Wednesday, January 27, 2010

Who needs the Pinkertons when you have the Democrats?

As has likely been apparent from several recent posts, the aspect of the health care legislation being advocated that I find most interesting is the insurance mandate, which would make it illegal to not have health insurance. If we're lucky, the recent election of Scott Brown in Massachusetts will throw a wrench into the "reform" process, but I'm not getting my hopes up too high. (A good rule of thumb is that if your hopes involve phrases like "If the Republicans are principled and resolute," you're fucked.) In any case, there's another aspect of the mandate that is worth exploring.

One side effect of so many people getting their health insurance through their employer is that it often weakens the bargaining position of employees relative to their employers. For many people, leaving their job- whether by quitting or by being fired-not only cuts off their income, it deprives them of their insurance until they get their own policy or a new job.

The whole point of insurance is to secure yourself against unexpected catastrophe, so losing it can often entail serious costs beyond its monetary value- fear, insecurity, lost peace of mind. This can and often does make the prospect of temporary unemployment more daunting than it otherwise would be. As a result, it can become easier for a boss to cow workers into accepting mistreatment, and harder for workers to walk away from a bad job (or credibly threaten to do so).

Which makes it interesting, I think, that the government does so much to encourage precisely this arrangement, through the tax structure and through various state-level regulations. The government started the practice of getting health insurance from your employer more or less by accident, when businesses competing for workers during the Second World War started offering insurance to workers in order to get around wage controls. It then became encouraged through the tax code, and now it is pretty much taken for granted as the right way to do things.

Indeed, when the supposed of the working man attack this or that business, "They don't give their employees health insurance" is usually near the top of the list of charges. In most cases, I think this is the result of simple ignorance, since the idea that we live in a universe of scarce resources, and that therefore the money to pay for additional employee benefits has to come from somewhere- monetary wages, quality of working conditions, new hiring- is something a lot of people don't really understand.

There's also a contingent, much less common in my experience, that acknowledges the trade-off and is instead motivated by paternalism- workers should not be permitted to sacrifice employer-provided insurance in favor of higher cash wages, because they don't understand what's best for them. (It's always important to remember that most laws framed as restrictions on employers can be described as restrictions on workers with equal accuracy.)

That said, if I've figured this effect out, I find it hard to believe that companies big enough to have some muscle in Washington haven't. Which in turn makes me wonder how much of the political support for the tax code's favoring of employer-provided health insurance over other compensation, and more recently the idea of mandating employer provision of insurance, is motivated by precisely this.

Which brings us to the proposed universal mandate, under which everyone must have insurance. Despite the psychological factors described above, people are sometimes willing to accept the risk of temporarily going without insurance. But once health care is "reformed," being uninsured will be not merely a risk, but a crime. Everyone must pay, either to the insurance companies or to the government in the form of fines. (Which will almost certainly go up if their initial level is low enough that large numbers of people choose to pay the fine rather than hand over their money to the insurance industry.)

The upshot is simple. If you are insured through your employer, the proposed mandate is, in effect, a tax on quitting your job. Like so much that is ironic in politics, it would be funny if it weren't so sick: The people who shout loudest and longest about protecting the common man from the oppression of merciless plutocrats are the champions of measures that will bind more workers to their current jobs and bosses, and will chain you more tightly the more vulnerable, desperate, or impoverished you are.

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Rod Smith said...

I hadn't thought of it this way, but I totally agree. Just another example of government programs creating exactly the opposite result of what they intend to create.

Lots to think about... thanks for the post.

Michael Price said...

@Rod Smith
Umm... who says the results weren't intended? As he says the big companies would have figured out that the current system reduces the bargaining power of employees. It's a simple step from that to the changes increasing that effect. So from a big business POV the changes probably created the exact result they wanted. When people talk about "unintended consequences" of government action they need to remember not everyone has the same intentions. Is it "unintended consequences" if the politicians who vote for it didn't intend it, or the voters who supported it didn't, or the bureaucrats?

John said...

Good article but a bit of a red herring. What sort of "crime" would one be guilty of for not buying health insurance? Something along the lines of a parking violation? What is the fine? I don't remember how much the fine would be, but don't think it's a lot. Maybe $75. Do you know?

The broader issue of job lock you refer to is real, though. I experience it myself - support single-payer.

John Markley said...

Thanks for commenting, everyone.


The proposed fine was $750, if memory serves. Not an amount to be sneezed at, especially for someone who is already struggling to make ends meet. The amount can always be raised, of course, and I'm sure it would be if significant numbers of people decided buying insurance still wasn't worth it.

John said...

It might go that high, or even higher, depending on the income level of those not buying insurance. The FoxNews article (link above) says that under the Senate Bill, fines would start at $95 in 2014.

Even now, everyone has some de facto coverage, just not everyone pays. If a 25-year old uninsured man is in a traffic accident and rendered unconscious, he'll be transported by ambulance to the nearest emergency room where they will treat the guy, whether he buys insurance or not.