I started my first business in 1976. As anyone who has left a secure job and jumped into the briar patch of self-employment will attest, it’s an enormous decision.
My mother was against my plunge because of the benefits that big companies provided their employees back in those days. Nonetheless, 30 years ago this May, I made the leap to a life of relative independence — and free of employer-paid fringe benefits. There have been good times and bad times, but I wouldn’t have had it any other way.
Back in the 1970s, health insurance was less than 50 bucks a month for family coverage, and a majority of big companies offered pension-type retirement plans for their employees. By way of explanation, with a pension, compared to a 401(k), for example, the company assumes responsibility for providing a fixed amount upon the employee’s retirement, usually a percentage of compensation adjusted for years of service.
But back to health insurance.
It was fairly common in those days for the employer to pay the entire health insurance premium for the employee and not uncommon to have some, or all, of the dependent’s coverage paid, too.
Things have changed in 30 years, haven’t they?
Step by step, employers are retreating from responsibility for the welfare of their employees. The first trend in that direction was the demise of pension-type retirement plans. It’s easy to see why responsibility-averse employers would convert from pensions to 401(k) plans.
Pensions guarantee a fixed retirement benefit whether investments perform well or not; a 401(k) provides a benefit based entirely on the performance of the underlying investment portfolio. Since employees choose their investments in a 401(k), they either prosper or crash based on their luck and financial savvy. Either way, it’s not the employer’s problem.
The healthcare arena offers another example of employers subtly shifting responsibility for the cost and utilization of fringe benefits to the employees.
Where healthcare is available to employees, the vast majority of businesses, particularly small businesses, now require the employees to shoulder a portion of the cost of their healthcare insurance premiums. The rapidly escalating costs of healthcare left business little choice but to pass on some of the cost to the employees and, in my opinion, this trend will continue.
Anyone who watches even a few minutes of television is exposed to a torrent of drug ads. Naturally, we want our ills improved and , or at least mitigated, so we call the ol’ Doc and have him prescribe the latest and greatest so that our aches and pains, both real and imagined, will go away. Ten bucks for the prescription co-pay and we’re on our way. The rapidly escalating cost and use of drugs is the primary culprit in driving the cost of healthcare through the roof. Health insurance without a drug card is actually pretty affordable.
And the customer would be…?
I have long felt that the cost of healthcare is out of control because consumers aren’t kicking the tires and comparing prices. Health insurance premiums are based, at least in large part, on usage. The more we use it, the more it costs. Employers have no control over our usage of health benefits and, in fact, are prohibited by law from even being aware of our health situation. The insurance companies couldn’t care less about how much we spend because they merely add up the costs, factor in a profit for themselves and adjust the premium upward. Doctors and other healthcare providers are not concerned with the cost because the insurance company pays pretty much whatever they charge anyway.
No one is minding the store.
Though not widely available in Mississippi at this time, healthcare savings accounts will eventually arrive on the scene and change things for the better. Doctors and hospitals oppose health savings accounts because people will be more discerning when spending their own money than if they merely pay $25 co-pay and the problem disappears off their radar screen.
The insurance industry will eventually yield to pressure from consumers and relent in their opposition to healthcare savings accounts and things will get better for consumers. It will not, however, get better for doctors, pharmacies and hospitals who will then have to justify their charges and compete for business.
No ‘right’ to healthcare
The hue and cry for government-funded healthcare for everybody is getting louder and louder. Many feel that a right to healthcare has been added to the Bill of Rights. That notion is absurd because the Bill of Rights concerns actions that you cannot prevent me from doing and none of them require me to do anything for you. Universal healthcare, on the other hand, requires me to pay for your healthcare and that is not a right.
An entitlement, perhaps, but not a right.
So, how’s it going to be?
My best guess is that health savings accounts will become a stabilizing force. Plus, some form of government-funded healthcare will be enacted within the next decade or so. After all, around 65% of all people are already participating is some form of government health program and I suppose it’s inevitable that the rest of us — a mere 35% — will get on board the train, too. Then, we will truly have two separate healthcare systems: one for the wealthy who wish to pay for the best and one for everybody else.
Thought for the Moment
To be happy is easy enough if we give ourselves, forgive others, and live with thanksgiving. — clergyman and writer
Joseph Fort Newton (1880-1950)
Joe D. Jones, CPA (retired), is publisher of the Mississippi Business Journal. Contact him at firstname.lastname@example.org.