Last week the US Supreme Court upheld the Affordable Care Act and in no time at all Mitt Romney issued a response. In this response he made a very interesting statement.
Obamacare also means that for up to 20 million Americans, they will lose the insurance they currently have, the insurance that they like and they want to keep.
From my knowledge of the Affordable Care Act I couldn't quite understand how Romney arrived at this claim, so I started looking into it. First I started off with looking into the history of health insurance in the United States.
During World War II there was a severe shortage of labor in the United States. The work force at the time was primarily male, by a large margin, and with so many of our men overseas fighting the competition for employees was pretty hot. Businesses started looking for new ways to attract and retain good employees and one of the methods they started to use on a large scale was to provide health insurance to their employees. They weren't forced by law to provide insurance, instead it was something that they did voluntarily as they saw the competitive benefits outweighing the monetary costs.
As time went on the war ended and the labor crunch eased but companies continued to provide health insurance as they still saw the cost of providing insurance as being more than returned by the gains they received from making sure their employees could see a doctor when they needed to. Sure, a few companies were contractually obligated to provide health benefits because of agreements made with unions, but as unions waned in America employer provided health care remained reasonably steady.
When the Affordable Care Act, i.e. Obamacare, was being debated and after it passed we were warned that it would cause people to lose the health care insurance they have enjoyed for years. Why? Because employers would be penalized for not providing health insurance but the penalty would be less costly than the insurance plans and therefor businesses would simply drop their health care plans and pay the fines so they could save money. This would be pretty scary stuff except that it simply isn't true.
If you look back a couple of paragraphs you will be able to read, once again, why employers are the most common path to health insurance in the United States. If you read carefully you will see that businesses aren't required to provide insurance, instead they do so because they believe the benefits outweigh the costs of providing insurance. A legal requirement for businesses to provide insurance won't change that cost / benefit assessment, in fact it reinforces it.
After businesses are required to provide health care or pay a fine a business could decide to drop its health care plan and pay the fine which could possibly save them money. Of course up to this point businesses have not been dropping their health care plans left and right even though if they did now they could save 100% of the money they were putting into health care. After the fines are in place they will only be able to save a percentage of the money they were putting into health care since the rest of the money would have to pay for the fines. Sure, after the fines are implemented a business might save some money, but they could save more now. So if saving a bit of cash is why a company would stop providing its employees with health insurance why aren't they dropping their plans now?
The answer to that question is very simple. Companies continue to provide health benefits because it helps them to compete for and retain better employees. After the requirement to provide health insurance goes into effect the greatest likelihood is that more companies will offer health insurance, not less, as most businesses do follow the laws that apply to them. This of course means that eliminating employee health plans would create greater competitive costs after the employer mandate goes into effect than it did before as an employer without a health plan would look like an even worse choice to a job seeker than it had before. This is why employers haven't been dropping health care plans in large numbers and why they won't in the future. It would make bad business sense to do so, especially after the savings to the business are reduced while the costs increase. No sensible business person would ever do this, but apparently Mitt Romney thinks they would.
Mitt Romney is out of touch, not just with Americans but with American businesses as well. So obviously Mitt really isn't like President Obama, because it looks like President Obama actually understands how business works. Maybe Mitt has just forgot about the way things function in the business world. After all he implemented a health plan in Massachusetts just like Obamacare. So to be kind maybe Romney's problem isn't ignorance, maybe it is just crippling forgetfulness.
No comments:
Post a Comment