The Next Stupid Health Reform Idea: Fees On Insurance Companies

by William Teach | September 8, 2009 7:57 am

Once again, Democrats are proving that they do not understand the free market nor the law of consequences

A leading U.S. senator[1]seeking to forge agreement on healthcare reform will put forward a plan that includes sweeping insurance market changes and a fee on companies that will help pay to cover the uninsured, a source familiar with the proposal said on Monday.

Senate Finance Committee Chairman Max Baucus, a Democrat who leads a group of six senators trying to craft compromise legislation on President Barack Obama‘s top domestic priority, plans to discuss the proposal when the group meets on Tuesday.

So, you charge insurance companies a fee to pay for those who do not have insurance coverage, many of whom voluntarily choose not to purchase insurance. What happens? Insurance companies need to raise their prices! And the consumers pay higher prices. Shocking how “good” intentions cause bad consequences, eh?

And what would the fee be? Like most of the main health system overhaul legislation, H.R. 3200, we have no idea. The majority of the legislation, including all the competing Senate plans, and, probably President Sparky’s, too, are generally broad outlines. One thing that seems pretty consistent is that there would be an 8% payroll tax on any company that does not provide health insurance to its employees. Let’s do the math, shall we?

  1. Companies want to spend around $6,000 per year on average per employee for health insurance
  2. Because of rising costs, which includes employees running wild in the use of their insurance, companies are paying $8-$12 thousand per employee (many are switching to health savings accounts, which drop costs $2-$4 thousand per year)
  3. $75,000 divided multiplied by 8% is $6,000 (I think y’all knew what I meant)
  4. Companies have to deal with massive overhead to deal with their health insurance
  5. If the average payroll cost is less than $75,000 per employee, it would be worthwhile for said company to dump their insurance plans and say “have fun with the public option!”

One of the problems with the way President Sparky is discussing a public option is that he gives two different messages. First, he says that he just wants to cover the “47 million who are uninsured.” Then

With 46 million Americans without health coverage, Obama said, “A public option within that basket of insurance choices would help improve quality and bring down costs.”

“I want a health insurance system that works as well for the American people as it does for the insurance industry. They should be free to make a profit. But they also have to be fair,” he said.

So, does he just want to cover those 47 million, or, simply create a system that competes with private insurance? Which would quickly become a huge boondoggle program as employers dump their insurance.


The source said a new tax on insurance companies proposed by Baucus would raise about $6 billion a year and help pay for the reform plan.

Math time, again. $1 trillion over 10 years equals $100 billion per year. $100 billion > $6 billion a year. Where does the other $94 billion per year come from?

  1. leading U.S. senator:

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