Thursday, September 26, 2013

The Far Greater Burden of Hidden Taxes

The earliest coverage for health services in the U.S. was established for seamen by the federal government in 1798.  It was a compulsory payroll deduction, something I learned about while representing small businesses on a task force in Durham only a couple of years before I retired .

The group was noodling how to minimize the impact that people without health insurance have on those who do (prior to passage of the Affordable Healthcare Act), and it included Durham hospital administrators, medical associations, universities, local officials and others.

A study conducted in 2009 by the actuarial consultant Milliman quantified that people without healthcare coverage (often ranging to 1 in 3 Americans) are shifting a hidden tax on to those who do.

This amounted to $1000 per family and nearly $400 per individual because the costs of uncompensated care are shifted on to those with insurance through increased premiums, or on to businesses if they are covered at work.

By now, this tax-like shift was projected to increase by a third.  This above and beyond the fact that in the U.S. we overtly spend more tax dollars on healthcare than countries with universal coverage, many times more.

We only publicly provide care for mostly “poor people, old people and congress people” and we still spend 58% more per capita in public dollars on healthcare than countries with universal coverage and that doesn’t even count the hidden tax.

If you find yourself wondering why, watch the rest of this fact-checked video by the hilarious author John Green as part of his Question Tuesday series.  As the Upworthy post by Adam Mordecai notes, it will blow your mind in just the first five sentences, that is for those still open enough to watch or even read this far.

Until the 1930s most health insurance only protected workers from disability due to accidents or lost wages should they fall sick.  Companies in mining, lumber and railroads, however, experimented with plans that covered medical services in the 1870s and 1880s beginning in the Pacific Northwest.

Spurred by the Great Depression, healthcare insurance as we know it today evolved in the 1930s.  By 1940, a little less than 10% of Americans were covered.  But spurred again by WWII, by 1950, two years after I was born, 50% of Americans had some form of healthcare insurance.

Unlike soon-to-be required healthcare insurance, compulsory auto insurance wasn’t organized by the federal government but it too, was modeled after one passed in Massachusetts in 1925 and enacted in 1927.

It took nearly 30 years before another state followed suit. In 1957, North Carolina, where I live, became the third state to require car insurance.  Until the 1970s, a majority of states required only proof of financial responsibility, something still done in Virginia.

If a driver can’t provide poof they can pay any liabilities, they can either buy a bond or pay a fee, the proceeds of which are distributed to insurance companies to offset the hidden tax uninsured drivers place on the system.

The first car insurance policy was sold in Ohio in 1897, but it took a while to sort out whether auto accidents would instead be resolved in court like Torts.

In the beginning, insurance companies opposed legislation to make even financial responsibility mandatory for automobile drivers.  Reading the arguments back then seems very much like listening to conservatives today when they “diss” health insurance requirements as “Obamacare.”

Studies show that 1-in-7 drivers in the U.S. are still uninsured today, ranging from 4% in Massachusetts to 28% in Mississippi, including 14% in North Carolina.  These uninsured drivers shift a hidden “tax” onto the premiums of insured drivers that amounted to $10.8 million in 2007.

It sure doesn’t appear that handing that on a state by state basis has worked for car insurance either.

When I read that the CEO of Papa John’s estimated that meeting the requirements of the Affordable Healthcare Act could possibly raise the cost of a pizza by 15-20 to cents, it sounded like an excellent trade off to me.

That is peanuts compared to what leaving Americans uninsured does to my premiums.

Visitor-related businesses have been very slow to provide healthcare insurance to employees, often by keeping employees part time.  Sixty percent of restaurant employees are part-time, one third of which, according to studies, are using those jobs to further their education.

Last month, Rick Newman, a financial bloggers, quoted Victor Fernandez of People Report, an HR consultant that publishes benchmarks and forecasts for restaurants as saying about the Affordable Healthcare Act:

“If it works as it’s supposed to, we’ll probably see a happier, more engaged workplace.The law will provide some good benefits compared to what people have now.”

A recent survey by PwC found that the majority of private companies are already in compliance with the new healthcare insurance law and a very small percentage of those who aren’t cited affordability as an issue.

For many decades now businesses have understood the value of a healthy workforce.  Most also understand that plugging loopholes and avoiding the shift of hidden costs is just good business.

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