Choosing Between Healthcare and Higher Pay

Posted by in Healthcare


No one would dispute that job seekers look for companies that have high-quality affordable health benefits. Three quarters of employees who say they have good health benefits are also highly satisfied with their jobs. Seventy-one percent of those workers are loyal to their employers. The Affordable Care Act (ACA), which promises to extend healthcare coverage to all Americans, should make a lot more people satisfied employees.

 

It would be interesting to ask those same employees if they would prefer a raise equivalent to the cost of their healthcare coverage instead of the healthcare benefits. Little do employees realize the full cost of healthcare. In fact, an article in the New York Times, “The Health Care Benefits That Cut Your Pay,” uses the example of a young 20-something employee making $35,000 per year and all the costs she will pay over the course of her career for healthcare benefits.

 

The $35,000 doesn’t go directly into her bank account through direct deposit. Instead, much is diverted before it ever gets to her bank account. In fact, the article estimates that she will pay about $1.8 million over her lifetime for healthcare benefits. That’s a low number, provided she stays single and healthy.

 

Some costs are transparent. Healthcare plans have deductibles, co-pays and out-of-pocket limits. You also have to pay monthly premiums, unless your generous employer foots the bill. Those premiums have to be paid from your income. 

 

Employers may pay all or a portion of employee premiums. This is money that could be used for other employee benefits, such as raises. Employers may pay thousands of dollars per year on their portion of employee benefit premiums. How many employees would rather have an extra $1,000 a month in their paycheck?

 

The employee making $35,000 is paying about $1,500 in federal and state taxes to finance Medicare and Medicaid. Also, 1.45 percent of every paycheck goes to Medicare. Once that employee turns 65, she is eligible for Medicare, which will cost about $140 per month, payable for the rest of her life. Add to that the 21 or so new taxes attached to the Affordable Care Act, which employers will probably pass on in higher premiums to employees or cutting benefits. You get the picture.

 

These numbers are just for the cost of paying premiums and a few trips to the doctor for preventive care, the flu or a bad cold. If an employee suffers a major illness or injury, high-deductible plans, which are more affordable, can take a huge chunk of what’s left of that $35,000 yearly salary. Any costs over negotiated rates for doctors and hospitals, co-pays and non-covered services drive the costs even higher. Don’t even think of going out-of-network or utilizing alternative or experimental treatments. 

 

The article explores a lot of solutions. One is to cover everyone, but not everything. Comprehensive healthcare plans cover every imaginable situation, doctor visits, and preventive care. Would healthcare be more affordable and manageable if it only covered major illnesses like cancer or heart disease or trauma? Routine preventive care, checkups and minor health conditions would be paid out of the person’s own healthcare savings. With lower premiums for both employees and employers, those extra dollars could be transferred to employees in the form of higher wages and more generous raises, bonuses and incentives. 

 

The ACA will require employers to note the amount employees and employers each contribute to the cost of health insurance on W-2s. This will be a revelation to employees when they see how much is going to healthcare insurance they may not fully utilize or even need. That’s the good news. Even better would be to see those dollars in the income column of each paycheck, automatically put into personal savings account to pay for doctor visits, massages, alternative medical treatment, a weight-loss program or exercise equipment. 

 

Photo Source: Freedigitalphotos.net

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  • Mary Nestor-Harper
    Mary Nestor-Harper
    The ACA will provide coverage for dependent children up to 26.  Not sure if they have to be students or not.  COBRA is outrageous...you may be able to find cheaper coverage at the exchanges.  Finding a full-time job after the ACA goes into effect will be even more difficult, I predict.   Thanks for the great comments.
  • Paul R
    Paul R
    If the 20 something cited above is 25 or younger, would he or she be covered under the parent's health plan?
  • Audrey T
    Audrey T
    When a person looses its job- the cost of Cobra is just about your income. Trying to find a job in that same field is "non existance.What is a person to do. Something has to be done about that
  • Danny H
    Danny H
    I think covering major illness and true er visits should be looked at closer if it reduces cost but providers need to set up reduced cash prices for those services not covered
  • Danny H
    Danny H
    I think covering major illness and true er visits should be looked at closer if it reduces cost but providers need to set up reduced cash prices for those services not covered
  • Elizabeth D. S
    Elizabeth D. S
    Excellent, informative article.
  •  Terri B
    Terri B
    ACA will force us all onto a single payer system eventually and we will all look back on the "good ol' days" when my company paid for most of my health care and I could go to the doctor same day.
  •  Kerry T.
    Kerry T.
    I was let go by my previous employer, am 58, was at the top of pay scale (healthcare worker), and now am finding very few Full-Time postitions in my field.  Most are as needed, part-time, or per diem; all of which pay reduced or no benefits.  I will repeat that this is a healthcare field.  I can only imagine what will happen in other areas of empolyment.
  • Cathy H
    Cathy H
    After paying $33 copays on $35 chiropractic visits after paying $600/month insurance premiums for the benefit of having the insurance company pay $1.33 to chiropractic office (they need to recoup administrative costs), I would rather control my own medical costs because I know that I won't need coverage for pregnancy, nor chemical abuse and unlikely mental health issues, and if so, I'd be willing to pay those myself if I had control of more of the $600 a month that goes to build big buildings, enormous bonuses for the administration executives and shareholders who likely can well afford to pay their own medical costs, and probably don't even use the 'health insurance' that make them investment dollars.  Employers and their employees that need the benefit of health insurance have been too long held hostage to the health insurance "industry", who doesn't "make" anything, except money by charging huge premiums and limiting their "liabilities" by dictating what they will and will not pay for, and how much, if anything, they will pay.  Like in the article, if this employee is to spend $1.5million in health insurance costs and premiums, she would be better off to have the option to control that fund to suit her needs, even if some government guidelines were imposed, than to have the money sent away to line the pockets of those who now contol and manipulate the health care system.  The money should go to HEALTH CARE, not to administration costs.  Let's get back to a country that makes products and improves the lives of others, and doesn't take advantage of a broken system to 'sell their fellow countrymen a bill of goods"!
  • Beverly M
    Beverly M
    I believe the extra pay should go automatically into a healthcare savings account,  partially or totally payable to the employee at the end of the year, and it should roll over from year to year if it is not used.  Otherwise the money will be spent and there would not be money to pay for the routine visits.  
  •  John T
    John T
    Not enough space,but will try. Every employer should pay the full amount towards health care. The fact that gluttony has caused good company's to let their high quality workers to be let go so that they can afford to be competitive with those that hire incompetent and illegal immigrates for their workforce. If you don't think so, just take a survey on unhappy customers and then throw on a percent that wouldn't even know what to look for to see if it is a good job that was done on their homes windows , front doors, garage doors. Siding,  etc., and we have a problem in this country. When they don't pay the benefits to these workers then no one can afford to buy the products from even the clown that started the  whole mess by underpaying or cutting wages and benefits . If all company's have the same running cost it would be a fair playing field and those company' s running correctly doing quality work and using quality materials would be competitive in todays market and instead of becoming the next China or having riots like Greece . We would return to the country we were. Everyone is covered and all pricing across the board is raised evenly and everyone benefits . Same with retirement. The poor with no retirement funds should not have to fund a retirement fund for a government or school official that made more than 3 times more in salary every year , but is not asked to save for his own retirement as we have to. But thats another story.
  • Louella Y
    Louella Y
    I thought Obama said it would not cst tax payers any money. LIE!! That is the only thing he is good at.
  • Fredrick B
    Fredrick B
    Some companies and corporations are already going to healthcare "vouchers". The solution is to put a "cap" on healthcare costs. Insurance companies have been doing it for decades. They will only pay so much and the ee is responsible for paying the rest on top of paying a monthly premium.Capping health care costs would help everyone.
  • Xavier H
    Xavier H
    Good article
  • Amelia S
    Amelia S
    Thank you so much for sending out this email. So many people are not aware of how Obama Care will have a detrimental effect on all of us. I believe it took quite a bit of courage for this web site to state the true facts regarding Obama Care and I applaud you for doing so.
  • Rachael C
    Rachael C
    I have been unemployed for over a year and cannot get Medicaid.  Why were taxes paid for this for nearly 20 years and now I can't get help??!!!!
  • jane o
    jane o
    Not sure if this would work. If the irresponsible people or most of us that need this money did not put it away for an illness, then the medical field would be in dire straights more so than now. I'd prefer to pay the premium.
  • Angela T
    Angela T
    That will be nice if we can actually see it in place and working
  •  Howard H
    Howard H
    There will be many adjustments in the next few years that will make this a good plan.  Have patience and you will love the ACA.

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