Employers can reap $3,000/employee because 2010 Healthcare Reform has created an immediate arbitrage opportunity on health benefits
by Professor Paul Zane Pilzer
I hope you have been enjoying the Republican and Democratic Conventions as much as I have been enjoying them. As an economist, I am fascinated watching our political leaders debate the crucial business issues facing our nation.
The greatest business issue facing Americans today is the rising cost of healthcare and specifically:
What can be done to stem this rise; and
How to fairly distribute this cost.
U.S. 2012 healthcare costs, at $3.14 trillion, exceed 75% of our entire federal budget and are approaching 1/5 of our total GDP.
I will be presenting a special webinar on this topic this Tuesday, September 11, entitled Converting from Employer Health Insurance to Defined Contribution Health Benefits.
We will be covering the following three major topics in Tuesday's Webinar:
U.S. Total Healthcare Costs for 314 million Americans - $3.14 Trillion ($10,000 per person)
200 million Americans on Private (employer & individual) health insurance:
a) 160 million on Group Employer Plans at $6,000 per individual
b) 40 million on Individual Plans at $3,000 per individual
Windfall currently being enjoyed by 2a and 2b above of $4,000 to $7,000 per individual because they are not currently being forced to cover the other 114 million Americans (Medicaid, Medicare, Uninsured) through their income taxes
The underlying moral issue is whether unlimited healthcare is a universal right guaranteed to all citizens, such as life and liberty, or whether the higher users of healthcare should bear a proportionate amount to their usage. This moral issue is compounded by the debate over obesity, and whether obesity is voluntary or involuntary. Obesity is the “elephant in the room” that was unmentionable during both political conventions. Regardless of its cause, U.S. Obesity is the single greatest factor driving U.S. healthcare costs to 300% the level of other developed nations.
Meanwhile, for U.S. employers, the implementation of 2010 Healthcare Reform has created the greatest immediate arbitrage opportunity I’ve seen in my 38 years as an employer and public policy official.
The “average” American consumes $10,000/year in healthcare, but the 160 million Americans in employer group plans spend $6,000/year on health insurance and the 40 million Americans in individual plans spend only $3,000/year—all for effectively the same coverage. Now that so many millions more Americans qualify for guaranteed issue plans at no additional cost (e.g. children under 18), there is an unprecedented economic windfall opportunity for employers to start Healthcare Reform early by switching now to Defined Contribution plans. This typically saves employers up to 50% on their group plan cost while getting their employees the same or better coverage by placing their employees into a “healthier group of Americans” before 2014 healthcare reform implementation merges all groups for underwriting purposes.
We will be discussing this arbitrage opportunity further on Tuesday, September 11, 2012. I hope to see you there.
Very Truly Yours,
Professor Paul Zane Pilzer, Founder and Chairman of Zane Benefits, Inc.