I recently made a post about fixing health care.  Part of that included the radical idea that employers don’t pay insurance companies directly any longer but instead insurance is paid for by the government.  It appears that just may happen, not on a universal scale but it occur on a wide scale basis if employers drop employees’ health insurance. 

http://money.cnn.com/2010/05/05/news/companies/dropping_benefits.fortune/index.htm?cnn=yes&hpt=C2  There’s a ton of interesting information in this article including an amusing anecdote about democrats accidentally running across this information and immediately trying to bury it because it shows that the health care bill has the potential to cost massively more than was just estimated. 

Essentially, big companies started doing the math after the health care bill passed.  While the bill requires employers to provide insurance or pay a fine, it turns out that paying the fine amounts to a massive savings.  Employees who are not covered by their companies would be allowed to purchase through exchanges.  Families making $88,000 or less will have their health insurance subsidized by the government. 

The uninsured will still likely have to pay some money out of pocket but most people already pay some amount of their insurance.  It is assumed – and we all know the danger of assuming – that employers can’t just drop health insurance without increasing employees pay.  A relatively modest increase will cover the cost of employees paying for their own insurance.  Employees will still save a bundle of money and there’s a chance that employees will come out ahead as well with the insurance subsidies.

Of course we know that there’s no such thing as a free lunch.  Employers save billions of dollars while hopefully employees at least break even if not come out ahead.  The government picks up the tab to the tune of billions of dollars.  There’s no telling how much it could cost but the article above how some pretty interesting numbers.

By Fortune’s reckoning, each person who’s dropped would cost the government an average of around $2,100 after deducting the extra taxes collected on their additional pay. So if 50% of people covered by company plans get dumped, federal health care costs will rise by $160 billion a year in 2016, in addition to the $93 billion in subsidies already forecast by the CBO.

Only time will tell how this all pans out.  It depends quite greatly on if employers decide to actually opt out of paying for insurance.  It could be good for employees but the tax payer will end up paying for it in the end.  We’ll just have to wait and see if the cost of all of this comes in the form of increased taxes or decreased benefits somewhere down the government chain.