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  • Who Will Pay For Health Care Reform?

    As Congress debates health care reform and how to pay for it, the Congressional Budget Office reported today on something that economists have long known: ordinary workers – not their employers – will be paying for it. How can that be, when employers pay the lion’s share of health insurance premiums? Although workers do not physically write a check for the full cost of their health benefits, their employers write a smaller check to them every pay period. Workers pay for health benefits through lower wages. As the CBO explains:

    Although employers directly pay most of the costs of their workers’ health insurance, the available evidence indicates that active workers—as a group—ultimately bear those costs. Employers’ payments for health insurance are one form of compensation, along with wages, pension contributions, and other benefits. Firms decide how much labor to employ on the basis of the total cost of compensation and choose the composition of that compensation on the basis of what their workers generally prefer. Employers who offer to pay for health insurance thus pay less in wages and other forms of compensation than they otherwise would, keeping total compensation about the same.

    So if Congress makes health coverage more expensive for employers, they will simply cut their workers’ wages to make up the difference. Every policy Congress adopts that makes health coverage more expensive for employers will be paid by employees.

    For example, virtually every healthcare reform proposal includes an “employer mandate” that requires employers that do not provide health coverage to pay higher taxes. The current Senate draft requires employers to pay $750 for each employee without health benefits. This is billed as a tax on employers, but as the CBO points out:

    [I]f employers who did not offer insurance were required to pay a fee, employees’ wages and other forms of compensation would generally decline by the amount of that fee from what they would otherwise have been.

    The government will collect the taxes from employers – and those businesses will then lower wages by $750 a year. Fortunately, these wage offsets mean an employer mandate does not make hiring workers more expensive, so employers have no incentive to cut jobs. It’s not exactly a great deal for workers, who will now earn less while still having no healthcare, but at least they will not be unemployed.

    After July 24th, however, the minimum wage will rise to $7.25 an hour. Employers will not be able to take the full cost of the health tax out of the paychecks of anyone earning close to this minimum. That does not make healthcare reform a good deal for these workers, though. Paying $7.25 an hour plus the healthcare tax will make unskilled workers even more expensive to hire. So, as the CBO points out, their employers will respond by hiring even fewer of them. Healthcare reform is supposed to help vulnerable workers, not to cost them their jobs:

    [A] play-or-pay provision would reduce the hiring of low-wage workers, whose wages could not fall by the full cost of health insurance or a substantial play-or-pay fee if they were close to the minimum wage.

    No matter how Congress writes the healthcare legislation, remember one thing – through lower wages or fewer job opportunities, you are the one footing the bill.

    Posted in Obamacare [slideshow_deploy]

    25 Responses to Who Will Pay For Health Care Reform?

    1. William Santman, War says:

      How this administration can expect the people in this country to accept these programs they put forward is beyond me. I just hope you at Heritage can help put these things to bed. That is why we joined your organization. It is GREAT by the way.

      We are routine listeners to Rush and Sean.

      Thanks for what you do.

    2. Karen Shaw, Greenvil says:

      What can I do to help? I have written my S.C. senators asking them to oppose national health care provided by the government.

    3. Mike Cillo, Clevelan says:

      It is amazing to me that the general public does not understand the basic economics of business. The employer has no intrinsic value by himself, only the value his work and the work of his employees bring to the business. How can the public or government expect business to foot the bill for healthcare, taxes, etc…, when it is nothing more than a group of individuals "working" together to provide a product or service. Basic economics is not rocket science. Wake up people!!

    4. Lisa McDaniel, Chatt says:

      My company does not offer insurance benefits so I pay for health insurance on my own. Health care is not a "right". I go without other things so that I can afford to insure myself. What a concept……taking responsibility and making my own choices! I am only 37 years old but when I was growing up that was what I was taught to do. This next generation will simply give up on education and working for a living, since our Brave New World will reward them more for sitting at home being helpless and useless.

    5. Gary, Norfolk, VA says:

      It is amazing to me to see how many elected officials are complicit in wrecking our economy. It is also clear to me that a majority of our elected “Representatives” DO NOT represent the American people at all, but rather represent the Lobbyists who make their voices heard, and who most likely fund the so-called Representative’s election/re-election efforts.

    6. Bill - Florida says:

      I know it looks like only the "evil rich" will be taxed, but we all know this will almost eliminate the middle class.

      I suppose this is the Democrat's version of trickle-down economics!

    7. Lebo, florida says:

      What can I say that hasn't already been said. I'm starting to believe the average IQ of most of those on Capitol Hill in both Houses, and both parties is about 50. How else can you explain the totally stupid things they are doing?

      Didn't their mothers ever tell them there is no free lunch? Ya don't have to be a rocket scientist to see these bail outs, Obama-Care, and Cap & Tax are all ill-conceived and in the end, downright stupid.

      These are sad times. The number one threat we face as a Nation is lack of education and/or stupid people. The number two threat to our great Nation is the current administration.

      Gonna be tough to clean up their mess when it all comes falling down.

    8. NEAL says:


    9. Ben C, Ann Arbor, MI says:

      The problem with the above arguement is that currently employers pay for health care premmiums for employees with BEFORE tax dollars and employees pay for their health care premiums with AFTER tax dollars. I am happy to give the health care payment to the employee and let them struggle with the insurance company, but as soon as they realize their dollar is worth only 70 cents they come racing back to me to cover the expense as it was before.

      So, I need to know how the "premiums" will be handled. If employees and employers are required to pay taxes on the premiums the "change to believe in" will have devastating effects on employment. If the tax liablity remains as it is the consequences for employment will not be as bad – but then we will have Obamacare and the net result of this will be dismal.

    10. susan-virginia says:

      no government health care plan for me. I will start voting people out of office if they dont do something about the Obama take over. People can not afford this and it is not going to work, all this is doing is making us all poor,and then who will pay for everything.

    11. Gwen N.-Saline, Mich says:

      What are they thinking? In Michigan our unemployment just went over 9%. My companies work in down 50% from last year. We are now paying a 03% surcharge to the federal goverment unemployment agency because too many companies have laid off workers and our state has had to borrow money to pay them the extended benefits the government voted to give them. I have written letters to my congressmen and senators more this year than ever before in my life. They all support this reform. It is just sickening.

    12. Pingback: Who Will Pay For Health Care Reform? « Conservative Thoughts and Profundity

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    14. Ronnie B Albuquerque says:

      vote out all incumbents. It"s that simple.

      It's easy to lead the uneducated masses, just look at your President.

    15. Marshall Hill MI. says:

      WE all know the Politicians that have done this and will do more if not stopped!

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    18. Ken, Oklahom says:

      This is shocking..


      Read what's in this bill. Pass it on so others will know.

    19. Charlie- Tulsa says:

      It is amazing to me that tort reform is not mentioned in any

      part of the debate. The reason our health care costs are so

      high is due to all the lawyers padding their pockets with law suits that punish the medical industry. As we all know, Washington is full of these legal snakes and they don't dare touch tort reform because they would be hurting their own. If you have a senator or congressman running for office that has a law degree…vote them out. This is a perfect example of the fox guarding the hen house!

    20. DebK-Ct says:

      Albert Einstein once said: "We cannot solve a problem with the same thinking that created the problem."

      With that said, follow the money……

      No one in a country this rich should be denied healthcare, simple as that. No one should be profiting from illness, simple as that. No one should lose everything they spent their whole life working for because an insurance actuary says your disease costs us too much and we won't cover it.

      It's time we started working together and not against each other. This is no campfire hug-fest, the money grab will not solve our societies ills. Richer than you does not mean better than you or more privileged than you.

      Business practices in this country turned sour 25 years ago when worker loyalty became a thing of the past. Ethics were thrown out the window. Bottom line profits became the end-all and be-all of corporate life. Corruption is a way of life on every level, from the big guy to the little guy. How sad for this country………..when we threw out simple and basic respect for one another.

      Wake up people……there's an all out war on everyone not at the very top of the pecking order. The international Power Elite are intent on keeping us divided and poor………… and it has nothing to do with all the distractions being played out on the so-called "news" or in Washington. Just look around you……….see the fear in people's eyes. No one has an explanation. The greatest rip-off in world history just happened on Wall Street and it was no accident. Honest, hard-working Americans are losing their homes left and right, families are living on the streets, lifetime personal savings wiped out……..is that on the news? This is a human tragedy on such a massive scale and most people are asleep at the wheel. As long as my little apple cart isn't tipped. They must have done something wrong……..to deserve it.

      Turn off your TV's and start helping your neighbor. Throw out the corrupt bums in every level of government. Give more than you get, it's good for the soul.

    21. william Milwaukee,WI says:

      Go for the gusto why stop at health care

      I want a new battery operated car a big house with solar panels two dogs and a cat that don’t fart (ozone free animals) 20 acres with trees that don’t produce carbon monoxide and a large lake a good paying job a collage degree (Doctrine) plenty of food and free health care, retirement at 40 and I want the government to give me this at no cost its my right.

    22. macfrom pittsburgh says:

      banking business, auto industry, now insurance industry, the government has its hands in everything will the tv stations and radio stations be next? sounds alot like marxism to me.where has the pride of being american gone? you know, when a person wanted to work for something? this whole thing is beginning to scare me. my grandchildren will be paying for this mess. God help america.

    23. antonio alejandro says:

      One day i became unemployed. I lost my contracts and I could not collect unemployment. I had to scramble all my money just to survive. Paying mortgate, etc. I saw the unemployment situation temporary. The bills kept coming in, mortgage, gas, electricity, etc. I saw an opportunity to collect food stamps but i was declined because i owned investment property. Would it had been logical to sell my investment in a market that was so low, in a situation that i consider temporary? I had to pay property taxes, otherwise my house could have been auctioned off. I had been falling behind on my property taxes on the house i live in. So what are my thoughts on big government? They want more money, more programs, but none of it helps me in any way. In fact it hurts me. The economy is pretty much controlled by the Federal Reserve, so the Federal Reserve did a poor job in preserving economic stability. This is not new with them, they have been doing it since the 1930s. Then the local government want me to pay taxes on my house, and if i dont, they could take it away from me. So my thoughts are…a person could become homeless because he needs to pay for the education of children, libraries, animals shelters, food stamps for the needy, all of these programs that sound so logical and so socially necessary. But meanwhile i could become homeless. What if i had children? I would have to forgo my children to pay for other children that are needy. What if i had my own pets? I do believe in social programs, but at what expense?

    24. JANE CALIFORNIA says:

      You keep going on about expense, it's not going to cost you anything unless you earn over 200k a year. Your country is in debt because of a republican war waged on behalf of greedy politicians with vested interests in oil. These same republicans are duping you into supporting their interests now in pharmaceutical companies, in their assests of which they will have to pay 3.8%. They don't want to do that so they gather people like you to fire their guns. Only people earning over 200k will bear the brunt of the cost of this reform, that's less than 10% of Americans and not until 2018. This country is in dire straits financially , you're right about that and it means your families will suffer and that won't be because of a healthcare bill, these problems are going on right now. Businesses are going bust, jobs are being lost, your job might be lost. What will your families do then? How will you care for the health of your children? There is a bigger picture here, check your facts, seek out the real cost of this reform to your income and where it's coming from before talking about what it's going to cost you personally because the reality is it's going to cost people like me a lot more, I have kids too, I will feel the cost on my PPO which will increase, on my savings that will be taxed, but I only have those things because of the support I have recieved from this country and it's my responsibility to take care of that country when it is need and right now 32 million men and women and children are without healthcare and don't use the welfare of sufferring American to justify your Victorian politics either. This country is in a bad way this healthcare reform is being sent to protect you, why can't you see that?

    25. Ed, Philadelphia says:

      Jane is right!

      Finally, someone who has been paying attention during the last eight years, and isn't a mindless zombie follower of "Rush and Sean"!

      Where were the above panicked commenters when the Bush administration was creating record deficits, waging war for oil, spying on American's citizens, deregulating the banks into ruin, repealing laws that protected our water and air, allowing profit taking at the expense of jobs, and generally riding America into ruin?!

      Not one negative comment during the eight years of horror. I guess Rush and Sean never mentioned any of the above…

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