GM's Corner: Buying Insurance, Selling Groceries
It’s time to dump
this system and get
the burden of offering
off the backs of employers.
On October 2, 1942, six days before the Anglo-American invasion of Nazi-controlled North Africa, the U.S. Congress, as part of the federal government’s efforts to maximize the output of the nation’s war economy, passed the Wage Stabilization Act.
This action is proving consequential to the Co-op in 2018.
The Wage Stabilization Act put strict limits on the ability of private-sector employers to increase wages, thus helping control inflation and labor turnover in key wartime industries.
Employers, looking for ways to attract top talent without running afoul of the Act, started offering enhanced “fringe benefits”: paid vacations and holidays, retirement plans and, above all, employer-sponsored medical insurance.
By the end of World War II, many American workers and their families were receiving medical insurance benefits through their jobs. A precedent had been set, and the decision by the IRS not to treat medical insurance benefits as taxable income only accelerated the practice.
So in the United States, unlike just about everywhere else, health insurance is widely perceived to be one form of enticement offered by employers seeking to attract and retain the best workers.
Today, most Americans, 155 million of us, get health insurance through employer-based plans. The rest are covered by Medicare, Medicaid or the Veterans Administration, pay for individual policies themselves or go uninsured.
The Affordable Care Act, love or it hate it, did little to change how most Americans are insured, and in fact, by mandating that employers of a certain size offer plans to their employees, it has only solidified the assumption that, in this country, health insurance is something you get through work.
For quite some time, Weavers Way has offered its employees comprehensive health insurance, with robust benefits typically not available through employers of our size. Over the years, we’ve gone from this insurer to that, tinkering with our plans to keep premiums in check, and relying on the relatively desirable demographics of our group — disproportionately younger, with a track record of few major claims — to keep costs in check for both employer and employee.
But some years our claims history bites us, and 2018 has proven to be such a year. Two major claims in one year for a group of our size is enough to spook an insurance underwriter into rating us a high risk. As a result, our current health insurer, the for-profit United Healthcare (2017 revenue: $201 billion), jacked up our rates for 2019 by 38 percent.
Since receiving this good news I cannot utter United Healthcare’s name without inserting a Philadelphian’s finest four letter expletives, but my anger aside, there’s little the Co-op can do, practically speaking, other than play the insurance company’s game.
So instead of a 38 percent increase to our current plans, in 2019 the Co-op will increase its contribution to health insurance by just under 10 percent and offer plans with reduced benefits. Employees will get stuck with higher co-pays and deductibles. Both employer and employee will pay more for skimpier plans.
Like many other aspects of our country’s “free”-market capitalist system, employer-based health insurance punishes smaller businesses, as our size makes us more susceptible to one bad claim year.
Who’s to blame? You can blame United Healthcare’s CEO David Wichmann (2017 compensation: $17,389,976) for insisting that each group policy be profitable. You can blame United Healthcare’s shareholders, who reward or punish guys like Wichmann based on the most recent quarterly results and little else. You can blame that anonymous underwriter, toiling in some nondescript office building in Minnesota, unconcerned about the impact his or her decisions have on any particular small businesses and their employees.
Blame whoever you want, but I blame the Wage Stabilization Act of 1942. It is the root cause of the nonsensical arrangement that treats health insurance like a perk, not really that different from tuition reimbursement and free coffee.
It’s time to dump this system and get the burden of offering health insurance off the backs of employers. I’m not speaking as a public-health advocate, or a medical professional, or an expert on the various alternatives that are out there (single payer, Bismarck model, insurance co-ops, whatever).
I’m speaking as a businessman. We are obliged to spend a huge amount of time and attention on something that’s not in any way related to our business. And it’s stupendously expensive — the monthly check we write to United Healthcare is roughly $62,000 (about $750,000 a year for a business with annual revenue of about $30 million) — and that expense negatively impacts everything from our starting wage to the price of a baguette.
Any politician who claims to be “pro-business” (don’t they all?) should be working to find ways to get businesses out of the business of providing health insurance.
I just want to get back to selling groceries.
See you around the Co-op.