Benefits Expert Estimates Health Care Impact
We look to an HR and benefits pro for a sense of what life will be like under the new Health Care legislation. His answer: Your standard of living will decline, starting very, very soon.
I wanted to get a better sense of what might happen in real life, as the new Health Care package is rolled out. I talked to my buddy Stan who works on benefits programs for four different companies. Here’s what he had to say…
Although nobody has released any hard numbers yet, Stan is already getting wind of the new health insurance rates. We don’t know when, and we don’t know how much; but he’s hearing about potential rate increases in the neighborhood of 20% – 40%.
That’s assuming you don’t have really good coverage. If you or your employer have been paying up for a strong plan, in an effort to seriously take responsibility for your health and your future… Well, the government is going to slap you hard for that behavior. In this strange world, paying more for good health care is considered inappropriate. Unless you’re in a union. Otherwise, expect your investment to draw serious penalties, putting your health care cost increases much higher than the original 20% – 40% bump.
Now, I know from the shock of moving from Ohio to Florida that insurance rates vary wildly all over the country. But let’s use Stan’s early estimates as a guide to what may happen.
INSURANCE RATE INCREASES
Employees can generally look at their current contribution to health insurance and increase it by 20% – 40%. That would give you an idea of what your new deduction might be, when it’s taken from your future paychecks. You will take home less money for the same amount of work, at the same pay. (Your health care, by the way, will probably not improve at all. Virtually nothing but costs kick in until 2014.)
Employers will have a tougher time. Employers typically contribute the bulk of each employee’s benefits. If, for example, an employer contributes 80%, then the company is putting up four times as much as the employee. On the company side, health insurance costs may jump by the same 20% – 40%.
That gets to be a spicy number. Then multiply that by the number of employees. It’s huge. And it’s due every month.
ANY HELP FOR EMPLOYEES?
That leaves employers with two possible solutions, if they want to help their employees with the increased cost of health insurance:
– Raise employee pay;
– Increase the employer contribution.
Does anybody think that’s going to happen? Not very likely.
BENEFITS DEFENSE ON THE COMPANY SIDE
And on the company side, there are three likely solutions to deal with these enormous costs:
– Raise prices;
– Lower pay;
– Reduce the workforce.
Some industries actually do have pricing power right now. In those cases, companies may be able to jack up their prices to cover some of these costs. Think of it as an opportunity for the consumer (all of us) to pay for somebody else’s health care, while working harder than ever to pay for our own.
Most companies won’t be able to make their customers pay for new health care costs. The need to remain competitive will keep a lid on price increases.
Instead, many employers may try to hold the line, reducing pay or contribution rates. In other words, if the company can’t afford the increased cost of insurance, it might contribute a lesser percentage and demand more from the employee. In a similar strategy, companies could lower overall pay to recover the increased cost of insurance. Either way, the effect on the employee will be approximately the same: Net pay will go down.
Of course, the other obvious choice is to lay off more people. This would be especially tempting to companies just a few people over the 50 employee cut off, congress’ arbitrary line that changes how health care rules are applied.
COSTS AND CHAOS: CONGRESS’ GIFT TO YOU
Of course, this is a mess deliberately caused by congress, hoping to crush existing insurance plans and drive insurance companies totally out of business.
First let’s look at what happens to the employee under these conditions:
– Prices on consumer goods will go up.
– The employee’s net pay will decline. (That’s the good version.)
– Some people will lose their jobs altogether, while prices go up.
Just a personal guess here, but isn’t that the formula for stress? It certainly looks like the typical law-abiding citizen will have to work harder and longer, in a losing race against higher prices and higher taxes.
Ironically, paying for the new Health Care program might make more people physically ill.
GOVERNMENT GRABS INSURANCE
Here’s the picture, long term: As more and more companies just throw in the towel, insurance companies will lose their customers. The U.S. government will swoop in and supply its own brand of insurance, cunningly priced with artificially low rates.
Government insurance roles will swell, medical availability will decline, quality will collapse, taxes will continue to climb, and insurance companies will wither away.
RECRUITER’S VIEW – Employers show a renewed, and completely understandable, resistance to hiring anybody at all. If there is any earthly way to avoid adding to the payroll, employers are trying to hold the line. Proof: Unemployment Claims numbers are climbing again. Hiring is generally temporary, on the contract level.
Understand, it doesn’t matter what actually develops over time. What I am reporting, here, is the mood of the markets and what it is based on. Employers generally believe that government actions are going to increasingly suck money out of their companies, and for that reason, many don’t want to play anymore.
Candidates increasingly try to operate as one man micro-companies, but they simply don’t have the finances to do much.
Strategy: It’s important to stay with strong industry segments, and it’s imperative to work with strong companies. There’s no room for silliness right now.