Good Essay On Should Employers Provide Employees With Health Care?

Obamacare for larger businesses will begin to take effect this year, and for small businesses it will begin to take effect in the year 2016. However, more and more economists, including those on the right and those on the left, are of the opinion that for businesses, whether large or small, to provide healthcare for their employees is not a very good idea. Are such people correct?
This is a difficult question to discuss, much less to answer. The reason why it is so difficult is that even renowned scientific journals, such as the Journal of the American Medical Association, publish commentaries that blatantly disregard what the science of economics has to say on the topic in question. They disregard, for example, the basic fact that businesses are not the same as people. In other words, people are susceptible to feelings of pain and to its opposite, feelings of pleasure, whereas businesses are not. Although courts do treat businesses as people, this is regarded only as a “legal fiction” (Goodman). If, for example, a business is taxed, a relationship is in reality being taxed and the burden falls on actual people. If a business is regulated, the burden again falls on actual people. If a business is subsidized, it is the actual people who benefit from such subsidization. This, then, is not a matter of economics but rather a matter of simple logic.

Yet, in spite of this, McDonough and Adashi state the following in defense of the employer mandate:

The core value undergirding the shared responsibility principle is the realization that all of the major stakeholders of the health care system must contribute something if comprehensive health care reform is to be accomplished. Stated differently, making the ACA work requires a measure of responsibility from consumers, hospitals, physicians, insurance companies, drug makers, medical device makers, home health agencies, labor, and—because of section 1513—large employers. (665)
In the above paragraph, there are but three actual stakeholders that are made mention of: physicians, workers and consumers. All other entities are a pass-through organization. Thus, if an insurance company is taxed, for example, the burden does not fall on an entity by the name of “insurance company.” Rather, the burden of tax falls on either the consumers, who ultimately end up paying higher premiums; the employees, who in turn receive wages lower than before; and the shareholders, who get lower returns.
For this reason, the above-quoted passage is not an analysis that is well reasoned. Instead, it consists of the type of rhetoric a person would probably expect from someone such as a politician, particularly one who is on the left. The main reason why this kind of rhetoric endures is that economists do not always know for certain whom the burdens fall on. This is especially true of tax on such industries device manufacturers and insurance companies.
There are, however, a couple of things which have been established quite well. The first is that the burden of payroll taxes falls directly on employees and are a dollar-for-dollar employee compensation substitute. The second is that mandated and non-mandated employee benefits are a dollar-for-dollar wage substitute. These two facts have been established over the years by a number of studies. The second, moreover, implies a fact that is in no way, shape or form a subject of contention in economics, namely that 100 percent of employee benefits that are mandated are usually deducted from the employees’ wages and also from some of their benefits that are not mandated.
For instance, Gruber and Krueger state that worker compensation insurance costs are ultimately deducted from employee’s wages, and they predict that this will also be true in the case of health insurance that is mandated. In another study, Gruber states that the burden of this cost falls on the same employees whom this law is supposed to help. Finally, Kolstad and Kowalski found that the wages of employees who received health insurance from their employers were lower by about the same amount their employers spend on providing the employees with health care.
Thus, if the cost of providing health care for employees is deducted from their wages, then in fact there is no difference between the individual mandate and that of the employer. In other words, making it a requirement that employers provide health care is no different from requiring employees to pay for health care out of their own pockets.
Some, however, still hold that there are a number of advantages to offering health care to employees. For instance, providing health care will not only attract but also retain the most qualified workers. But whether providing health care is necessary for attracting and keeping the most qualified workers hinges on several factors, such as whether other employers in the same area are likewise offering health care for their workers. Another purported advantage is that employers can avoid health care reform assessments. This is because, starting 2015, the Patient Protection and Affordable Care Act will require employers that have 50 or more full-time employees to offer health coverage or be assessed if their workers are receiving tax credits to purchase their own coverage. Another advantage is related to taxes. A company can provide their workers with something which makes their compensation package increase while at the same time allowing the company to make an income tax deduction for the increase, so that the company’s costs are less than the benefit it is offering its employees. If the business is run by a “self-employed” individual, then this person can deduct 100 percent of the costs. If the business is incorporated, not only can the cost of the employees’ insurance be deducted, but the cost of the business owner’s insurance can be deducted as well. An advantage for small businesses is that if they have fewer than 25 workers and provide them with health coverage, they are entitled to a tax credit. Another advantage, particularly for employees, is that even if an employer decides not to provide health insurance, it could offer its employees the opportunity to purchase insurance through them at a lower cost. Moreover, if the employer is small (i.e. it has fewer than 50 full-time employees), it can buy health care through the Small Business Health Options Program (SHOP), a government-run insurance specifically established for such an employer. A final advantage is that employees with health care are more likely to get yearly physicals, ensuring that they are healthy. By contrast, employees without insurance are more susceptible to illness and, by extension, sick leaves, which in turn is bad for any employer. Thus, although it is apparent that there are in fact advantages to providing employees with health care, such advantages seem to be mainly for employers and not employees.
What, then, is the purpose of an employer mandate? In my opinion, it is deception. If employees do not possess a sound understanding of economics, deceptive politicians will beguile the naive masses into believing that they, the politicians, have devised an effective plan when in fact they have done no such thing. They are fooling people into believing that employees will get a benefit and that they will not bear the cost of such a benefit.
Employer mandates have, as has been shown, major drawbacks. Take, for example, the Obamacare mandate. Someone who makes USD10 per hour can go into the program and receive a subsidy that is worth over 90 percent of the insurance cost. However, if the company has to offer health care, the federal government offers no help except for giving the company the ability to purchase insurance with pre-tax dollars. What this entails for such an employee is avoidance of the payroll tax.
This, then, is the reason why many businesses are changing the full-time statuses of their employees to part-time, outsourcing, hiring contract workers as opposed to hiring new employees and make use of use of other loopholes. In the end, employees who earn a low wage are left either with no insurance or with a skimpy one and have no chance to get insurance.
In conclusion, the employer mandate is not only interrupting the labor market, but causing harm to the individuals it was designed to assist. As such, employers should not provide their employees with health care coverage.

Works Cited

Goodman, John C. “Should Employers Be Required To Provide Health Insurance To Their Employees.” Forbes. Forbes Media, 19 Feb. 2015. Web. 14 Apr. 2015.
Gruber, Jonathan. “The Incidence of Mandated Maternity Benefits.” American Economic Review 84.3 (1994): 622-641. Web. 14 Apr. 2015.
Gruber, Jonathan and Krueger, Alan B. “The Incidence of Mandated Employer-Provided Insurance: Lessons from Employees’ Compensation Insurance,” NBER Working Paper Series. Cambridge, MA: NBER, 1990.
Kolstad, Jonathan T., and Kowalski, Amanda E. “Mandate-Based Health Reform and the Labor Market: Evidence from the Massachusetts Reform.” NBER Working Paper No. w17933 (2012). Web. 14 April 2015.
McDonough, John E., and Adashi, Eli Y. "In Defense of the Employer Mandate: Hedging Against Uninsurance." JAMA 313.7 (2015): 665-66. Web. 14 Apr. 2015.