As the open enrollment deadline for the ACA (aka Obamacare) approaches, the news is full of happy stories about people able to purchase affordable health policies for the first time in years. Invariably, the comment sections of these articles then fill up with diatribes similar to this one from “Cindy” regarding a New York Times story:
The bottom line… the millions being covered via MEDICAID and the subsidized costs for others in the exchanges…. ARE NOT FREE!!!! We, the taxpayers are footing this bill and I think we are all in for a rude awakening 3,5 or more years down the road as the costs continue to spiral upwards… anyone who thinks otherwise is delusional. I applaud those states who refused to expand medicaid,
Ahem… you know what else taxpayers are footing the bill for? Employer-paid health insurance that is a deductible expense for the company and is provided to employees as a tax-free benefit.
Obamacare insurance subsidies are expected to cost $1 trillion over ten years. An estimated 160 million people have employer-provided coverage, and tax subsidies for employer-provided coverage cost the federal treasury $200 billion in 2007.
Multiply that $200 billion by 10 years and the federal treasury takes a $2 trillion hit – twice the cost of ACA premium subsidies.
Somehow, the people who are vehemently opposed to giving away “free stuff” under the ACA don’t seem to have the same level of indignation about the “free stuff” they get courtesy of their employer. Oh, and yes… mention it and you’ll hear the obligatory gruff retort: “I work hard for that.”
I’m sure you do, but you know who else works hard?
- The 50-year-old woman who scrubs floors, cleans toilets, and schleps vacuum cleaners up and down stairs all day.
- The roofer who’s out in all kinds of weather doing hard, physical labor but who works for a small company that doesn’t offer health insurance.
- The waitress struggling to support her family with a job that pays $2.13/hour plus whatever tips the guy who hates “free stuff” deigns to toss her way.
- The person who used to work in the office next door but who got laid off as the economy lagged. He worked hard, but it didn’t matter. He’s trying choose between paying incredibly high COBRA rates for coverage or making his car and/or mortgage payments.
Those first three don’t make near the wages of your average government contractor, banker, or white-collar manager – and they don’t get near the vacation and sick leave benefits either. What they do get is the opportunity to help subsidize those benefits with their taxes via tax breaks for employer-sponsored health insurance.
A Kaiser Family Foundation study from 2008 (PDF) illustrates how the higher income people benefit disproportionately from the employer health insurance tax break:
Note that this includes the state income tax deduction for California. Alabama also an income tax deduction for health insurance, but our rates are much lower. Still, this chart is based on a family of 4 with an insurance premium of $11,500 – about standard for a good family premium (although it’s a shocking number to people who aren’t used to seeing the total cost of their premium).
Also notice that the Social Security system takes a hit as well from employer-paid insurance subsidies. Because the cost is subtracted before SS taxes are calculated, the amount paid into the system is lower and take-home pay is larger – yet another subsidy.
This table breaks it out by type of taxes and really highlights the disparity between someone with employer coverage and someone without.
Person A (who no doubt works hard) pays an extra $3,030 in federal taxes and still needs to purchase health insurance for him/herself & the family.
The Obamacare subsidies help right that wrong. It’s not people getting “free stuff:” it’s a small step towards leveling the playing field between the people who have employer-sponsored (& federally subsidized) coverage and those without it.
People without employer-paid coverage have been helping pay the freight for the other 160 million for a long time, and frankly, the whining coming from some in that group of beneficiaries is getting really, really tiresome.
I’m happy to have a debate about whether this favorable tax treatment should be continued, but don’t defend your own subsidy and – at the same time – criticize others for receiving the same benefit.