however, instead of providing insurance, the employer gave the worker a $16,000 raise — allowing the worker to purchase his or her own insurance — the worker would have to pay taxes on $66,000 in income, a tax hike of as much as $2,400. This puts workers who buy their own insurance at a significant disadvantage compared to those who receive insurance through work.

In a less politically polarized world, that would be a reform that both left and right could embrace.”

As a result, Americans were driven to get health insurance through their job: In 1960, just a third of non-elderly Americans received health insurance at work, roughly. Today, 58.4 percent do. …read more

Source: OP-EDS

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