Employer-Based Health Benefits: The Death Spiral Is Nigh

Let’s presume that the government isn’t actually going to jail anyone for not buying health insurance. Considering the health-insurance “reforms” that will require insurers to cover anyone, regardless of pre-existing conditions, the rational course of action for anyone is to drop coverage, pay the fine, and then re-enrol in a health plan once you need medical care, which is what happened in Massachusetts. [Currently, the Health Insurance Portability & Accountability Act (HIPAA) of 1996 already requires insurers to cover pre-existing conditions, but the individual has to maintain continuous coverage, in order to prevent this obviously bad incentive.]

Anyway, we don’t have to rely on policy-wonks to arrive at this conclusion: Less than half of employers intend to continue health benefits if the cost of paying the fine is less than the cost of health benefits, according to Towers Perrin (p. 9, exhibit 13).

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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