Merrill Goozner wrote an opinion piece in The Fiscal Times recently explaining how “health reform could shift increases to consumers.” His piece basically speaks to employers deciding to forfeit the grandfathered status of their health plans by raising coinsurance rates in the face of rising premiums. I see a slight problem with the way he’s framed this. Because the Affordable Care Act requires insurers to pay out 85 cents worth of benefits for every premium dollar collected, insurers have a weak–albeit not absent–incentive to raise premiums. If an insurer charges $1,000 a year in premiums, they have to pay out $850. If they charge $2,000 a year in premiums, they have to pay out $1,700. They do, indeed, double their potential profit, but that’s quite different than if they were to charge $2,000, face no requirements to pay out more than the $850 and net a cool $1,150.
The point that Goozner makes, somewhat indirectly, is that employers can sidestep cost increases, or even get out of the game altogether. This is one of those things that people just don’t seem to get. **Ahem** YOUR EMPLOYER IS UNDER ABSOLUTELY NO OBLIGATION TO PROVIDE YOU WITH HEALTH INSURANCE, NOR TO PAY ANY PARTICULAR AMOUNT TOWARDS THE COST OF ANY COVERAGE THEY DO OPT TO OFFER YOU.
Sorry about that. The point is that if costs go up, or if they don’t, your employer may decide to shift the costs your way. Recessions help that sort of thing. Case in point, one of my family members was talking with me the other day about the increased amount they were going to have to pay for their health insurance. Let’s say their insurance cost $10,000 a year, but their employer paid 90% of the total. That left them paying $1,000. Well, now their employer is only going to be paying 80% of the total. That means, even if the insurance doesn’t get more expensive, they’re going to have to pay $2,000. That’s right. Their bill just doubled. So, if what you pay for health insurance goes up, don’t assume that it’s because of health reform. It could just be your employer deciding to shift a portion of their costs your way. I would say that they decided to shirk some of their responsibility, but per my statement in all caps above, it was never really their responsibility to begin with.