How will employers respond to a public Medicare option?

It’s simple, just think what you would do to save money and limit future liabilities.

If a public option becomes reality and if it allows workers with employer provided coverage to join Medicare, the consequences are clear.

Employers will simply dump their costs on to Medicare by doing what many large employers have already done to their retirees with company health benefits.

Employers who made a commitment to contribute toward or even pay in full retiree benefits supplemental to Medicare stop that commitment and convert it to a fixed amount contributed to a health reimbursement account (HRA) for the retiree and dependents. Initially that contribution keeps the retiree whole cost-wise, perhaps even ahead of the game, but over time the rate of increase in the employer HRA contribution is held below the actual cost increases thereby shifting more of the cost to the retirees.

Now think about that for active employees. The employer does the same thing; drops its active coverage and replaces it with an amount equivalent to its current costs which the employees use to offset the new Medicare public option premiums.

The employer now has control over its future increases, even negotiated contributions because there is no risk other than the known and “fixed” contributions to the HRA. In the process, the employer has eliminated all health benefits administration and related costs … it’s now hands off on all benefits and coverage decisions and the employer is reduced to determining the annual contribution.

Sounds like a good deal for employers and perhaps even workers most of whom now face high deductible plans and high premiums. However, you can bet politicians and bureaucrats know all about this too.

There is no way we can have a Medicare public option that looks anything like current Medicare in terms of benefits or premiums or one that allows so much adverse selection. 😂

3 comments

  1. Richard is absolutely correct here. Initially, the company will cover the expense through increased salary, but going forward it will fall behind the actual cost to the employees. Very few employees appreciate or understand how much their employer subsidizes their health insurance.

    About the comment about a national sales tax/VAT – why would you index a % for inflation? It’s baked in – prices go up and more $$ is collected even though the % remains the same.

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    1. Tom Murin- You would have to adjust the VAT to inflation because healthcare cost rise faster than core inflation. I am sure the politicians know the math, but they will still push M4A, because it buys the votes of the uninformed.

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  2. The day we have M4A, the government should just start a 1% federal sales tax or VAT. adjusted for inflation, on all sales with no exemptions for anyone to avoid the tax. That way everyone pays something into the fund. That would include all purchases even stocks, bonds, insurance, and derivatives contracts. Disclose this tax before congress votes on the bill and I bet congress will never pass M4A. The blow back from everyone would be fun to watch.

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