How (Health) Markets Are Supposed to Work

Uwe Reinhardt was right when he said that “Logically, it must be true that all spending on the health care system in any country originates 100 percent from the budgets of private households.” We all pay for our nation’s healthcare. If we are employed, we pay for it through an impenetrable thicket of state, federal and local taxes and fees, insurance premiums, wage cuts, health user fees and out of pocket spending. And we don’t even get to choose the health insurance we buy. It’s as though we walk into a bar, sit next to a total stranger who helps himself to our wallet. That stranger then orders us both a Bacardi and Coke with our money and returns our wallet. The Bacardi and Coke isn’t really what we wanted but, thinking that the stranger was treating us, we thank him and drink it politely. It’s not until later that we discover we are $20 short. That’s what happens when we get our health insurance from our employer. And we have gotten really good at hiding that from ourselves. We ought to stop it.

We have a lot at stake in stake in the healthcare debate. The Milliman Medical Index tells us that an average family of four with a median income of about $60,000 spends over $28,000 on healthcare. The Kaiser Family Foundation lets us estimate how much we would have to pay for healthcare if we were to buy it on the marketplace and provides us with a somewhat customizable Household Health Spending Calculator. And thanks to the Affordable Care Act, box 12b of your W-2 Form tells you exactly how much your boss is withholding from your total compensation to give to insurance companies. And that’s before you factor in your out-of-pocket costs such as copays, deductibles and co-insurance, the premium you pay out of your “visible” paycheck, the state taxes you pay for Medicaid, Children’s Health Insurance, Medicare Part D, and the federal taxes you pay for Medicare, Medicaid, the Marketpkaces, the VA, Social Security, and Medicare Part A. All told, you may well be paying 50% of your compensation in healthcare. Go on, take your W-2’s out and do the math. I bet I’m close.

So you have all the information you need to go to yor boss and say, “look, this insurance I am buying from you is nice and all but I looked at the Exchange and I think I can get a better deal for me and my family even without subsidies. Oh, and by the way, you know that money you are handing over to an insurance company? I’d like you to pay me that money instead. I’ll even show you proof that I am overed in comprehensive coverage every month but I want a raise.” Problem is, you can’t do that.

Or, rather, you can but your employer has every incentive not to let you buy your own insurance because if they did, they would face a penalty. And that makes sense in rural areas (for example) where there isn’t much choice of insurers and you get a better deal buying insurance through your employer. It may make less sense if you live in an urban environment with many insurers and hospitals competing for your business. .

Box 12b of our W-2 gives us the information we need to decide whether or not we can get a better deal if we bought it ourselves on the Exchanges. Now, we need to be able to do something with that information. We should be able to go to our employer and him to give us that money instead of an insurance company and, in return, we will show him that we are buying an ACA-compliant plan on the Exchange. If it makes sense for us and our families, why shouldn’t we switch? Isn’t that how markets are supposed to work? With us deciding on a plan that’s right for us and our family?

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