Health Insurance From an Employer's Perspective

I sincerely believe that most politicians, many of whom have never had to find the money to meet a payroll or pay business expenses, have no clue about what insurance really is.

The current administration and its supporters in Congress like to demonize insurance companies as evil entities just out to increase their profits. They don't seem to understand the very basic concept of insurance. An insurance provider adds up the premiums of everyone who participates in the plan. That is the amount of money the insurer has to pay claims. The insurer POOLS the premium money and adds a percentage to cover its overhead and profits.

Not all insurers are for-profit. For example, the largest managed health care provider in the United States is the Kaiser Permanente Foundation. Its health plan and hospitals are non-profit entities.

Many employers, like our parent company, are self-insured. They pay a fee to an insurer to administer their plan. There is no evil insurance company, just some very hard-working people trying to make sure their employees have health insurance at a price they can afford. The struggle gets tougher each year.

At the end of each premium year the insurer adds up what was spent on claims. If there wasn't enough in the pool to cover the claims, then the insurer has to raise premiums to provide for future claims. If there was more than enough money in the pool to pay claims (highly unlikely) then the insurer can lower premiums.

If employers don't like the higher premium request, then can shop for another insurer. This is exactly what individuals do when they are shopping for car, home, boat, life, or other insurance.

Presently insurers look at the claim history of the applicant and charge premiums accordingly. It's just like charging drivers who have a lot of accidents more for their car insurance. In a capitalistic society, we believe that the people who use more should pay more. Socialists believe that everyone should pay the same, regardless of who the major consumers of services are. That leads to everyone paying more to subsidize the people who are using more services but paying the same amount regardless. You don't have to have a PhD to see the kind of scheme Washington's politicians are proposing.

For those of us who paid attention in economics class, what happens when there is no connection between what it costs you for something and how much you use? You use more of it, because there's no consequence for over-consumption. And what happens if consumption goes up and the supply (of insurers and medical providers) goes down? Prices skyrocket as people compete for scarcer resources. How do you control over-consumption if there's no cost consequence? You have to ration it.

Employer-sponsored plans already can't exclude people with pre-existing conditions. Employers and employees already pay higher premiums if someone in their health insurance group has a serious illness...pre-existing or otherwise. As insurance premiums go up, there is less money to pay for employees. So the number of jobs goes down, and current employees have less money to spend on things like groceries. This is the reason why European countries with high taxes to pay for mandated social services traditionally suffer from higher unemployment than the U.S.

Unfortunately, if Washington politicians are able to impose a European-style health insurance scheme on the American people we are going to wake up some day and find the system is bankrupt. Want some examples? Medicare, the Post Office, and Social Security are all technically bankrupt or headed for bankruptcy. The free-spending California legislature has already taken us to the verge of bankruptcy.