Discussion Draft Legislation on Health-Care Cost Disclosures

Considering the lame WorldAtWork response to EESA, we better comment. Unfortunately, this is a lot more complex. Fortunately, we have more time before Congress will act. If you want a tax deduction for something, government has a right to set terms and conditions. The testimony by the Congressional Budget Office Director that employees forgo wages in exchange for benefits is not entirely true or is an extreme overgeneralization. Most employers have standard group health plans with minimum enrollment thresholds which do not permit employees to refuse benefits in exchange for higher wages. Even when an enterprise does permit employees to choose less expensive health care options, they still almost universally require a certain basic minimum of catastrophic coverage be maintained. This is as much in the employer's own self-interest as for the welfare of the employee, because a sick and untended worker is a valued asset lost from the enterprise. Health care for employees is basic necessary self-defense for the organization because all organizations are essentially human entities that operate best with healthy workers. If an employee didn't want health insurance, most employers would normally either require it anyway or demand assurances that the employee was otherwise covered elsewhere. Most employees do not forgo wages for their basic health benefits. Otherwise, the general premise of the Congressional economic logic is correct. Of course, transparency enhances efficiency. You can't have efficient markets without transparency. Hence, transparent costs will be the most efficient costs. But that's not the whole issue. First, Congress can't even measure the value of its own benefits. Suggest Congress test any provision on itself before it imposes it on all other employers. Publicize the cost of congressional health care first, to establish both a precedent and a norm. Let them better understand the issues and problems by paving the way and setting the example for a change. Be aware that charities and foundations already report the value of benefits provided to their executives on IRS Form 990. The only thing new or revolutionary is parsing out the health care costs alone. There is no connection between employer's health costs and what an employee pays for it. If so,... well, maybe that needs to change, for the benefit of everyone involved. Transparency enhances efficiency. Seeing the amount of the employer's health care cost coverage will identify a value in the employee's mind. I headed benefits at Rexall when we had a company-paid 100% first-dollar no-deductible medical reimbursement plan (yes, in the dark ages of prehistory). When I left, we had instituted a $25 deductible and immediately saw an unbelievable improvement in our experience rating and health coverage cost savings. Once people feel a cost, they perceive, appreciate and conserve the value. Hiding the cost of health care from the employees and insulating them from the full price has led to uncontrolled health cost increases. Putting a number on a W-2 does not identify that number as a tax. That's not a good argument against this. W-2 numbers show contributions and allocations. It is completely appropriate to show on a W-2 the amount the employer contributed to employee health care benefit costs, just as it shows the amount contributed to FICA for Social Security and Medicare by the employer. People usually know that the amounts contributed to those benefit programs are not equal to the amount of value or even the eventual actual cost of whatever benefit they eventually accrue or receive from them; but it is never inappropriate to remind them of that reality, to guard against misunderstanding. More disturbing is the implication, nay the reality, that Congress is intervening in employer-employee relations to entice individuals to demand their employers give them the cash instead of the health benefits. That's direct intervention into individual and collective bargaining territory, potentially interfering with negotiated labor contracts and individual terms of employment. The terms of the most economically-viable group health plans usually preclude the type of cafeteria-benefit selection Congress seems to envision as the model for the future. Encouraging individual employees to opt out of group health benefit plans is the surest way (from an actuarial standpoint) to assure that health costs continue to increase at obscene rates. Small-group health care plans (not always feasible) tend to be far more expensive than total-employee-population health plans. Also, some short-sighted employees who drop essential family coverage will inevitably suffer devastation by catastrophic illness, will go bankrupt and will eventually become burdens upon the state. That is the exact opposite outcome from the universal protections Congress supposedly seeks for our population. Perhaps some clever social scientist envisions that the public outcry at the horrors created by permitting employees to opt out of employer benefit plans, then being bankrupted by health bills, will create a backlash sufficient to justify a universal public health plan whereby the elite central controllers can make all the decisions for everyone. Scary stuff, this balancing between anarchy and socialism. If the congressional proposal contains an exception barring individual benefit opt-outs from health plans negotiated under collective bargaining, then the truly paranoid among us may fear that this is might be a carefully masked initiative to place pressure on employers to reorganize more of America into unions. That might be the consequence, if the only way enterprises could afford good health care plans was to lock the employees into them by unbreakable labor contract terms. If Congress wants to tax benefits, they will tax benefits; and, considering the political winds, they probably will. Whether or not this is a foot in the door doesn't matter. Total reward statements are truly the best vehicle for employee communications of total compensation and benefit values; but they are not provided with every paycheck, they are not required by government, they are not submitted to government and they are not consistent in pattern or format. Perhaps this is the best approach: for a federal standard on total reward statements for tax-exempt benefit communications between employer and employee. I expect that "best practice" already includes such an initiative. If it were required rather than optional and if it met minimum "best practice" standards, that would achieve all the stated Congressional objectives without requiring new mandated forms for every paycheck and all the other nonsense.

Re the bulleted questions: * no * yes * yes * yes. My full answer first draft runs two pages long. Will work on it.