Union pulls support for Obamacare, a sign of things to come?

[David88vert]

First of all, I get a total compensation package every year from my employer. I know exactly how much they pay for my health care, disability, etc. That's actually irrelevant though. Salaries are not dictated by individual employers, they are determined by market forces and negotiation. Unless every company colludes to pay all their employees less (by reducing their benefits), those companies who reduce health benefits without replacing compensation, will lose their employees to other companies that will pay them full market value.

I've worked for two Fortune 50 companies that do not give out that information to their employees. It's certainly not available system-wide, and unless you legislated that into healthcare, it is unlikely to happen system-wide. Obamacare has not included that legislation.

While employers do look at the market, and tend to follow it in a general sense, the offer comes from an individual employer, and is an agreement between the individual and the company. Supply and demand works here, and in an economy like we have today, the employer has the ability to dictate the pay in many fields. If the employer did not, then we would not have minimum wage laws. The mere fact that we do shows that employers do have the ability to dictate wages in many (not all) instances.

It would not need collusion to have employers remove benefits without adding compensation. It only takes a few big players to do it, and then many more follow suit. Case in point, up until a few years ago, most large companies offered full pensions to employees, but look now, big Fortune 100 companies have managed to remove pension plans and replaced them with 401K plans that do not cost the employer as much, and have not raised salaries to address the compensation issue. A record high of 70 companies in the Fortune 100 provided only a 401K or similar type of retirement account to new hires in 2012, compared with 67 employers in 2011, and 63 employers in 2010. In 1998, 90 companies in the Fortune 100 sponsored a traditional or hybrid pension plan. This was done without collusion.

AT&T, Verizon, Caterpillar and Deere have already looked into dropping all healthcare plans - and without collusion between them. (AT&T, Verizon, others, thought about dropping health plans - May. 5, 2010).
I can tell you for a fact that one of those 4 has greatly reduced what they pay towards healthcare benefit already - without increasing compensation in any of their other benefits. I have first-hand knowledge of it.

I didn't say private single payer, I said private OR single payer.

Government single-payer - According to Canada's top think tank, and quite a few independent analysts, Canada's provinces are spending too much to keep the same benefits much longer. But we have nothing to be concerned about, because the US government is so efficient, right?

I'm not suggesting they should be legislated away directly. I am suggesting we have a system that will not incentivize business to provide them in the first place. For example, if you can't set rates by using pre-existing conditions, the negotiating advantage of businesses with insurance companies is greatly diminished.

I am not against unhitching individual medical plans from employment. It's a good idea, and would empower individuals to change jobs with more ease.
What I don't see is how you can take away a method of compensation that employers value highly. The reason that they offer health plans is to get the employee to want to stay and work. Unless you legislate that they cannot offer a health plan, businesses will find loopholes to get around it, and the insurance companies will help them - it is cheaper for an insurance company to write a policy for 200,000 people than to write 200,000 individual plans.

[bu villain]

I've worked for two Fortune 50 companies that do not give out that information to their employees. It's certainly not available system-wide, and unless you legislated that into healthcare, it is unlikely to happen system-wide. Obamacare has not included that legislation.

As I said before. It's actually irrelevant. Employees recognize that company health care benefits have a lot of value even if they don't know the exact dollar amount. People definitely take benefits into account when looking at jobs, not just salaries. Yes the opacity of health care costs can make it more difficult to judge but it is very much a factor.

While employers do look at the market, and tend to follow it in a general sense, the offer comes from an individual employer, and is an agreement between the individual and the company. Supply and demand works here, and in an economy like we have today, the employer has the ability to dictate the pay in many fields. If the employer did not, then we would not have minimum wage laws. The mere fact that we do shows that employers do have the ability to dictate wages in many (not all) instances.

If salary negotiations are actually just dictates from employers, why would they pay anyone more than minimum wage? I think your argument makes sense for minimum wage jobs but I don't see how it applies to better paying jobs.

It would not need collusion to have employers remove benefits without adding compensation. It only takes a few big players to do it, and then many more follow suit. Case in point, up until a few years ago, most large companies offered full pensions to employees, but look now, big Fortune 100 companies have managed to remove pension plans and replaced them with 401K plans that do not cost the employer as much, and have not raised salaries to address the compensation issue. A record high of 70 companies in the Fortune 100 provided only a 401K or similar type of retirement account to new hires in 2012, compared with 67 employers in 2011, and 63 employers in 2010. In 1998, 90 companies in the Fortune 100 sponsored a traditional or hybrid pension plan. This was done without collusion.

But companies didn't just get rid of pensions, they replaced them with 401(k)s. Now you can argue that the value of 401k contributions did not match up with pension benefits but that is a hard case to prove and is rather subjective. For example, if your company went bust, you may lose your entire pension. A 401(k) is yours even if your company goes under. Also, as you mentioned, some companies still have pensions. Why didn't they just get rid of them and thus lower their costs as you suggest would happen with health care benefits? It's because they know it will attract employees who consider a pension a valuable addition to their salary.

AT&T, Verizon, Caterpillar and Deere have already looked into dropping all healthcare plans - and without collusion between them. (AT&T, Verizon, others, thought about dropping health plans - May. 5, 2010).
I can tell you for a fact that one of those 4 has greatly reduced what they pay towards healthcare benefit already - without increasing compensation in any of their other benefits. I have first-hand knowledge of it.

Sure, in the short term it may work like that on an individual company basis, but over time, their employees will switch to other jobs that provide them more total compensation. My main argument is that company health benefits are not totally different from salary. They are both forms of compensation that employees care about and take into their decision making.

Government single-payer - According to Canada's top think tank, and quite a few independent analysts, Canada's provinces are spending too much to keep the same benefits much longer. But we have nothing to be concerned about, because the US government is so efficient, right?

We are having the same problem here in our quasi-free market system. Health care costs are becoming overbearing. So while you are right that a single payer system won't solve that problem, our free market system isn't solving it either.

I am not against unhitching individual medical plans from employment. It's a good idea, and would empower individuals to change jobs with more ease.
What I don't see is how you can take away a method of compensation that employers value highly. The reason that they offer health plans is to get the employee to want to stay and work. Unless you legislate that they cannot offer a health plan, businesses will find loopholes to get around it, and the insurance companies will help them - it is cheaper for an insurance company to write a policy for 200,000 people than to write 200,000 individual plans.

Individual plans are only difficult to do because you have to look into those individuals medical history. If pre-existing conditions can not be used as a basis for policies, there is no longer a need to do that laborious work.

[BanginJimmy]

If salary negotiations are actually just dictates from employers, why would they pay anyone more than minimum wage? I think your argument makes sense for minimum wage jobs but I don't see how it applies to better paying jobs.

Because people that employ higher wage earners know what the market dictates for someone with a particular resume. In fields that still negotiate salary, competition for the best and brightest go a long way to decide salary and benefit packages.

But companies didn't just get rid of pensions, they replaced them with 401(k)s. Now you can argue that the value of 401k contributions did not match up with pension benefits but that is a hard case to prove and is rather subjective. For example, if your company went bust, you may lose your entire pension. A 401(k) is yours even if your company goes under. Also, as you mentioned, some companies still have pensions. Why didn't they just get rid of them and thus lower their costs as you suggest would happen with health care benefits? It's because they know it will attract employees who consider a pension a valuable addition to their salary.

Surprisingly, you are correct. You are forgetting one aspect though. Without doing any research, I am willing to bet that most, if not all, of the companies still offering a defined benefit pension are union shops. You can also add mobility in the workforce has really lessened the usefulness of a traditional pension. People just arent staying in a job for 30 or 40 years and retiring like they used to. I used to work with a guy that started there in the late 60's. It was his first job after he got out of the military, and the military was his first job period. People simply dont do that anymore, so you will see that fewer and fewer hourly employees actually see it as the benefit they used to see it as.

Sure, in the short term it may work like that on an individual company basis, but over time, their employees will switch to other jobs that provide them more total compensation. My main argument is that company health benefits are not totally different from salary. They are both forms of compensation that employees care about and take into their decision making.

This may happen, but probably not in the numbers it would take to force companies to change their practices.

We are having the same problem here in our quasi-free market system. Health care costs are becoming overbearing. So while you are right that a single payer system won't solve that problem, our free market system isn't solving it either.

Most of the reasons for the rise in healthcare costs are caused by the govt. You can look at tort laws, you can look at medicare/medicaid, or you can look at state directed mandated coverage. Can you think of a single govt program that brings the cost of health care down? I know I cant.

Individual plans are only difficult to do because you have to look into those individuals medical history. If pre-existing conditions can not be used as a basis for policies, there is no longer a need to do that laborious work.

And if you cant look at their history, how are you going to accurately quote a price for the coverage? Just like when you apply for car insurance, they look at your history to assess the risk, then charge in accordance with that risk.

[bu villain]

Because people that employ higher wage earners know what the market dictates for someone with a particular resume. In fields that still negotiate salary, competition for the best and brightest go a long way to decide salary and benefit packages.

Exactly, David was saying that no other form of compensation would take the place of health care benefits if a company got rid of them. I agree with you, competition for employees would force them to compensate in another way to make up for it. The labor force still generally behaves according to market principles with or without health insurance being one particular form of compensation in the mix.

Surprisingly, you are correct. You are forgetting one aspect though. Without doing any research, I am willing to bet that most, if not all, of the companies still offering a defined benefit pension are union shops. You can also add mobility in the workforce has really lessened the usefulness of a traditional pension. People just arent staying in a job for 30 or 40 years and retiring like they used to. I used to work with a guy that started there in the late 60's. It was his first job after he got out of the military, and the military was his first job period. People simply dont do that anymore, so you will see that fewer and fewer hourly employees actually see it as the benefit they used to see it as.

I'm not forgetting it, I just don't see it as that relevant. Compensation was not cut across the board when companies started shifting to 401(k)s. That is my argument. Your statement about mobility is one of the reasons I think single payer is an option to be considered. Company health benefits are a barrier to mobility. We shouldn't dictate what benefits companies can give, but we can have an alternative that makes it less of an issue.

This may happen, but probably not in the numbers it would take to force companies to change their practices.

Then those companies will not be able to attract the best talent. That's fine. The labor market won't collapse.

Most of the reasons for the rise in healthcare costs are caused by the govt. You can look at tort laws, you can look at medicare/medicaid, or you can look at state directed mandated coverage. Can you think of a single govt program that brings the cost of health care down? I know I cant.

If you go back and read what I wrote again, I specifically stated that single payer would not solve our health care cost problem. I also stated that our free market system isn't solving it either though.

And if you cant look at their history, how are you going to accurately quote a price for the coverage? Just like when you apply for car insurance, they look at your history to assess the risk, then charge in accordance with that risk.

You do it exactly the same way they do now for large companies. You base it on averages.

[BanginJimmy]

You do it exactly the same way they do now for large companies. You base it on averages.

How do you average 1 person or 1 family?

[bu villain]

How do you average 1 person or 1 family?

How do they do it now when they write a policy for a large company? Think of it this way, the whole country is now a large company. The insurance company's actuarial team looks up medical statistics including their own data from over the years and determines the average cost of payments. The next year they analyze again and raise or lower premiums accordingly. This is basically how they determine premiums now in a large company policy.

[BanginJimmy]

How do they do it now when they write a policy for a large company? Think of it this way, the whole country is now a large company. The insurance company's actuarial team looks up medical statistics including their own data from over the years and determines the average cost of payments. The next year they analyze again and raise or lower premiums accordingly. This is basically how they determine premiums now in a large company policy.

They use company wide averaging like you said. They also look at the industry you work in and the type of work you do. An engineering firm that does most of its work on a computer is going to have a cheaper plan for the exact same coverages than an industrial firm whose employees work on heavy objects and in tight spaces.

Why cant you do the same for the entire country? Differences in the cost of health care in different regions is one. individual under writing would be too expensive is another.

[David88vert]

As I said before. It's actually irrelevant. Employees recognize that company health care benefits have a lot of value even if they don't know the exact dollar amount. People definitely take benefits into account when looking at jobs, not just salaries. Yes the opacity of health care costs can make it more difficult to judge but it is very much a factor.

At my current level, health care benefits are still a major part of employee compensation. I know that lower paid employees have less emphasis on them, as I used to be one, but my point is that what the company pays out is relevant if you are looking to see if the employee is still getting the same compensation for their job as before. If you cut $2K out from what the employer pays out, but only give the employee $500 more, then the employee is then receiving less compensation for the same work. Right now, they don't know what the employer is paying out.

If salary negotiations are actually just dictates from employers, why would they pay anyone more than minimum wage? I think your argument makes sense for minimum wage jobs but I don't see how it applies to better paying jobs.

Lower wage earners don't tend to be good negotiators of compensation. If they were, they would not be lower wage earners. Aren't these the people that Obama wants to help?

But companies didn't just get rid of pensions, they replaced them with 401(k)s. Now you can argue that the value of 401k contributions did not match up with pension benefits but that is a hard case to prove and is rather subjective. For example, if your company went bust, you may lose your entire pension. A 401(k) is yours even if your company goes under. Also, as you mentioned, some companies still have pensions. Why didn't they just get rid of them and thus lower their costs as you suggest would happen with health care benefits? It's because they know it will attract employees who consider a pension a valuable addition to their salary.

Funded Pensions are usually used by private employers and were paid into plans. Unfunded ones are usually state governments. If the company went belly up, the pension plan still was in place, and you still get your benefits as the pension was funded.
Do you realize that most of the pension plans have been killed off since 2008? They are being replaced or eliminated very quickly now at an accelerated pace. The only reason that the last 30 companies haven't replaced them is that they haven't had HR do it yet.

Sure, in the short term it may work like that on an individual company basis, but over time, their employees will switch to other jobs that provide them more total compensation. My main argument is that company health benefits are not totally different from salary. They are both forms of compensation that employees care about and take into their decision making.

I agree that they are both compensation - that's what I have said this whole time.
Employees won't switch jobs much when the economy is down - fear keeps them in place. Companies take advantage and reduce benefits when the economy is down. When the economy is booming, and its hard to find employees, then they will add in more benefits to attract more employees.
You can see it with raises right now - many employees have not been getting raises for several years, yet they stay in place.

We are having the same problem here in our quasi-free market system. Health care costs are becoming overbearing. So while you are right that a single payer system won't solve that problem, our free market system isn't solving it either.

Correct. Costs will rise until the demand for healthcare services starts to decline. Supply and demand.

Individual plans are only difficult to do because you have to look into those individuals medical history. If pre-existing conditions can not be used as a basis for policies, there is no longer a need to do that laborious work.

If you can't access medical history, then you have no way to assign risk, other than a vague, generic amount. We see this with car insurance. Right now, they can look at your DMV record - what happens if they no longer can look and see how many points that you have? The answer is that they will raise the rates across the board. They will still cover their bases - they won't operate at a loss. Someone has to pay for it all - all you are doing is shifting the cost to someone who should have had a lower rate.

[bu villain]

I responded to most of this within my response to Jimmy but just to add a few more details

At my current level, health care benefits are still a major part of employee compensation. I know that lower paid employees have less emphasis on them, as I used to be one, but my point is that what the company pays out is relevant if you are looking to see if the employee is still getting the same compensation for their job as before. If you cut $2K out from what the employer pays out, but only give the employee $500 more, then the employee is then receiving less compensation for the same work. Right now, they don't know what the employer is paying out.

If the employees won't know the difference, why don't they just cut their $2k health benefits and give those employees $500 more right now?

Lower wage earners don't tend to be good negotiators of compensation. If they were, they would not be lower wage earners. Aren't these the people that Obama wants to help?

Same response as above. Why are they currently giving these benefits if their employees don't know the difference.

Funded Pensions are usually used by private employers and were paid into plans. Unfunded ones are usually state governments. If the company went belly up, the pension plan still was in place, and you still get your benefits as the pension was funded.
Do you realize that most of the pension plans have been killed off since 2008? They are being replaced or eliminated very quickly now at an accelerated pace. The only reason that the last 30 companies haven't replaced them is that they haven't had HR do it yet.

But how does that support your argument that the replacement of pensions with 401(k) resulted in lower overall compensation for employees?

I agree that they are both compensation - that's what I have said this whole time.
Employees won't switch jobs much when the economy is down - fear keeps them in place. Companies take advantage and reduce benefits when the economy is down. When the economy is booming, and its hard to find employees, then they will add in more benefits to attract more employees.
You can see it with raises right now - many employees have not been getting raises for several years, yet they stay in place.

Yes companies can often reduce benefits in compensation and salary in a bad economy. But that is true whether you have health care benefits or not so I fail to see how health care benefits deserve any special consideration here.

Correct. Costs will rise until the demand for healthcare services starts to decline. Supply and demand.

Good then we can agree this is a separate topic for the time being.

If you can't access medical history, then you have no way to assign risk, other than a vague, generic amount. We see this with car insurance. Right now, they can look at your DMV record - what happens if they no longer can look and see how many points that you have? The answer is that they will raise the rates across the board. They will still cover their bases - they won't operate at a loss. Someone has to pay for it all - all you are doing is shifting the cost to someone who should have had a lower rate.

Yes, that is exactly what I expect to happen. Many people will receive higher rates to cover those with preexisting conditions. The whole point of insurance is to shift costs. Coming from a young, healthy person, I fully understand my premiums will undoubtedly go up but I still believe it is a better option for society as a whole.

[David88vert]

I responded to most of this within my response to Jimmy but just to add a few more details

If the employees won't know the difference, why don't they just cut their $2k health benefits and give those employees $500 more right now?

Same response as above. Why are they currently giving these benefits if their employees don't know the difference.

But how does that support your argument that the replacement of pensions with 401(k) resulted in lower overall compensation for employees?

Yes companies can often reduce benefits in compensation and salary in a bad economy. But that is true whether you have health care benefits or not so I fail to see how health care benefits deserve any special consideration here.

Good then we can agree this is a separate topic for the time being.

Yes, that is exactly what I expect to happen. Many people will receive higher rates to cover those with preexisting conditions. The whole point of insurance is to shift costs. Coming from a young, healthy person, I fully understand my premiums will undoubtedly go up but I still believe it is a better option for society as a whole.

It's really very simple.

Employers currently know that if they give health benefits, they are more likely to retain their employees for a longer period of time. They don't hire the best employees - they hire the ones that are the most profitable for the company. If they simply wanted the best, there would be no such thing as outsourcing. They want those that can make them profit, and if they can use health benefits to keep the employee there longer, they will. If you take that away nationwide, then they simply won't offer that benefit anymore. They aren't going to give out $500 more in salary and cut the health benefits, as that does not succeed in tying the employee to the company as tightly as health insurance does.
The employee doesn't know the cost, but he does know that if he leaves, he loses his health insurance - and many are afraid to lose it with the high cost of emergency care.

Healthcare benefits have a psychological impact on the employee more so than just salary, as people get attached to a doctor/physician, and many do not want to change to a company that may not have that same doctor/physician listed on their health care provider plans. For this reason, it is different than straight salary or vacation days.

Two things that you do not seem to have contemplated is that, while you are willing to pay more to help cover others insurance costs, not everyone feels the same way as you. Many think that there is no problem to pay extra to help cover others, but others think that each should cover their own family and costs. Why should one group force their will on the other group?
The other thing is that many of those that will end up suddenly insured, are not currently insured - by choice. They currently choose to spend their money on other luxury items - TVs, cars, better housing, etc (non-necessities). I used to see it all the time when I had a retail business. I sold car audio systems back then, and I saw many people that chose to spend their money on amps and subs, rather than get health insurance. These are a lot of the people that you will be insuring under Obamacare.

[bu villain]

It's really very simple.

Employers currently know that if they give health benefits, they are more likely to retain their employees for a longer period of time. They don't hire the best employees - they hire the ones that are the most profitable for the company. If they simply wanted the best, there would be no such thing as outsourcing. They want those that can make them profit, and if they can use health benefits to keep the employee there longer, they will. If you take that away nationwide, then they simply won't offer that benefit anymore. They aren't going to give out $500 more in salary and cut the health benefits, as that does not succeed in tying the employee to the company as tightly as health insurance does.
The employee doesn't know the cost, but he does know that if he leaves, he loses his health insurance - and many are afraid to lose it with the high cost of emergency care.

Healthcare benefits have a psychological impact on the employee more so than just salary, as people get attached to a doctor/physician, and many do not want to change to a company that may not have that same doctor/physician listed on their health care provider plans. For this reason, it is different than straight salary or vacation days.

This doesn't refute any of my points which to reiterate are:

(1) Total compensation would not significantly decrease if health care is not an offered benefit - you actually give evidence that bolsters my stance by saying that health benefits are worth more than the monetary face value to employers because they tie the employer more closely to the company.

(2) We should have a health care policy that removes barriers for the labor force to be more mobile/entrepreneurial

Two things that you do not seem to have contemplated is that, while you are willing to pay more to help cover others insurance costs, not everyone feels the same way as you. Many think that there is no problem to pay extra to help cover others, but others think that each should cover their own family and costs. Why should one group force their will on the other group?

It's not forcing my will because it must be implemented through a democratic process. If we only had to follow the laws we agree with on an individual level, that would be rather chaotic.

The other thing is that many of those that will end up suddenly insured, are not currently insured - by choice. They currently choose to spend their money on other luxury items - TVs, cars, better housing, etc (non-necessities). I used to see it all the time when I had a retail business. I sold car audio systems back then, and I saw many people that chose to spend their money on amps and subs, rather than get health insurance. These are a lot of the people that you will be insuring under Obamacare.

As I stated above, there will always be people who wish a certain law did not apply to them. If we can carve out reasonable exceptions, then that makes sense to do but in the case of health insurance, you really need everyone in from the beginning. It is the only way to avoid people from jumping on the wagon only after they get sick. Having everyone in the pool is an unfortunate necessity.

[David88vert]

This doesn't refute any of my points which to reiterate are:

(1) Total compensation would not significantly decrease if health care is not an offered benefit - you actually give evidence that bolsters my stance by saying that health benefits are worth more than the monetary face value to employers because they tie the employer more closely to the company.

(2) We should have a health care policy that removes barriers for the labor force to be more mobile/entrepreneurial

It's not forcing my will because it must be implemented through a democratic process. If we only had to follow the laws we agree with on an individual level, that would be rather chaotic.

As I stated above, there will always be people who wish a certain law did not apply to them. If we can carve out reasonable exceptions, then that makes sense to do but in the case of health insurance, you really need everyone in from the beginning. It is the only way to avoid people from jumping on the wagon only after they get sick. Having everyone in the pool is an unfortunate necessity.

I think that you think that I am trying to refute all of your argument - I am not. I am pointing out some realities that have to be addressed.

Total compensation would decrease, there is no question of that; however, if the employee is receiving health benefits from another source, they may or may not perceive these changes/decreases. The employers might find other benefits to attract employees to stay for long periods, that is certainly possible, and in some fields, I would say even likely. Regardless, the employee would see a decrease in compensation if the employer is no longer paying out part of the healthcare plan, and does not add in some other type of compensation.

I do not have a problem with the concept of healthcare being decoupled from employment - it is empowering to the employee. It's something to be very careful on though.

As to the democratic process, you can claim that if you want, but it is hardly bi-partisan when a particular party completely overrides the other. Obamacare was pure Democratic Party platform.

If Obamacare is so good, why was it only Democrats that voted for it, and now those same Democrats are talking about exempting THEMSELVES from the plan that they passed?
Lawmakers, aides may get Obamacare exemption - John Bresnahan and Jake Sherman - POLITICO.com