You're overlooking a huge one Ezra, employee retention. If insurance is portable employees can go for top dollar. Right now a worker may be fearful of changing jobs because even if the new place has insurance, they have no real idea if it'll cover their current doctor, specialist, dentist, how long they might have to pay out of pocket for pre-existing conditions, etc. Its an employee lock in.

We know businesses pay wages above the market clearing price to keep employees, this way they have another way to reduce turnover.

Good on you Rob -- that was the first thing I thought of even before reading Ezra's list. If I'm worried about losing my health care I'm less likely to leave my job even if I could get paid better elsewhere.

It will be extremely difficult to move them, but maybe this depressed economy is a perfect time to move away from it.

Jobs are at more of a premium, so there isn't as much competition for employees, perhaps making employers feel less obligated to provide healthcare.

Employers talk a lot about "benefits", but what that means, for all practical purposes, is health insurance. Take that away and they have to compete on pay and working conditions.

It will be extremely difficult to move them, but maybe this depressed economy is a perfect time to move away from it.

Jobs are at more of a premium, so there isn't as much competition for employees, perhaps making employers feel less obligated to provide healthcare.

I thought about retention -- I guess the reason I didn't include it is that when employees are enticed away from an employer, they get health insurance. And I don't think the change from one to another keeps many of them. Indeed, the money spent of health care could be spent on other inducements, and probably to much the same effect. But you're right that it could play a small actual role in retention but a big mental role in employer's decision making.

Absolutely, Rob -- but I'd say it's often more like "employee blackmail" than employee retention. Health insurance is one of the first weapons used against employees in organizing a union or in a contract campaign. Workers who have insurance are rightfully very worried about losing it, and union-busters always slam the issue to crush workers -- "everything's on the table" "do you really want to risk your health insurance coverage?" etc.

It's all bullshit, since once anyone starts organizing it's illegal for the boss to make that kind of change, but that doesn't matter. The lies scare people, and they work.

And when a contract campaign is in full swing, and it's time for a strike authorization vote, the #1 worry members I worked with as a union staffer had was, "What happens to our insurance?"

Imagine if we had this system instead of public school, with your boss paying for your kids' education. How much harder would it be for workers to sustain a strike if their kids might be thrown out of school while the parents are on the picket line? From a power perspective, the status quo is a bonanza for bosses.

Ezra: the other big role in retention is that it presents a hurdle to employees leaving their current job (if it has health insurance) to attempt to set up their own business, or downshift to a part-time role to take better care of their kids, etc.

In a rational world, wouldn't the retention argument go the other way? If health care was detatched from employment, then labor becomes more mobile, which benefits management. I always thought that this was a persuasive "free market" argument for universal health care. If the government, not employers, provides everyone with adequate health care, that's one less barrier/restriction/restraint/regulation bearing on the employer/employee relationship. Sounds like something a conservative might like. Am I missing something?

I am directly involved in this area in an industry with 160,000 employees and 400,000+ covered lives.

Right now, any sort of national health arrangement has been and is vaporware. When something actually gets done, we will react appropriately. Until then, until it takes shape, we will carry on, trying to figure out ways to NOT have the premium cost that we are paying inexorably increasing at 8.5% a year, which is what the consultants are projecting--and which is ruinous.

And I have been in on executive team meetings with our CEO and his direct reports on this, and the paragraph just above is what has come out of those meetings.

A minor quibble with your comment Ezra, as many folks are not enticed away to other employers, but simply want to strike out on their own (or with others). Especially true with trades and professional services, but the added risk of health coverage really is a deal breaker when added to the uncertainty of going off to be a solo practitioner, or start a small firm, or whatever (law, doctors, plumbers, electricians, etc.). It is risky to start with, but the expense of health insurance (plus the idea that you will lose it if your venture does not pan out) is scary and prevents innovation and competition.

Some good points both in the original post and in the discussion that follows. One thing to point, however, with regards to the original question

Why should lumber companies cut trees and create hospital networks?

is that you seem to have a slight misconception about how the system currently works. Employers do not create hospital networks or provide the actual care. Instead they contract with health insurance companies who are in charge of the network and/or paying for the care. The employer subsidizes the cost and negotiates with the insurer. That is another reason why it makes sense for the employer to provide healthcare - because they can negotiate a lower premium with the insurer than you would be able to negotiate on your own - this is both due to scale (ie, leverage) and lower risk of adverse selection (ie, an individual buying health insurance will always have to pay more than a group of people would, per member, simply because if you elect to be insured you most probably carry a preexisting condition).

The choice is not just between employer-based healthcare and government healthcare. You can have a non-employer based system that isn't run by the government. An individual would receive a tax write off for the cost of their policy (like they implicitly do now because healthcare costs are tax deductible for the employer) and get an insurance policy on their own.

I know how dedicated you are to research Ezra and thus was curious how many employers you spoke with when comming up with this list? How many businesses have you started or ran that had employees and offered insurance?

FYI flaming example of your ignorance with this argument;

"They are departments in which everyone will lose their job if the government takes over the provision of health care."

A small part of HRs time is benefits. They have some other minor issues like hiring and firing, compliance, payroll. It wouldn't be fair to expect you to know this,you would have to actually spoke with someone in HR.

This is an excellent theme for discussion-- it is illogical thinking truly based in part on distrust of government-run programs. How far are employers willing to go defending a broken system that weakens their international competitiveness, is a randomly increasing, inconstant variable on their balance sheets, and a often just a crappy choice for their employees?

Excellent thoughts on the rest of the list. Consulting companies make a huge amount of money profiting from the inadequacies of our health-care system. They convene the HR execs to attend lavish conferences on how to save money on their respective employer-provided plans. It would be nice to see the specific figures on how much money these companies invest trying to save money on health-care coverage.

We need to educate employers and, stakeholders more broadly, on why the system doesnt work and provide a vision for what the public-private role might look like.

AND .. follow this interesting series in the LA Times, http://www.latimes.com/business/la-fi-insure22-2008oct22,0,7656120.story

because they can negotiate a lower premium with the insurer than you would be able to negotiate on your own.

I'm sure they could do that with my house, too. And clothes. And schools. And beans. And well, pretty much anything.

But they only do it with healthcare. It's much more complicated than "oh, they can get you a deal."

The really big companies self-insure and get a lot of bang for their buck especially if they have a young and healthy workforce.

1. If they give great benefits, they can keep actual wages down while still seeming like great guys.

2. They get a tax deduction even though they simply transfer the premium money to another entity that they control.

3. They get to invest their pool of money just like other insurers.

Not a bad deal for them.

Too bad they set the bar for benefits that smaller companies have to compete against.

Loyalty and employee retention has a flip side, too, it causes employees who aren't happy with their jobs to stay at them because they can't duplicate the health benefits elsewhere. My boss and I have advised many employees with performance issues who hate their jobs that they would be happier and more productive if they went elsewhere, where they could do something they want to. Even more so than pay and the prospect of retirement benefits, their health benefits are the reason they most often cite for staying.

Exactly, anonymiss.

If you could hold over your employees' heads a huge number that represents the value of a part of their "total compensation package" that they never see in cash, and that you actually pay a fraction of to be able to make the claim, wouldn't you take advantage of that and advocate to keep the system status quo?

Well, having worked as an exec type person at a software company, I can tell you that I looked at health and other benefits as an important part of our plan to hire and retain workers.

In our case, being a larger company, it was easier to offer lavish health care benefits, which we needed to do to compete with software startups that offered the sometimes illusory and sometimes real opportunity to get rich quick.

While the dynamics of the software industry are different than other industries, I bet there is a significant percentage of people out there who don't particularly like their corporate jobs who stay because of health care.

If universal health care were to exist, how many bored corporate types would leave their jobs to join a smaller company? A non-profit? To try starting their dream business?

Like others, while I think a lot of this is spot on, I think you're hugely underestimating the role of retention. There are industries in which many, many more people would go freelance if it weren't for the fact that being a payroll employee is the one way to hold on to reliable health care.

@anonymiss: The big difference between health insurance and, say, offering to pay for mortgages for employees is that health benefits are not taxed.

In California, corporations can give employees "Commuter Checks" which are like cash that you can only use for transit. Because these costs are pre-tax (just like health care) a lot of companies take advantage of this.

I think employee demand is the biggest factor; people demand health insurance and employers either offer it or deal with a transient workforce of temps and part timers.

Some enterprises get by just fine with transient workforces of temps and part timers, and these tend to not offer health insurance.

Other firms can't afford health insurance, so they manage as best they can with a transient workforce of temps and part timers.

I've forgotten the details now, unfortunately, but, Ezra, on this subject, it would be worth looking up an article in the New Yorker about a year ago, wherein the reporter discussed how auto company CEOs are beginning to press the Government to take over health-care benefits--to press for single-payer, in other words.

The habit of business providing health care benefits started after WWII, to help retain workers...by the 1950s, the auto industry in particular was employing huge numbers of people.

The head of the Union, Walter Reuther, was a visionary, and realized that relying on the future financial health of GM for health-care benefits was too risky, and he proposed to GM's executives that they lobby the Federal Government to form a system of single-payer, universal health-care, so that they--the auto companies--would not be burdened with that expense.

The executives refused...and now, of course, GM is saddled with huge financial liabilities in its health-care costs for retired and active workers. You could even argue that this liability has been a significant part of GM's decline.

Turns out, according to current leadership of the UAW, that the CEOs of the auto companies in the 1950s were actually considering the notion of health-care supplied by the government, but that they were afraid they would be denounced as communists and be banned from their country-clubs by other executives who disagreed.

This is a true story. Because their status was at stake (not even their money! just their status), these idiot executives turned down the smartest deal they ever could have made.

Stupid right-wing ideology killed universal, single-payer insurance in the 1950s; this moron ideology has been killing it every since, and it's still killing it today. How long do we continue to let a zombie ideology slay such a useful, practical, beneficial idea???

Ayn Rand has been dead a long time. And she was wrong about nearly everything, as have been her desciples. Time to consign her, and all her ilk, to the ash-heap of history. As should have been done 50 years ago.

"""the involvement of employers in the health care marketplace doesn't make policy sense""

This really is funny. You forgot the ONE REAL reason.

Its called FREEDOM. Healthcare in the public market place is not a 'policy'. We do not run our entire economy as 'policy' perscriptions,,,,I mean until Obama gets elected.

Emploters naturally wanted to atract the best employees, they did this by offering benefits, one benfit is healthcare as anyone will tell you good, educated employees want a healthcare plan as part of their employment. A big duh.

You may want to right this down and put it on the ceiling above your bed:

CAPITALISM IS WHAT OCCURS WHEN GOVERNMENTS ALLOW FREEDOM.
Every other economic system is government imposed.

Nice to know that Anonymous is not only against the current tax exemption for employer-provided health care benefits (which is, in fact the policy decision that's led to the current state of affairs), but is against all of John McCain's health care policy, such as it is, as well. Can't have any "policies" don't you know.

When you sign your name by hand, you put a little circle around the "A", don't you?

CAPITALISM IS WHAT OCCURS WHEN GOVERNMENTS ALLOW FREEDOM

And Anonymous is what happens when parents give a kid a copy of The Fountainhead and his own computer for his 13th birthday.

How many businesses have you started or ran that had employees and offered insurance?

Ha! I like his writing, but I'm pretty sure that Ezra hasn't ever even worked full-time for a business that's obligated to try and turn a profit.

Anonymous-

I don't think you understand the historical background of how businesses started offering health care benefits. It was because of the LACK of freedom. The practice began in World War II, when the government imposed restrictions to limit wage increases (insert snarky comment here about how wage, prices and production all come under government control during a "real" war). Since salaries were restricted by a wage ceiling, they started offering benefits as a way of making their jobs more attractive (labor supply was obviously tight at the time).

http://www.bls.gov/opub/cwc/cm20030124ar04p1.htm

To find the historical reason, one has to go back to when thse decisions were made.

I believe that corporations hung onto their current tax deduction (for health benefits) in the post-war period, as other developed nations, like Britain, chose another path.

"Worker retention" was not on the list, back then. As best I recall the history, even the AMA mobilized against nationalization of healthcare.

Today, it's a large combination of reasons, as listed above, which vary company to company.

Sadly, many Democrats may believe that "no work, no healthcare" is an important (Christian?) legislative principle.

You are so correct, Mr. Klein, that we need to move away from employer-based healthcare, which not only imprisons millions of workers in jobs they hate because they can't afford to lose the "coverage" ... but maintains a massive user-base for third-party insurance payments, that distorts the HELL out of any semblance of "market pricing" (and provides incentives for overcharging by hospitals, etc., to keep their Medicare payments high ...)

The thing you miss is this: If the primary connection between healer and patient were direct, instead of via multiple channels and layers of paperwork, the prices would fall rapidly, since more people would have incentives to take better care of themselves, see doctors (and other healers) for checkups and screenings, eat and exercise and otherwise preserve their own carcasses with more self-responsibility ... and ultimately restore themselves to wellness and longer vital lives, through the real version of "preventive medicine" and self-awareness.

That doesn't require "government taking over healthcare" ... it requires an end to the overmedication, over-treatment and "sickness aftercare" model of medicine, that has been perpetrated and perpetuated by allopathic-only AMA pros, along with Pharma, Insurance and Government (FDA).

Try another approach: freedom's the answer ... what was the question?

Ezra, I think you're missing the boat on employee retention. Losing insurance and having to start over with a new provider is at best a hassle (new doctors) and added expense (during probationary period before insurance coverage kicks in). At worst, it's a nightmare for those with pre-existing conditions (their own or a family member's) who want to strike out on their own. Crazy to leave off the list, probably belongs at the top.

More points about retention:

Sometimes you end up retaining people you would rather see go their own way.

It doesn't differentiate you from your competition because companies like you all offer healthcare.

Health care takes up the lions share of spending on "benefits" so much so that whatever else you offer is dwarfed by it.

You want to "pay for performance" but 1/3 or more of your employees compensation is exactly the same no matter what the employee does to differentiate him or herself. That leaves very little room to reward those employees you wish to keep. The difference between what you can give a top performer and a marginal performer at the end of the year ends up ammounting to a few hundred dollars because increases in health care costs chew up the rest.

OK, everybody over 40 raise your hands.

Nobody's mentioned that a lot of big employers continue to subsidize health insurance for retirees. The catch is that they typically require a long period of service. I don't know what the average is, but I've worked for two companies where it was 10 years.

That means nothing to somebody Ezra's age, but once you get to be in your 40s or older and only have one or two 10-year chunks of time left in your career, that retirement health care can be a BIG incentive to stay put.

Many people have said that good people will give up more than the cost in salery to get health insurance.

HR departments won't go out of business with universal coverage. They'll always be 401(k)s, life insurance, payroll, etc. to manage. And don't forget emergency contact forms. Someone has to enter the form!

I think LL's comment above-- that CEOs should have been lobbying the gov't to take over health care, but didn't for personal reasons-- is on the mark.

I'm not sure which would be the larger consideration by CEOs when refusing to lobby for their company's best interest-- that their friends at the country club would denounce them or that more tangible consideration, that they'd end up personally footing the tax bills for single payer.

I would think that business would benefit by not having the additional cost of health care added to their ledger. Their businesses would be more competitive.

Employer-paid health insurance is the primary reason why more than one million U.S. manufacturing jobs have moved to Canada since 2000. (apologies for not having precise statistics because I was downsized out of my career in 2000 because, at 49, I was no longer welcome in my small company's insurance plan - millions of us have been prematurely retired for this reason).

NAFTA enabled this drain of manufacturing jobs because unit labor cost is lower in Canada (and most of Western Europe) because health insurance is financed through taxation, and health care may be less of a profit-seeking industry.

The choice is not between employer-paid health insurance and single-payer government national health.
Take a look at France...

Mr. Klein:

As the President of an administrator of corporate sponsered health plans I must say you have a much dated outlook on the opinions of CEOs. I would bet a lot of money that very few CEOs actually want to offer a health plan. They continue to offer health plans for one reason and one reason only and that is to maintain a competative advantage over their competitors for whom they are competing for employees who happen to offer a health plan.

I can assure you most of them are sick and tired of paying millions of dollars for what is suppose to be percieved as an employee benefit and yet hear nothing but complaints. They would much rather allocate those resources elsewhere.

I disagree, employers do not want to be in the middle of this.

it can be cost effective for employers to run health coverage if they gain more than it costs. It could be that employers get more in the way of loyalty and diligence than it costs them to provide the coverage. And since a business bargains for a group it may be more efficient than individual coverage.

That said I think its mostly down to historical accident.

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