There is a lot of discussion of the pro and cons of Obamacare or what is also known as The Affordable Care Act. I am not going to debate this still evolving health care plan here but I do want to discuss what I feel is a bigger and more important issue:
The cost of healthcare should not be allowed to be borne by the employer.
Making this one change would open up many more jobs to Americans and dramatically reduce our unemployment rate.
Instead of the employer most often footing the bill I advocate the exchange idea where people would be required to purchase a competitive health plan or alternatively we move to a one payer system. I don’t really know which structure would be better but the big point is to take the burden off the employer.
How would this action affect our unemployment rate and dramatically increase hiring?
Let’s look at a hypothetical situation.
Individual health care insurance coverage costs about $6,000 in premiums / year. On average about 20% of this is paid by individuals or $1,200 and the balance or $4,800 in premiums is paid by the company.
Family health insurance plans cost about $16,000 premiums / year. Typically 30% or $4,800 is paid by the individual and the balance or $11,200 is paid by the company.
Imagine a hypothetical 50 employee small company. Let’s say the average base salary is $50,000. So the entire payroll is 50 X $50,000 or $2.5 Million.
Here 25 employees choose single plans and 25 employees choose family plans. So the cost to the company is 25 X $4,800 for the individual plans and 25 X $11,200 for family plans. The sum is $120,000 individual plans + $280,000 family plans = $400,000 in total health care costs to the employer.
If we moved to an exchange or one-payer system borne by the employee then the employer would have $400,000 more profit. This could be used to hire 8 workers or 16% more company workers to relieve the stress of payrolls far too thin.
We have 130 Million working Americans. A 10% increase in hiring of Americans means 13 million more employed.
This one movement away from employer funded healthcare to user funded would dramatically lower the cost of hire thus igniting hiring and reducing persistent unemployment.
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