From Employer Coverage to Single Payer Health Insurance

Yves here. While this post may seem a bit narrow, the issue it addresses, that of employer-paid insurance, is oft cited as an obstacle to implementing single payer.

Keep in mind that this isn’t just a matter of dollars and cents. “Endowment effect” is a cognitive bias. People are irrationally attached to what they have. One classic study has participants say what they’d be willing to pay for a cheap coffee mug. They are then given the same coffee mug and ask what they’d need to be paid to give it up. The second amount is always a lot higher than the first. That is one of the reasons the Obamacare promise, “You can keep your insurance” was important and customers were upset when it proved to be empty.

By Peter Dorman, an economist and a professor at Evergreen State College whose writing and speaking focuses on carbon policy, child labor and the global financial crisis. Originally published at EconoSpeak

This holiday season I’ve heard several tales of woe from working class acquaintances, mostly self-employed, about Obamacare: how they are just above the subsidy cutoff and would rather pay the fine than buy expensive individual policies, or how they are just below and can’t afford to put in more hours per week. I can understand why there is a lot of disappointment with the Democrats.

So what about single payer? Along with free public higher ed, it’s supposed to be the leitmotif of the resurgence of the left, with even moderate politicians signing on, or claiming to, to save their skins. And I’m all for it too.

But a big political obstacle is widespread employer-based health coverage, a benefit that would disappear under a universal system. As a public employee, I have coverage of this sort myself, and it’s a big part of my overall compensation. How do we fold the millions with adequate-to-good health plans into a new system financed through taxes?

I have an idea. As single payer goes into effect, require every employer to publicly report how much it pays in the form of contributions to employee health insurance, documented by its payment record over the past twelve months. The health care law would then mandate that this sum be returned as added wage payments to employees for some transitional period (such as six months) or the term of the employment contract, whichever is greater. Ideally the law would specify a reasonably progressive apportionment of this payment across the workforce, such as equal lump sums. At the end of the transition, wages increases and decreases would fall under the same employment law rules, such as they are, as before.

From the worker’s point of view, there would be no loss under the switch to single-payer, even if existing coverage were gold-plated; it would generate that much more wage income. To the extent that the new system can reduce America’s bloated medical costs, workers could even come out ahead over time. From the employer’s perspective it should be revenue-neutral, and changes in the composition of the compensation package should have little effect on HR. In principle, then, it ought to address most of the political concern over how we can get from here—a fragmented, employ

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  1. Disturbed Voter

    You know that isn’t what would happen. Employers would simply drop the insurance (they already crapified mine as part of complying with non-Cadillac regs) … they aren’t in the business of compensating employees in any way they aren’t forced to. And they won’t be forced, except in terms of “please don’t make me do what I already wanted to do”.

    Single Payer would work, but without draconian regulation of health care providers, it won’t save a dime. In fact, in trade for Single Payer, rates would go up.

    1. Yves Smith Post author

      I don’t see how you can claim that. The cost of dealing with unnecessary insurers (including their profit margins) narrowly defined is estimated at ~15% of total health care costs and when you throw in the administrative burden on MDs (extra staff plus their own time playing coding games and fighting to get paid) is over 30%. For single payer systems, comparable costs are 2% to IIRC 8% absolute max. Then you have beating down Big Pharma on drug prices. That’s just for starters.

      1. Larry

        These are excellent points Yves. However, I think doctors that reap high salaries don’t mind the administrative burden at all, because the fear the greater unknown of cost controls under a single payer system. And I doubt physicians care at all about high drug prices, hell, the Pharma companies are another lucrative source of personal income from multiple channels (speaker fees, travel, meals, etc).

        Doug Henwood interviewed Jane McAlevey on his radio show recently and she noted that the fight to save Obama care was possible because powerful capital interests (hospital networks, Pharma, physicians groups) were all interested in saving it. An alliance of public interest and capital was able to defeat undesired legislation. But she outlines why changing our current health insurance market oriented system will be so difficult, principally because moneyed interests have designed this system and have no interest in it being broken.

        1. JTMcPhee

          The doctors I am acquainted with do not “reap high salaries” and some are considering a couple of options, like leaving the medical profession, or going concierge if they are in the right specialties or have the right patient mix. Or becoming serfs, voluntarily or by acquisition of their paractice groups, to the corporate looters who are crapifying the field.

          One clinic my wife worked at as a nurse and I had looked to as a single-source place that included decent primary care and specialties under one roof was sold by its founder to Big Blue. Almost all the specialties have been cleaned out, parts of the building are rented to other businesses, and what remains is “internists” who are being whipped to see ever more patients each day and up-treat and up-code and extract more “wallet biopsies,” or get the boot. The billing operation is dishonest and ruthless. The nursing and tech staff are each doing two or three persons’ workload, for flat or reducing paychecks.

          Meantime, the remaining titular head (who cashed out nicely to Big Blue to sell out the several thousand people, mostly older folks now, who also relied on this as an honest and comprehensive source of medical care,) has himself a nice 65 foot motor yacht and a big pot of money to play out his years with. And he keeps signing the nice BS (Bernays Sauce) letters that praise the skeletonizing of the clinic as “great improvements in service.”

          The docs I worked for, in a small clinical practice, have fortunately found a niche for themselves as physical medicine and rehabilitation practitioners. They provide excellent care, but they shuttle between two offices and the big hospital where they run the rehabilitation floors. They put in long hours and are comfortable but not getting rich off their work. They are calm enough in spirit to put up with the switch to ICD-10 coding, meet the paperwork burdens not only of Medicare and Medicaid and numerous workers comp coverages, but an assortment of “private insurances,” and a few self-pays who have lost “coverage” but can affor the very reasonable fees.

          I know there are docs who have figured out how to game the system or have ensconced themselves in practice areas that let them loot. Like the ophthos in Miami area. There’s one well-known local doc, actually several, who have thousands of patients “under their care,” in “nursing homes” and “long-term care facilities” where they place patients or where they are “medical directors.” If they actually go to the facilities to “see patients,” as opposed to delegating to PAs or other assistants, it’s late in the evening when most are asleep, and they do “drive-by assessments,” sometimes not even going into the patients’ rooms, let alone examining them. Then off to the nurses’ station to scribble a bunch of orders and add still more meds to the poly pharmacy stew, sometimes dozens of sometimes conflicting meds, to support billing for an “encounter.” Most docs in my experience are not like that, though the pressures to “perform in the market” are strong and growing.

          The horrors of “medical insurance” come from the whole kleptocratic domination of all the institutions of legitimacy, both legislative and regulatory, by “monied interests” made up of totally self-serving people at the top, and ranks of increasingly enserfed minions driven or willing to serve their masters, with lesser and lesser degrees of agency and under ever increasing pressures to “produce” in precarious jobs. And under strong disincentives to do simple decency-let alone good works. Almost none of all this is “about health care,” except interstitially where exceptional persons make it happen (until they are spotted by the overseers, and that “quality control” that the corporate monitoring of all calls for “‘training and quality control” gets imposed.)

          I’ve watched regulatory capture and corruption from inside government, and even sadly participated in it from within a large law firm. Interest-seekers are interconnected and organized and loaded with money and consequent power. Mopes are divided, atomized and distracted, and also struggling to survive on ever less, so I see very little likelihood that, in the general mass vectors of the political economy, there is much of a prayer that all this talk of “single payer” will lead to anything that’s not pre-loaded with poison pills to make more carcasses for the few to gorge on.

          1. Disturbed Voter

            Private sector economics has few laws, other than lying, fraud and theft. Assault, kidnapping and murder are State enterprises. As long as you have gullible customers, employees, vendors … or captured regulators, it is just a game of civilization destruction. It might be a bad thing for “the popular will” to capture the public sector, but far worse for the private sector to do so. Certainly we need both, but without corruption.

            One can choose optimism or pessimism .. but you can’t choose the facts. Unless you have the titans of power and wealth chained in Tartarus, I don’t see any reason to be optimistic about Mt Olympus.

            This is apart from … is it right to enserf medical practitioners to the State? Just saying, that unless you enserf the pharmacy, laboratory, doctor complex, you can’t dictate prices. In fact, it takes a dictatorship to do that.

            1. Andrew Dodds

              It’s not a matter of ‘enserfment’. Under the NHS at least, the state simply employs doctors and other staff, who then treat people as medically required. Although there has to be some accounting, it’s not price-driven.

              There are good reasons for this. Patients are not, generally, in a position to act as informed consumers, so the care delivered is best decided by expert opinion (i.e. the doctors). In a system where doctor pay ios constant, but they are judged by results – i.e. how many patients successfully treated – they have incentives to give the correct amount of treatment to as many patients as possible. Contrast with a billing based approach, where the incentive is to maximize the amount of billable treatment, regardless of clinical need.

          2. oh


            Thanks for pointing out the doctors who game the system. I know that there’s a lot of hospitals where there’s so much pressure for doctors to produce “RVU’s” much the same as “billable hours” by lawyers and engineering companies.

            I enjoy your comments. Keep ’em coming. Happy holidays to you.

    2. JohnnySacks

      That money eventually needs to go back into the health care system, just in a more across the board manner. Right now we have the privileged, me included, with decent employer plans, and the exploited, with crap or no plans. Employers expect to pocket that money, leaving an unfunded system for all. It’s one of the problems faced by the state’s which tried, everyone wants their free pony.

  2. ChiGal in Carolina

    Huh? The much-touted loss aversion is less about employer $ and more about coverage and resistance to change. (Itself a red herring since 1) much employer insurance is crapified and won’t be missed and 2) every day people transition from employer insurance to Medicare.)

    The funding scheme for HR 676 includes a “tax” on employee wages that is paid by employers into the M4A trust fund.

    This seems to me simpler than Jon Walker’s proposal of a duplicative system of having employers either offer insurance that meets M4A standards or pay into a collective program that will do so.

    But no one is proposing employers will be free to pocket the difference.

      1. ChiGal in Carolina

        Danke sehr!

        I wasn’t sure it was in Sanders’s Options and was too lazy to go hunting past the first Friedman thing I found (he consulted with PNHP TX on that calculator)

  3. Steve Ruis

    This idea is not new, I have been saying it for years. The question is: how will we pay for universal health care and my answer was that we are already overpaying for it. Since the employee insurance benefit was already agreed upon by employee and employer, either by contract or employment agreement, the current insurance payments must devolve to the employees with which they will pay for the higher governmental insurance amounts (Medicare, whatever) and and their own policy. This can be effected by fiat as there is no difference between paying a sum to an insurance provider for the employee and paying the employee. There are tax consequences, however, and it would be nice for the health insurance policies be a tax deduction for federal purposes, but if not, then not.

    Yves has said over and over that in the U.S. we are paying roughly twice what any other industrialized nation is paying for care, that on average, is quite a bit less than others are getting. (of course, the elites are getting special care, which is why they think out “system” is the best in the world. There part is, our part is far from that.

  4. Otis B Driftwood

    Well, after nearly a decade my employer (via merger) switched from passive to active enrollment this year and guess who was too pre-occupied with other things to notice? Found this out when I got a snail mail last week showing I have essentially no benefits at all. And while I am appealing this to my employer, the window for Obamacare has closed. If my appeal is denied, I face paying a fine of 2.5% of my household income – and with no insurance I can only hope I don’t have a major illness.

    When I checked, the premiums I would pay for Obamacare would be nearly 10K per year with a crappy deductible. If nothing else, this gives me a fuller appreciation for how badly Obamacare works for those who don’t qualify for the subsidy.

    Ironically, I work for a healthcare company. The laugh is on me.

  5. stefan

    In 2008, I went from employer coverage to single payer. How did I do this? I am a self-employer artist, and when my monthly payment to Anthem jumped from $258 per month to $460, I said “to hell with this”, stopped buying insurance, and resorted to the VA for my health care. I qualified as a Vietnam veteran.

    While not perfect, the VA in New Hampshire/Vermont is pretty good in my experience.

    Story #2: In 1992, my 17-year old son was diagnosed with high-risk acute lymphoblastic leukemia and was treated in an experimental protocol for five years at the National Institutes of Health Clinical Center in Bethesda, MD. The doctors and nurses, all members of the National Health Service (NHS), were among the very best in the world. I never saw a single bill; all paid by the government.

    End result: my son is now an MD/PhD doing research in cancer genetics and has three beautiful sons of his own. He even has his own company to commercialize his inventions in non-invasive, highly precise diagnosis of ctDNA (circulating tumor DNA), the wave of the future. Details at

    My point: Not even Satan could design a healthcare system as bad as the one we currently have. The VA and NHS systems are existing turn-key systems for healthcare for all. They can provide models for excellence and effectiveness. Naturally, doctors who wished to could remain in private practice, and insurers could continue to offer private health insurance to those who wished to purchase it.

    1. JTMcPhee

      Too bad those discoveries were not under the aegis of government programs, so rather than being commercialized/monetized, they would become part of the great gift and public investment of government-supported and widely available health care resources. And thus outside the rent-generating apparatuses of the current system. (Not that the elites have not figures out how to privatize and commercialize and monetize pretty much all that “government-funded research and development” stuff, of course.)

      But so glad your son’s NIH treatment produced such a happy outcome for you and him! And I hope his clinical insights do in fact lead to much better treatment of cancers, something other than “poison the tumor faster than the rest of the body.”

  6. XXYY

    I appreciate the writeup, but don’t see the point. The fear people have about losing their employer insurance isn’t financial. It’s disruption and/or loss of their current medical care, something that can literally mean life or death for those with a chronic health condition in the family. This fear has been stoked for years by the forces of reaction, who tell us that no government-run system can ever work and so on. Giving people a six-month (why only six months?) salary bump may provide a countervailing incentive, but it doesn’t alleviate the actual fear.

    Also, under most SP proposals I have seen, employers will pay (sometimes hefty) additional taxes to support the population’s healthcare, as they should. Making the employer remit their earlier health insurance costs to the employee plus pay new taxes will thus leave them in a hole. I shed no tears for many of our employers, but this requirement would be no way to get industry on board with SP. They will want to save money under the plan like everyone else; this is single-payer’s most powerful inducement.

    1. redleg

      I can’t wait to lose the employer insurance. It’s the only thing keeping me from self employment.
      How many people will change jobs or leave the labor pool if universal coverage happens? [raises hand, hops]

  7. verifyfirst

    It’s important to remember that single-payor is a payment system, which can result in better financial and health outcomes for a society, but it is not automatic. You still have ongoing battles to keep the system adequately resourced.

    I have been reminded of this reading the news in Atlantic Canada the past two years–they have shocking levels of under-resourcing in their health care system at the moment.

    Obviously the U.S. system has many of the same problems, but for an educated, upper-middle class person with good health insurance, living in a large urban area, my experience has been that I can get the health care I need pretty much when I need it (don’t abuse the privilege!!).

    Since I have other reasons I would like to be in Canada, at least part-year, I was very surprised to read of their own problems, especially as the Canadian single-payor system has been routinely held up in various publications as a shining progressive star over the last 30 years.

    So for example (some anecdotes, some data, but enough consistent volume of issues over the last two years that I would believe there is a systemic problem):

    Two year wait for hip replacement;

    No primary care doctor available to you if you don’t already have one;

    Emergency Room closed for a day because no doctors;

    6-12 month waits for diagnostic imaging and specialist appointments;

    Life-threatening inadequate mental health care

    6 month hospital stays to wait for an LTC bed

    1. marym

      Yes, public programs, private systems subsidized by public funds, and totally private systems will fail if they are underfunded, mismanaged, or managed on behalf of privatized, for-profit entities.

      Solidarity to Canadians fighting the diminishing of their system; and to those in the US working on single payer strategies to reduce chances for manipulation for private advantage to providers or select patients, and increase chances for a robust system that serves the common good.

      As a US worker with decades of good employer-based insurance, I never thought that was a better deal for me or my country than HR 676, but YMMV.

      As far as I know LTC, which is included in HR 676, is not included in Canadian Medicare. Others who regularly comment here can better speak to Canadian benefits and issues.

      1. ChiGal in Carolina

        I think theirs is not the expanded and improved version of Medicare envisioned by HR 676. No dental, no vision IIRC.

        Verify, I appreciate the links. Good to be reminded that you gotta keep fighting even after you’ve won where there’s a buck to be made.

        As marym so eloquently states:

        Yes, public programs, private systems subsidized by public funds, and totally private systems will fail if they are underfunded, mismanaged, or managed on behalf of privatized, for-profit entities.

    2. XXYY

      Note that the Canadian system also has no dental or vision coverage, which surprised me. Proposals for US systems seem to be correcting this omission, important since access to dentists in the US is shockingly poor at present.

      Of course the Canadian people have been fighting the neoliberals for 40 years, too.

  8. Expat

    Why would the employer’s health care payments be returned to the workers? Shouldn’t it go to the government instead?
    US healthcare is the most expensive in the world and gives some of the worst results. These are features, not bugs. The system was designed by all interested parties, including the AMA, to maximize revenue. HMO’s, a creation of the Nixon administration, were designed to make money, not treat patients.
    America doesn’t want single payer healthcare because too many Americans honestly believe that they are better off dead than red. They refuse to believe America’s system is not the best in the world, even in spite of Obamacare. They prefer dying wrapped in the flag.
    So the solution to healthcare or putting in place single payer is not some financial adjustment. It is a mindset. And Americans are generally too ignorant and uneducated to change their minds.
    So, the rational, educated and erudite (i.e. NC people) will have to either suffer alongside the mullet-headed deplorables or join me in some “commie” wonderland.

    1. JTMcPhee

      It seems that most of the governments and populations of those commie wonderlands have seen what even us enlightened and erudite bloggers are, when it comes to emigration to their beatific lands — having crapped in our own nests, we think we have an exceptional right, under “freedom,” to cut and run to the lands of decent (sort of, depending) living and socialized health care. What a suprise that only those who can pay a hefty entrance fee or bring great valuable skills are allowed to enter to “take advantage” of the benefits there, and then often only on visas (which can be revoked) and not into citizenship with all the people who were fortuitously born in Whereverland, the people who paid the taxes and built the infrastructure and political economy there and spend a lot of effort resisting the predations of Exceptional America…

      There are, of course, credentialed people happy, for a nice fee, to help those who can pay the freight and meet the points test to make the move to NZ,, likewise to many other “desirable” places. But you have to meet the minimum criteria.

      I’m sure you are very happy (and maybe even a little smug?) that you made your move when you did, before the crap pile got as deep as it has. Looks like there’s not much chance that “we” who remain behind can get together and clean out our own Augean Stables, or even agree what the place ought to look like if “we” could muster the necessary common energies and direction. And there are more than enough Supra-nationalists, individuals and corporate things, who are nominal “Americans” but only exist as massive and successful parasites and tumors, feeding off the residue of the exploitation of the North American land mass, to hold the rest of us in check while they strip us down…

  9. polycarpus

    I thought the primary reason for employer provided health insurance was to give them more control over employees and not so much for economic reasons (i would think ridding the headache of open enrollment and selecting insurance companies would motivate businesses to clamor for single payer, but then they would lose another string to pull on employees).p

  10. willem

    Personally, my main objection to Single Payer is that the government would be running it, and the government cannot be relied on consistently to administer such programs reliably or cost-effectively over the long haul. (For example, think FEMA.) Occasionally they get one reasonably right, but most of the people willing to roll those dice on something as important as their health care are the ones with little or nothing to lose?

    1. Pat

      Personally I am for single payer as I would prefer not to be tied to the whims of a private system where profit and ROI determine what health care I can receive. At least with an inconsistent government run program I have a good chance of getting some medical care. Witness the top three “insurance” programs with the best customer satisfaction ratings in America – Medicare, TriCare and the VA.

    2. Andrew Dodds

      Other countries seem to manage it OK.. Generally, because healthcare is so visible, it’s harder to get away with incompetence.

  11. Zappa

    Medicare Advantage plus that includes dental, vision, chiropractic, all comprehensive A,B,C,D $240 per month (under current annual income of $170k or less). Current spousal covered with mostly 0 deductible $650-670 per month. Spouse will now retain that amount in paycheck per month. How can this be? $2900 per year sounds right vs $8K. Over a work life span this would put another $250-300k into a retirement account.

    The employer should pay the single payor amount toward healthcare and split the savings balance with the employee. The employer (if not public employer) receives 50% of the $4900 difference in savings.. Employee receives healthcare along with a $2450 raise. Win/win. Employer would champion single payor.

  12. Bobbyk

    I have union negotiated health insurance. Had to have a cardiac ablation last year. The hospital and various doctors billed the insurance just over $150,000. The insurance company paid just over $75,000, my contribution was $0. Gotta say I won’t be to happy if I lose this insurance.

    1. Zappa

      Cardiac ablation $10-$45k, $21-36k, depends where and by whom vs hip replacement $18-30k. Mayo, $50k. Knee replacement $30k. The last 2 procedures are real numbers actually billed. Taken from the estimated costs to expect, the hip and knee procedures are in line with actual. Cardiac ablation listed as given, but insurance is applied arbitrarily. The insurance company won’t be happy either. But again, healthcare is not the same as insurance. Check the Mayo clinic list of doctors and their country of origin along with their studies and degrees in their country. Exceptionalism has no physical borders. The sky appears to be the limit when it comes to $$ going to insurance companies. Not so when they pay the doctors. See the itemized amount paid to the doctors. The “endowment effect” is also real.

    2. Andrew Dodds

      I’m in the UK.

      I’ve had a week’s intensive care followed by two weeks on a ward, an operation, multiple consultants, two courses of chemotherapy, continuous medication and multiple followups.. and all I’ve paid are parking and prescription charges.

      Interestingly, I had private health cover through work as well; their reaction to my health crisis was to go through the policy in detail to find reasons not to help. I’ve now opted out of that scheme..

  13. Mike Gramig

    JTMcPhee: “… doctors I am acquainted with … are considering a couple of options, like leaving the medical profession, or becoming serfs…”

    – you mean like the rest of us??

    Undoubtedly this is a complex sytem. The simplist way to evolve into a single-payer universal system is to borrow a page of the the neoliberals – get the public option enacted, then let the market place work its magic and let the insurance companies go the way of the dinosaur.

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