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Friday, November 02, 2012
The Unappreciated Link between Health Insurance and Job Creation
Thanks to Prawfs for having me back. I hope to blog about a variety of things this time around, mostly in my primary areas of interest. But first, I've got a post that I've been thinking about for a while, and while I've got the bully pulpit, I'll try it out.
After two presidential debates (three if you count the ?foreign policy? debate), a vice-presidential debate, and eighteen months of campaigning, the candidates seem to be missing a critical link between health care reform and job creation. This link undermines Governor Romney?s plan to create jobs through tax cuts as much as it represents a missed opportunity by President Obama to defend his signature legislation. I have views about the best way to bring affordable health insurance to everyone, but I won?t express those here. I don't want my main point to get bogged down in the details of how you get there. Instead, I?ll only point out the importance of widespread availability of such insurance.
More than tax cuts, and more than abandoned regulation, small businesses need customers. Health insurance is a critical but unappreciated link to provide these customers. I?ll give a personal example. In May of this year, my wife and I committed to a modest renovation of a part of our home. A couple months later, just before work was to start, I was diagnosed with an extremely rare condition that took two surgeons about six hours to repair . The bill for my five day stay at the hospital was about $133,000, and the doctor?s bills, CAT scans, and MRIs will easily put the total over $150,000. But I was insured. We had to pay for a chunk of the operation ? about $2000 after all copays.
Coincidentally, work started on the house the day I came home from the hospital. We could continue with the plan, and our contractor and his employees, subcontractors, and supply houses will all see business. Our contractor may make over $250,000 per year, but I doubt it based on what we are paying for this work and what we are getting in return. He?s just a decent guy doing good work, but he needs customers ? especially in a tough economy ? and we would have been one less job. Our project isn?t the biggest one in the world; indeed, it?s a fraction of what I would have owed the hospital if I were uninsured. My insurance created jobs, and I am sure my insurance is not alone in that respect.
Insurance not only creates customers, it can help directly create jobs. Just last month, my sister?a podiatrist?seriously considered selling her practice for almost zero equity to become an employee at a large practice. This would have likely cut her lifetime earnings in half and forced her to lay off her three staff, one of whom is our mother! Why would she do such a thing? To get health insurance, of course. She has been denied several times due to a ?preexisting condition? that is related to her sex, essentially healed, and never life threatening. In other words, she cannot get insurance at any price. Her staff is all insured by other means, so she can?t form a group, and even if she did her coverage would likely be limited by preexisting conditions. She is holding on for the ability to buy insurance under the new law, and we are all hoping it will come soon. She is surely not alone.
My sister?s story ties to a bigger job creation issue. Without the ability to obtain affordable healthcare, people will simply not form businesses and hire other people. They will remain employees. This is a much bigger implication of insurance cost reduction. I know how much small group insurance plans can cost; I used to negotiate them for my law firm. We wound up having to purchase major medical insurance while self-insuring the first $5,000 of medical expenses because our premiums rose at astronomical rates. My partners and our employees were not happy with the bureaucracy this created, but the alternatives were daunting. This is not an incentive to form a business, and shaving some percentage points of my top tax rate won't get me to create a business if I think I can't get insurance at any price. That's me, by the way. Not that I would ever quit being a professor (the greatest job in the world), but because of my condition I won't be able to get insurance without. I would be an employee for the rest of my life, without even the ability to take a year off that isn't a sabbatical that includes coverage. So much for harnessing bright ideas to hire others.
Maybe it would be better to have more expensive insurance available to fewer people like we do now, but justifying the status quo should take into account all the effects of insurance. Accessible, affordable health insurance creates jobs in ways no one is talking about, but they should be.?
Posted by Michael Risch on November 2, 2012 at 09:29 AM in Law and Politics, Workplace Law | Permalink
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Comments
Insurance is a religion. As such, it is based on ignorance of the economic facts of life. Any scientific analysis will show that:
1. It is a bad investment, since it returns less than 80% on the premium dollar, and often much less (65% in the case of NFIP and 2% in the case of title insurance). Folks will respond that, in spite of the obvious loss, it is justified by the fact that it moderates risk. That attitude is even held by the brain-dead who play Roulette, Slots, Bingo and the Lottery (and who get married)! Actually, the return on a Roulette spin is around 95%, far better than the return on insurance, and paying an insurance premium is no fun whatsoever.
2. Of two persons, one who spends his life insured and another who doesn't, the uninsured who covers his own medical expenses will die tens of thousands of dollars richer, not only because of the lousy return on the insurance premium mentioned above, but also because he can seek better and cheaper treatment in places like Mexico, Thailand and the Czech Republic, where his insurance would be worthless. The uninsured is free to change jobs, take high-pay contracts or do independent work, take years off work to travel, study or build a house, even take a job in Buenos Aires, as I have done, at no disadvantage. The insured does not have that liberty-- he has made himself a prisoner to superstition.
3. The stats on insurance suffer from an evidence bias: every time someone suffers a loss in a disaster like Sandy, the first question posed by folks (especially on National Proletarian Radio) is "Did they have insurance"? NPR never asks folks in Peoria, where nothing ever happens, how much they've wasted in insurance premiums over the years. Of course, they won't have a clue anyway, especially if they've been covered by an employer's group theft insurance. The "accessible, affordable health insurance" you speak of destroys jobs on net everywhere, especially in Peoria, "in ways no one is talking about, but they should be."
Posted by: Jimbino | Nov 2, 2012 11:02:57 AM
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