Makers v Takers in Health Insurance

Peder Zane laments that Obamacare has turned his family into takers in the health insurance realm. My post shows the subsidy different groups now get for health insurance, with the key table below.

I work for Duke and Duke pays ~$12,000/year in premiums for my insurance, and I pay $5,100/year. The ACA essentially mandates employer provided insurance levels of coverage, and as Zane notes above, substantial subsidies between 100%-400% of poverty (for a family of 5, 400% is around $120,000/year). Note that many would say the subsidy I calculated for employer (the tax savings from the tax code not considering premiums income) sponsored is a vast understatement, and that the true value of ESI is the full premium; the conversation of “employers will dump and pay the penalty and pocket the difference” argument implicitly views what Duke pays as nearly identical to the subsidy reported by Zane in the sense of a flow to an individual controlled by someone else.

Indeed, AEI this week released a report on the cost of government citing an E21/Manhattan Institute assertion that employer paid should be viewed as implicit taxes, because employees don’t have the choice to cash out, and they lose this purchasing power if they lose their job. The traditional Labor Economics view says benefits are foregone wages and would be returned to employees if employers ended employer provided health insurance for any reason, including dumping individuals into exchanges. The truth likely differs by industry, and probably falls somewhere between these two poles.

What this all means is that there are myriad ways that our society has constructed over long periods of time that serve to make health spending vastly higher than it would be if everyone bought what they could afford from their wages and earnings. The ACA is just the latest example. In that sense, just about all of us are makers and takers in the realm of health care, with our mix of income, age and illness determining the balance of the cross subsidy (and it could change for any of us tomorrow). Simply put, we have consistently preferenced health care over other types of spending since the end of World War II, to both good and bad ends.

[Cross-posted at The Reality-Based Community]

Don Taylor

Don Taylor is an associate professor of public policy at Duke University, where his teaching and research focuses on health policy.