Health Insurance Clientele Effects

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In a comment, Spencer wrote,

You just can not resist claiming that firms were required to provide health insurance.

It may not matter whether you think of firms as obligated to provide health insurance or as incentivized to provide it. The trend toward reducing the number of full-time workers would be affected by rising health care spending nonetheless.

Workers differ in their preferences for employer-provided health insurance and take-home pay. This leads to clientele effects. That is, workers who place a high value on employer-provided health insurance will seek to be full-time employees. Workers who would rather receive more take-home pay and deal with health insurance some other way will instead prefer to be hired as contractors.

As health care spending rises, these clientele effects get stronger. One would expect to see more workers noticing that they can get higher take-home pay as contractors, and one would expect to see firms notice that their compensation costs for hiring contractors are coming down relative to the cost of hiring full-time workers.

12 thoughts on “Health Insurance Clientele Effects”

  1. But the ACA did require employers to provide health insurance or pay a penalty. It is irrelevant whether or not that penalty provision took immediate effective or in a couple years, its presence was, and is, a factor in every employer’s hiring calculus, most especially the smaller firms that employ the most workers in the economy and are faced with the 50 employee limit. https://www.irs.gov/Affordable-Care-Act/Employers/Employer-Shared-Responsibility-Provisions

    • Also, everyone except those actively touting ACA agrees that it is in the wrong direction.

  2. Earlier, outsourcing was done to limit the sharing and benefits for non strategic employees but that is over. Full time employment including health insurance is actually rising now. Preferences, but mostly among employers I would say.

  3. The cost of providing health insurance to full-time workers may also rise as more family members piggyback on the employee with insurance. This includes both adult ‘children’ now being covered until age 26 as well as ‘contractor’ spouses of full-time employees.

    It seems a fairly common pattern in couples for the wife to have a steady secure job with full benefits (often in ‘eds and meds’ — e.g. in K12 education or nursing which are ~90% female) which frees the husband to pursue a potentially higher-paying but riskier career path.

    So companies who want to employ contractors (and employees who would like to work for them) may find it convenient to locate near concentrations of ‘Eds and Meds’ industries where there are lots of potential heath insurance ‘sugar mommas’ around.

    • Hey! Some of us are ‘sugar poppas’ – in our house it’s me who has the large employer job, and my wife freelances. I am sometimes introduced as the ‘husband with benefits’…

  4. The phenomenon [phenomena?] of political intermediation in relationships (here the organization of work and services) is certainly not limited to arrangements for healthcare services.

    That “political” is not limited to governmental instrumentalities; though they weigh most heavily.

    While the impacts of healthcare intermediations (in ALL the relationships there involved) seem more “graphic,” apparent, and measurable; the ever increasing range and forms of intermediations and the conflicts of their differing objectives have changed, and continue to change, all the relationships themselves and the outcomes of their objectives.

    Note what happened in Wisconsin to the healthcare provider for teachers there, when forced intermediation (via required union membership) was removed.

  6. So, according to me, the initial value proposition was that insurance was a risk pool. You were insuring against relatively low chance of a hefty, but manageable expense. So, the value of insurance was greater than the price. And thus full-time employment was sought by employees as well as employers.

    Then, along the way, as third party payment incentives crept in, insurance evolved two scissor blades of mundane expense payment and overpriced catastrophic, chronic, and end-of-life treatments with little cost control.

    Healthcare became so expensive that insurance became both irrational to buy and crazy to forego. So, as prices grew to the sky and healthcare began to lose the ability to bill for service, full-time status (which became synonymous with vested in benefits) became a scarcer resource and highly sought-of by families and people getting the better end of the bargain.

    • Andrew,

      The shift to Cost-sharing or Cost-spreading from risk transfers and risk spreading by the move of political powers into intermediation in those relationships began at the state levels with the institution of “required” benefits and healthcare contracts subsuming insurance contracts.

      HC contacts now do carry some risk factors, but a principal cost determinant is the Cost-spreading which differs demographically from risk spreading.

      This is all basically in keeping with the (apparent) public acceptance of redistribution. Instead of redistributing revenues (incomes via taxes) there are redistributions of costs through deficient (private commerce) mechanisms.

  7. That is the result of displacing Medical needs INSURANCE (including the old form of Blue Cross/Blue Shield Prepaid funding) with HEALTHCARE as the objective.

  8. You would also expect an effect in married working couples where one person takes a full time job and the other person a contractor job.

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