The hidden costs of health care (your wages)

Great column (as pretty much always) by Dave Leonhardt today. Employers are actually the one's doing most of the shopping for health insurance policies, so why do they do such a poor job?

The bottom line: The cost of insurance comes mostly out of
employees’ paychecks. If insurance costs more, employees are generally
paid less. If insurance costs less, employees are paid more. The cost of insurance does not have a big effect on employers’ overall compensation costs.

That’s why no one should be surprised that employers don’t make for
good consumers of insurance. And it’s why insurers are not operating in
a very competitive marketplace.

And Ezra Klein hits the political impact:

Employees, in other words, don't worry too much about the cost of their
health insurance because they think their employer is picking up the
tab. Employers don't worry too much about the cost of health insurance
because they know employees are picking up the tab. And so there's no
real constituency for cost control. If either group were actually
experiencing the full cost of health insurance, the constituency for
reform would be a whole lot larger than it already is.


About Steve Greene
Professor of Political Science at NC State

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