Friday, August 22, 2014

We Won't See Massive Employer Dumping of Employees into PPACA Exchanges ... Yet

As always, a provoking and thoughtful column from Megan McArdle at Bloomberg with her take on whether we'll see massive employee dumping into the exchanges.  I generally concur with her.  If PPACA sticks around and the Exchanges turn out to be an adequate form of coverage it will take five to ten years for large employers (more than 100 employees) to really undertake a whole-scale transition.  But we will see it from smaller companies and in the hospitality, service and manufacturing industries sooner.  
... After all, why do employers offer insurance in the first place? Yes, yes: tax arbitrage. Wages are taxable to employees, while fringe benefits aren’t, so you can offer higher overall compensation by substituting benefits for wages. 
But that’s also true of luxuriously appointed offices. Yet relatively few employers have chosen to provide everyone a cavernous office with a luxe couch and a wine fridge. A lot of employers, on the other hand, provide luxe health benefits. The difference is that employees value the health benefits highly enough to trade off a lot of wages for them. For all the talk about how people are insulated from the cost of their insurance, if you follow union negotiations, you’ll know that when it comes to making explicit trade-offs between more expensive benefits and higher wages, the union representatives very frequently choose the benefits. 
That suggests that as long as employees are afraid of the exchanges, employers are going to be reluctant to force them there. This effect will probably be weakest at the low end, where the workforce is already struggling to find and keep jobs....
   Full story.