So either way, the total compensation registers an increase, but the employee is not better off because of corresponding rise in inflation.
It is a wash.
They are buying more care.
Now before you respond to what seems like a stupid statement let's review how insurance works:
Basically insurance shares risk, spreads it out among the policy holders. So when I was young and healthy, I bought into a health plan with a bunch of other people, the plan was closed when it became full about six months into it being opened, the plan has a given number of members.
The cost of our premiums depends on the total amount of care that we, as members, required. Well, I'd like to say I'm as healthy as I was when I was 32 now that I'm 51 but I can't vouch for the rest of the members because I don't know who they are. As you can imagine, even though I'm healthy and require less care than other members, I'm paying for their increasing need for care (they'd have done the same for me so I don't mind).
I imagine we've had some open heart surgery, some limb reattachment, some chemo therapy and a lot of CAT scans and MRIs as well as routine care that everyone requires. The advancements in the last 19 years in cancer treatment alone might be worth the freight. As a group we are buying and receiving far more care than when we were all 19 years younger and because some of us have died and some of us have quit the plan, this increasing cost is now shared by a smaller number of participants in my plan. Thus, one can't blame inflation entirely for the increasing premium in my insurance plan. Plus, the number of procedures and treatments covered by my plan has risen exponentially in the last 19 years as some of the greatest advancements of the last two decades have been in the medical field.
So, on average, all the plan members in my plan are receiving more care.
A business plan might have slightly different dynamics, but essentially they all work the same way, all costs are shared among plan members. Some businesses might be able to keep their costs better in line than others in that maybe that particular business is pretty good at laying off older workers before they become a drain on their plans, hence the numerous early retirement packages dangled in front of 50-55 year olds. They might put in a gym and encourage healthy food in their cafeteria and hand out health tips, etc. They also might employ discriminatory hiring practices which try to exclude workers who will be particular expensive to cover, like workers who are older, over-weight or workers who smoke or do drugs.
Personally, I think it was a terrible mistake to attach health benefits to employment because it drastically raises the cost of employing older workers. A lot of laid off 50 year olds found this out the hard way. It is easier for a 65 year old than a 50 year old because that's the age when Medicare kicks in.
Health insurance like any other insurance is one of those things that everyone loves to hate. It seems like a wasted expense if you never get to use it and if you really need it, well that's a total bummer too. You can't really say you are ever better off with it.
But we aren't measuring whether people are better off, we are measuring the dollar value of their compensation against the change in value of their dollars. |
