Monday, February 11, 2013

The Unintended Incentives Of Tying Health Insurance to Employment

We should talk more about incentives in politics and in policies.  For example, the US system of tying health insurance to employment creates some very bad incentives.  Like these:

As part of his state’s new budget, Virginia Gov. Bob McDonnell (R) and his administration are trying to force potentially tens of thousands of public sector employees in the state to work fewer hours so that the government can avoid providing them health care.
It's in the interest of an organization to do that, and it's more in the interest of profit-focused private firms than the public sector, though McDonnell demonstrates that even the latter will join the cost-cutting train.

The bad incentives here have to do with manipulating hours of work to avoid paying for health insurance.  Other bad incentives of the employment-tied US health insurance system abound.  The latest of them is that religious thing about employers trying to have a say over what type of health care the insurance policies should cover, to avoid funding contraceptives.  Thus, health insurance becomes something affecting working conditions and also something other people's ethical values determine, in a fairly non-democratic way.

If health insurance was not tied to employment we wouldn't have so many things to argue about or the kinds of manipulations we are witnessing here, and firms wouldn't be so reluctant to hire older workers with potentially higher health care costs.