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Workers, not employers, bear the (full) cost of health benefits

In the Daily Caller, Michael Cannon of the Cato Institute dispels a popular myth propagated by the main-stream media:

The Kaiser Family Foundation recently issued its annual survey of employer-sponsored health benefits, declaring: “Family Health Premiums Rise 3 Percent to $13,770 in 2010, But Workers’ Share Jumps 14 Percent as Firms Shift Cost Burden.” That’s half-right — but the other half perpetuates a myth about employee health benefits that stands in the way of real health care reform.

Many workers believe they pay one part of their health insurance premium — say, $4,000 — and their employer pays the rest.  But that’s not how it works.  When your employer “contributes” the other $9,770 toward your premium, the money doesn’t come out of company profits.  It comes out of your wages.

In other words, you pay the full cost of your health benefits: partly through an explicit $4,000 premium and partly because your wages are $9,770 lower than they otherwise would be.

The Congressional Budget Office explains: “When an employer offers to pay for health insurance, it pays less in wages and other forms of compensation than it otherwise would, keeping total compensation about the same.”  MIT health economist and Obama advisor Jonathan Gruber writes in the Handbook of Health Economics that economic research yields “a fairly uniform result: the costs of health insurance are fully shifted to wages.”  In a recent survey, more health economists agreed on this issue — 91 percent — than on any other question posed.

Read the whole article:  Workers, not employers, bear the (full) cost of health benefits.