Go on your state's Obamacare exchange. Hypothetically you are a mid 30s individual with a spouse and two young children. Look up 2017 numbers. You are looking at $12,000 - $24,000 per year in premiums alone and then massive deductibles and coinsurance of 30% to actually access services.
Who can bootstrap a business like this? So people are staying with their powerful big corporations if they can't get millions in funding for a startup (and outside of tech this is simply not even a consideration).
Edit: and if at some point you hire an employee, you will need / want to provide them with health insurance, and it will cost just as much. Large corporations have an advantage in that they negotiate lower premiums in bulk. Add this as yet another barrier to entry, along with their lobbying for protectionism, tax loopholes, their ability to hire huge teams of tax lawyers and accountants, and if you really start to get their attention, they can sue you baselessly by throwing lawyers at you to keep you in court. Merely defending yourself and getting to the point of dismissal is unaffordable for a budding small business.
Take a look at S&P500's profit margins. They are at record highs and not coming down as economics teaches us, meaning new entrants are not coming into the market.
It was worse before Obamacare. If you had a common prexisting condition such as high cholesterol or high blood pressure you probably could not get health insurance at all on the individual market.
It's a problem with "Health Insurance in the US" as opposed to Obamacare.
I am not blaming Obamacare. I have reflected your exact sentiment in my other posts online. This is a result of the disaster that is the US healthcare system as a whole. Obamacare was a patch, but not enough to stop this from happening.
I do advise that people not write-off criticisms of ACA as right-wing hysteria right now; the 2017 increases are really unbelievable in many states (Minnesota: 50%+). Everyone can browse these rates online.
I've been saying for a while that the health care system is the biggest impediment to entrepreneurship in the US. Not only does it make it difficult to start a company, it makes it difficult to work for startups and small businesses. Employer-provided health insurance is an incredibly strong bias in favor of large corporations (that have dedicated HR and can negotiate rates and self-insure).
Its the same for investing - you /cannot/ tax defer more than $5500 a year of your income for retirement unless you have a COMPANY PROVIDED 401k. There is no such thing if you are a employee at a company that doesn't supply one.
I'd like to see Elizabeth Warren deprecate 401ks and raise the IRA contribution limits accordingly, while legislating that employers can contribute to them directly. Immediately remove employer-tied retirement plans, and you'll see expense ratios of funds plummet when you can have any fiduciary host your account.
Its absolutely silly we still tie retirement accounts and healthcare to employers.
"Allow individuals to fully deduct health insurance premium payments from their tax returns under the current tax system. Businesses are allowed to take these deductions so why wouldn't Congress allow individuals the same exemptions?"
"Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair."
Wow, who knew Trump had positions? Someone on his staff should tell him to talk about them rather than continuously drawing attention to attacks from his opponents that he should not even be mentioning. Well, actually let's not because he would not be a stable president for the US economy. Would be nice to have a president that didn't see business as an enemy and tax cuts as handouts for the wealthy though.
The problem with lowering taxes for the wealth is they invest it. which drives up asset prices. makes them feel good, because the assets values went up but it didn't create anymore actual assets or create anything more productive. Corporations are flush with cash and investing in new technology as fast as they can. Throwing money at the problem won't fix anything.
If you're already employed full time and your paychecks go directly to you its only possible if your employer is okay with paying you as a contractor, which of course makes their situation with you more complicated, and also you might have trouble getting health insurance through the company.
If SEP IRAs as mentioned above aren't an option, HSAs might be worth considering - after 65 they aren't restricted to medical expenses. I-bonds might be an interesting component for future retirement as well.
As I understand it, it doesn't help you as an employee of a small business though unless the business makes the contribution. SEP IRAs are primarily intended for freelancers and small business owners.
Europe is over-taxed and over-regulated and the US is, too. We're killing our golden goose as we speak. It was completely avoidable, but leftism just feels so good.
We should be hanging the people that caused this, but we're too nice and we won't until it all ends up like Venezuela.
Have you read pg's essay "Cities and Ambition"? He explains there why there isn't a Silicon Valley outside of Silicon Valley. Different cities have different cultures, and encourage different things. The cities of Europe are ancient. Their ambitions were set long ago.
That said, there's much more to "entrepreneurship" than tech startups! Opening your own restaurant - not a chain franchise - is entrepreneurship, too. Or a barbershop, or making custom clothing, or running a small theater, or any number of other things. Small business is mostly small, not a stepping stone on the way to being huge.
In those terms, is the US actually doing better than Europe? Do entrepreneurs - not the millionaires, just the people who don't have to answer to anyone but themselves - do better here, or in Europe?
All of our smart entrepreneurs go to Silicon Valley where the money and other talent is? I live in Toronto and can't count the number of friends I've know who moved to either SF or Seattle. The only reason I didn't move there was because I didn't have a 4yr "advanced degree" to qualify for a T1 visa (despite having a job + lawyer). Most leave right out of university. Considering jobs are $60-70k vs $150-200k I don't blame any of them.
Otherwise I believe it's a pretty good place to start a company. Our income taxes are equivalent to California and I believe our corporate taxes are lower but we have health care and relatively cheap housing downtown thanks to a housing development boom.
We also have a startup founder visa and an easier immigration policy. Access to seed capital and higher-end talent is the only constraint.
But people moving to take jobs aren't people moving to start companies. I lived in Toronto in the late '80s and found it to have a pretty decent startup culture. My wife worked for Alias at the time.
I don't understand why there is such a huge salary difference between Toronto and SF. I'd love to move to Toronto but really don't want to take that huge salary hit.
It's about even from the personal income tax side in california. Companies don't pay for healthcare so that 'tax' is gone. I don't think there is much of a difference past that.
There's a network effect. People want to live in a place where they have plenty of options if their current job doesn't work out. Employers want to have a large pool of local talent to draw from. This is all self-reinforcing and probably the reason why companies start and stay in the SF bay area even though the cost of living is insane.
Let's also not forget that a significant part of this hasn't even kicked in yet, the so-called Cadillac Tax has been kicked down the road, but is potentially enormous. Those who pay the most for their health care plan are going to be heavily taxed to subsidize everyone else. So as much as the current plan rate hikes are unbelievable, it's still going to get much worse before it (maybe) gets better.
How kicked? I remember a big internal uproar when I was at one of the big tech companies about cutting some benefits, and one of the explanations was the cadillac tax.
A quick google search brought this up, which might be accurate[1]. It suggests that 2020 is when it is supposed to be enacted now. The Wikipedia article [2] seems less concrete about it, other than to say that there's bipartisan support for not implementing it.
Maybe so, but someone has to pay for the subsidies. Whether it's this tax or a different one, the middle class is going to have to take on that burden.
Left-wing criticisms of the ACA are that it should've had a public option (or single payer) - which may get some momentum with ongoing premium hikes.
The right-wing hysteria part is the (false) idea that premiums didn't go up like this pre-Obamacare, as well as the idea that "roll it back" is a tenable solution.
10-20% rate growth was common before the ACA. Now my state is looking at a 74% hike. It is false to claim these kind of hikes were normal before the ACA.
> A new analysis from the Urban Institute found that the average unsubsidized premiums in the Affordable Care Act exchanges, commonly known as Obamacare, are actually 10% lower than the full premiums in the average employer plan nationally in 2016.
> According to the Kaiser Family Foundation the average cost of the second lowest priced silver metal plan, also known as the benchmark plan that is used to set subsidies, will see its price increase 9 percent next year. That's significantly higher than the 2 percent increase for these plans this year, but it's south of the figures provided by Trump.
It's more of a "you touched it; you're responsible" scenario. The insurance market was bad pre-ACA. Then Obama touched it. Now it's his fault. If he had left it alone, everyone could have continued to just point the finger.
It was worse before Obamacare for certain people, and better for others. ACA insurance premiums (combined with large deductibles) are causing a lot of pain for (self-employed) middle class families I know, even before the next set of rate hikes hits in a couple months. It's also sad to see that the most ''successful'' ACA insurers are running networks so narrow that some patients have called them unusable (search for Molina Healthcare in California).
The ACA was flawed from the start. My takeaway from the whole fiasco is that even the smartest, most well-educated policy analysts and lawmakers can allow some combination of enthusiasm, politics, and momentum to blind themselves to the most basic predictive models of human behavior and incentives. When the law was published it was obvious to me how insurance companies would make money - you create the narrowest, cheapest network possible in order to cherry-pick the healthiest patients, leaving competitors dumb enough to have broader (more attractive) networks to soak up the most expensive cases (and lose money). This is exactly what happened and the so-called ''death spiral'' will start next year when (my prediction) 1+ million unsubsidized middle class families refuse to pay for the next round of rate hikes.
I'm 100% for free, universal health care for all Americans. I don't think we're that far away. The bemused Federal Reserve searches for helicopter drop scenarios - Federally-funded (or re-insured) universal health care is not a bad option. I'd much rather bleed out the treasury in order to build a great health care system than in the middle east or some other boondoggle.
You're insane! It is not "free!" It can never be free. It is all who pays for it in their high-ass taxes! We're $20T in debt which isn't getting paid back. How far do you think the Fed can stretch this until it snaps? Bear in mind that if we have a collapse it will be a Mad Max type scenario--you'll wish we had just had a nuclear war. This is where we are and everyone just kind of nonchalantly goes along with their normalcy bias because they have never experienced any real hardship in their lives. It doesn't mean hardship isn't out there waiting for more stupid policy choices to seal the deal.
I think we can hit $40 to $60 trillion in debt (in real terms) before the system starts to collapse. In other words, at least 20 years from now, maybe much more. I have no faith in either political party to exercise fiscal restraint or conservatism. I firmly believe the excessive deficit spending will continue until the breaking point. Given that belief, I'd like to spend the money (the newly issued debt, as you correctly point out) as wisely as possible.
I used to be concerned about that. Look at Japan. They are monetizing absolutely everything in sight and the currency barely moves. Apparently your 'cultural equity' in the face of global chaos counts for a lot more than anyone ever realized. Time will tell.
While your point about pre-existing conditions is true, it's worse now. 3 months before ACA, I looked for an insurance plan because I was going to start my own company and we wondered if it would be cheaper than my wive's company plan. We found a $250/month $5,000 deductible plan with no co-pays (I'm fine with that). Her plan is $350. Idea was to get this plan, then add $100 to HSA (same cost but with added value). ACA comes along. Same-ish plan (ACA required more crap than we wanted) jumped to $550 without the HSA contribution. Now it's $712.
The reason it was lower is because your pre-existing condition simply wouldn't be covered, and just about any other claim would be initially denied, citing the pre-existing condition as a reason. Now that's not an option.
At least you had the option of not having healthcare and just creating a startup without it. Now with Obamacare you are forced to buy it by law which means no startup for a lot of people.
Of course if you have have preexisting conditions, you will have difficulty getting insured. Go try getting homeowners insurance while your house is on fire.
False. You could certainly get insurance. Even my dad, a 105-pack-year smoker with diabetes, emphysema, obesity, and hypercholesterolemia got insurance.
It may not have been cheap, but it was cheaper than the "insurance" I as a 37-year-old perfectly healthy individual am now paying. >:(
That's because you, as a 37 year old healthy individual, are subsidizing your father's healthcare. That was one of the main goals of Obamacare: push up and force premiums on younger people to help pay for the increasing costs of the large Boomer generation.
The worst part of Obamacare for me is the individual mandate. It essentially raises taxes on working class people or forces them to buy a high deductible plan that is of little use to them. The poor get a subsidy and the wealthy need not worry about preexisting conditions. The working class just gets screwed.
It's necessary given that the ACA restricts insurers for rejecting people for preexisting conditions. This only really works in a country where everyone has insurance. Otherwise, why not just hang around without insurance until you get really sick, then purchase insurance at that point? If this happens, it drastically distorts the insurance market and makes insurance even more affordable, because people who have insurance will be disproportionately sick.
It may seem like a tax on working people, but really, it is a payment for a very real benefit: a dramatic change in your personal healthcare risk. When you can purchase health insurance at any time even when you're unhealthy, you are essentially being granted an insurance policy for expensive, chronic conditions without even having to purchase anything.
You can't simply purchase Insurance and be covered next day. Insurance companies can have a waiting period of up to 3 months before providing you with benefits. It's not really a good idea to wait around with cancer for 3 months until you get your treatment covered
The ACA actually makes it very easy to purchase insurance only when you need it (you've moved, your employer drops your coverage), and drop it when you don't (you can go two months per year without insurance without penalty). This is a fundamental flaw in the program.
You must mandate participation through payroll taxes, but also ensure services can be affordably provided to participants. Insurance companies are still raking 20% off total premiums paid; that's money that could go directly into providing care.
It is awful but the alternative is adverse selection. That is, healthy people see high prices and drop out, leaving the prices to get higher for the sick.
One angle of the employer-based system is the "healthy worker" effect. It's almost impossible to answer questions such as "is working in a plutonium factory bad for your health?" because almost any population of workers is healthier than the average population because less healthy people don't work.
> It is awful but the alternative is adverse selection. That is, healthy people see high prices and drop out, leaving the prices to get higher for the sick.
Not exactly. Obamacare has other provisions that make this much worse. For example, Obamacare only allows insurance companies to charge older people at most three times as much as younger customers.
"But it’s worth noting that prior to 2014, there was no federal standard in terms of how rates could vary based on age. It was common for health insurance companies to charge older applicants five or six times a much as they charged younger applicants." [1]
This is a way of subsidizing the old (a better organized interest group), but it makes health insurance massively less cost effective for younger customers.
Is it fundamentally different from car insurance? It might not be very useful to them if they get in a fender-bender, but a high deductible plan can still save their bacon if they have a health catastrophe.
If you can barely afford the deductible, you will NOT be able to afford the bill at the end of the day for anything remotely complicated like a surgery. You will still end up with a >$50,000 bill you won't be able to pay, because you'll have to take time off of work to recover. There is nothing protecting someone from being fired from their job unless it was a workplace injury.
Everyone in the working class in the US is a single major medical event away from bankruptcy, insurance or not.
I can't speak to every insurance plan out there but there are typically out-of-pocket maximums and other limits on spending. A surgery does not routinely cost $50,000 out of pocket.
I learned a fun thing about out of pocket maximums - there's a thousand ways around them. You get a surgery, and they decide to use a "3rd party" doctor with this own billing that isn't in-network? You're still holding the bill.
Because entrepreneurs and small business owners is not a desired or targeted demographics by the Democrats anymore. Even though these groups provide a disproportionately large economic growth contribution, the number of votes the Democrats can realistically gather from them is relatively small. They target the lowest 30% and the salaried employees with their policy.
Very short-sighted thinking. Most multinationals were started by entrepreneurs, some even bear their names: e.g. Boeing, Ford, Dell, Bristol-Myers-Squibb. If you create a start-up unfriendly regime ( like in EU currently), they don't get started. Out of 1000 startups one becomes Boeing and 20 become sustainable medium size businesses that can be discarded for the microeconomic estimates.
I guess it depends on your definition. In my experience people who can barely support themselves make too much to be granted a subsidy most of the time. Myself when I was a cook included.
The alternative is a national Single Payer system where competition is negotiated in advance of any patients having a need (based on the historic rates of and future projections of patient needs).
You do this by making 'basic insurance' something everyone has, and a negotiating pool that more or less dutch-auctions per market with the practitioners. You might also include quality control measures like allowing patients to see any doctor they prefer from within the list (of doctors that met the group bid rate), and also allowing criminal mal-practice but not financial liability as a means of stripping titles from those who should not practice medicine. (The liability would be implicitly recognized as social; no big payout, but what life there is that is left you would be some degree of retired.)
No, the alternative is not to double down on madness. The alternative is to stop regulating healthcare out of existence while giving free handouts to billionaires.
my company pays 2000 dollars a month for our insurance premiums. This is a plan with a 2k individual/6k family deductible per year.
We are saving 1.37% next year by going to a plan with 3k individual 9k family deductible. If we didn't do that premiums were going to rise by 10.4% next year.
Our rates have gone up every year since I've been working here.
The total EOB (Explanation of Benefits) costs value for the medical care my family got last year was under 6k. This was unusually high because we had two minor surgeries. The two years prior were much closer to our baseline of about 3-4k of medical care. This includes shots for the young kids, regular checkups, the occasional prescription and one semi-emergent emergency. One year a kid broke her arm, the other my wife needed an MRI.
I know I represent a young family with relatively few health problems but so far, just since being on my current plan, we have paid 90,000 dollars (costs were slightly lower than our current premiums in prior years if you are doing the math) and received (at the high end) 18,000 dollars worth of medical care. I have paid 72,000 over just 4 years for insurance against catastrophic illness, disease or trauma.
As I sit here writing and calculating this I have this question in the back of my mind - Is it worth it?
I don't know. I think that question is ridiculous but I don't know what other question to ask.
But have you seen how they gouge the uninsured? I was in a minor bike accident last year and I had a 5k deductible. Just had an ambulance ride and got checked out at the emergency room. The bill was $6000 without insurance, which was reduced to $1500 with insurance.
Hospitals have such poor cost accounting.. they basically make something up if you're uninsured. It completely eliminates going without insurance. The charges would be outrageous.
Edit: The 4x multiple in my bill isn't anywhere near the worst. There are hospitals that charge up to 12x (so 1500 turns into 18000):
https://www.washingtonpost.com/national/health-science/why-s...
Add to that, hospitals won't tell you what something will cost up front... so you get to find out when they send you the bill.
To me, the #1 benefit of health insurance is not the insurance (i.e., swapping the cost of the unlikely, major expenses for a regular constant payment). It is price negotiation with service providers.
I would love to be able to get, from my insurer, a low cost option just for this: patient pays 100% of their standard negotiated rates. I go to the same network, they pay the doctor and bill me for the payment. Premiums just need to cover their admin cost plus some insurance that kicks in if I do not pay.
Doctors should not care -- they still get the same $$ from the same source the same way. Catastrophic coverage can be arranged separately, but the above schema I think would provide much of the current insurance benefits at the much lower cost.
There are plenty of generic meds that cost less than $10 with the discount negotiated by the insurance company but cost upwards of $100 if you don't get the discount.
The calculation that "you get nothing with a high deductable plan" is not entirely accurate if you take these into account.
There are free pharmacy benefit managers that will get you similar negotiated discounts. There are also store programs like Walmart's $4 drugs https://www.walmart.com/cp/1078664 .
(that's what lots of drug discount cards are, you get a negotiated price instead of the cash price)
So having a PBM price is an included detail of insurance plans, I'm not sure how useful it is (I expect the formulary used by cheap insurance ends up similar to the free stuff).
I had a similar experience. Burned the sole of my foot. Twenty minutes talking to a nurse at the hospital - two pain pills and the assurance that it was below the threshold for a third degree burn - and I walked out with a $3000 bill. They eventually knocked it down to $2500 and gave me a no-interest payment plan.
I've had uninsured hospital visits and when I called to pay they were shocked and surprised. I think they jack up the price so they can write it down because they don't expect to get paid.
No. The price is jacked up because insurance companies negotiate down, so providers have to price anchor high in order to receive payment at a sustainable level. They can't offer you a cash rate without hell from insurance companies, so you encounter the uninsured negotiation dance.
The problem is insurance companies can negotiate bulk rates, but it's actually illegal for people to get together in a group and do the same thing without the insurance part.
What's also annoying is you can't determine ahead of time what something is going to cost, so even when it's not an emergency you can't shop around.
For anyone interested, David Belck has some good lectures on how medical procedures get billed and how insurance (doesn't) work in the United States: https://www.youtube.com/user/davidbelk46/videos
> As I sit here writing and calculating this I have this question in the back of my mind - Is it worth it?
Well, it's insurance. It's there so if you have twins in the NICU for two months because they were born in the second trimester (like I did) you don't wind up with a multi-million dollar bill to pay. Most people will incur more premiums than benefits. That's normal.
Let me ask the relatively cruel question though for the purposes of prompting further discussion:
At what point does subsidizing other people's outlier events become unacceptable? I will never have kids (biological issues). I will likely die from a one off critical heart failure (also genetic in my family) rather than anything that will cost me significant amounts of money. I do not drive, leave the house much, or do any risky activities, yet as the parent said, I pay _hilarious_ amounts of money each year for insurance.
And the real kicker for me, I've developed some conditions related to stress-side effects, sedentary behavior, and joint issues because of my work. So the insurance money would be BETTER SERVED being reinvested so I could stop working in such a way that damages my body.
Now, you can say this is selfish, but as I said, I'm taking an intentionally selfish point of view for this argument. At what point do we draw the line of "I need this money for me now" or "someone else needs the net effect of re-balancing costs across a society?"
I will openly admit that as I've gone through a decent chunk of my career without incurring any major events, but while incurring major costs, where I sit on being OK with the current arrangement has shifted.
Let me ask an even crueler question. Let me preface by saying I am a parent of a child that needed some minor postpartum care in order to survive, so how horrible this sounds is not lost on me:
At what point do we stop holding up infant mortality as the gold standard of medical care? Spending untold resources on keeping alive infants who would otherwise die is inherently dysgenic, and allowing whatever conflagration of genetic anomalies that contribute to the necessity of postpartum care will inevitably lead to higher incidences of these cases in the future, as these genes are allowed to propagate into future generations.
Infant mortality is emotionally devastating, but preventing it will almost certainly increase our society's long-term medical costs.
Along this topic, if we are spending so much on these infants why is our rate higher than other first world countries?
Finland which is number one, "used the least resources and attained average results, making Finland the most efficient public sector health service producer according to the study's authors"
Spending is unevenly distributed. Poverty and drugs have a negative effect. Basically, spending 100 million on one baby born without a heart doesn't save twenty other crack babies.
But it also selects for empathy and parenting. Both will help build a better society. In fact we've been sacrificing physical skills for emotional ones, as long as human societies have existed. This is nothing new for sure.
On the other hand, something that is trivially treatable can be borne without issue, which, who knows, could enable later advancement.
Just look at the established tradeoff our species makes- our children are born helpless. Isn't caring for them dysgenic? But, being able to care for & protect them enables significant brain development to happen outside the womb.
Swaddling, clearing a wrapped umbilical cord, suctioning the nose & mouth... there are lots of things we do that improve mortality that are trivial.
Childhood mortality has to have imposed a tremendous selective pressure, on both the immune system and general congenital defects. I've been reflecting on what lifting this selective pressure means. Also on the fact that this lifting is nonuniform across cultures -- infants in less-developed nations are still subject to most of these effects.
That said: most of the improvement is through public health measures (clean drinking water, sewerage systems, municipal waste collection) and nutrition. Heroic measures are very much the outlier. That may be an even stronger argument against them -- other than as a learning experience, the resources they consume relative to providing much more basic, and effective, outcomes interventions is difficult to defend.
From the CDC: Infant mortality in the US <1 year was "up to" 30% in 1900. Maternal mortality was around 0.8% in 1900.
Wasn't this line of thinking discredited with the Nazis? Is eugenics back now? Do you also have a modest proposal for solving the problem of all those excess poor children?
> Spending untold resources on keeping alive infants who would otherwise die is inherently dysgenic, and allowing whatever conflagration of genetic anomalies that contribute to the necessity of postpartum care will inevitably lead to higher incidences of these cases in the future, as these genes are allowed to propagate into future generations.
Well, cystic fibrosis patients are encouraged not to have children. Is that eugenics? In the extreme, with enough time and money we could even harvest eggs and sperm from CF patients to ensure they can procreate even if they don't live long enough to do so. Is it eugenics to not spend those resources?
It's a pretty big gap between "don't treat preemies who might be perfectly normal once stabilized" (case in point: my kids) and "you should think about not giving a kid a death sentence" that CF entails.
That question is pretty close to home for me. Our family's highest yearly billing was about $3M, and we've hit $100k every year in the last 8. If you were writing a textbook about healthcare outliers, we'd be in it.
The closest thing I have to an answer for you is single-payer like the rest of the developed world, where they pay substantially lower medical costs for similar health outcomes.
I do hope to see our society mature a bit on end-of-life care. Dying is disproportionately expensive (http://time.com/money/2793643/cutting-the-high-cost-of-end-o...) and that money often results in little benefit to the patient (and at times, probably causes active harm).
Patients who'd like to undertake euthanasia and can't would get a DNR order. Medicare isn't spending massive billions on folks with DNRs - it's the folks that won't accept a terminal cancer diagnosis and put grandma through intensive chemo instead of prioritizing quality of life that costs.
To me, that's what health insurance is. Insurance should be for rare (or at least uncommon) events. Flood, fire, car accident, etc.
But health "insurance" has crept into regular health maintenance. But that's not really insurance; that's more like an extended warranty for your life.
That's true for various reasons such as benefits expectations (some of it the result of union negotiations historically) and tax effects. [1] There's also the theory, which may not be especially true as I understand it, that preventative medicine like regular physicals can cut healthcare costs down the road. In any case though, I'm pretty sure that annual physicals and the occasional stitches or urgent care visit aren't huge contributors to overall healthcare costs.
[1] And certainly things like dental insurance are pretty much just "extended warranties" rather than insurance against catastrophic expenses.
Those who work for a company and receive a W-2 form can look at Box 12 on the W-2 to see how much their employers paid for their side of their health insurance policy (coded with "dd").
You might think "who cares" but that's money that could have gone towards your salary.
oh I know. That's why I said "we have paid 90,000 dollars" Even though the insurance premiums are all covered by my employer I still count it as coming out of my salary.
I assume you're talking about the "Cadillac tax" on more generous insurance plans. Its implementation has already been pushed back to 2020 and there's a pretty decent chance that it will never see the light of day.
The problem there is that the subsidy money has to come from somewhere, and the longer that tax gets pushed back, the more we have to do other shenanigans to come up with the money: borrow more, raise taxes elsewhere, etc. As it is, the subsidies don't really help folks as much as was planned, and even with the subsidies, the costs are rising quickly. It's a runaway train at this point: costs rise, making the subsidies insufficient, so the politically expedient thing to do is to expand the subsidies, which means that taxes must rise to pay for them.
>As it is, the subsidies don't really help folks as much as was planned, and even with the subsidies, the costs are rising quickly.
I don't think this is in spite of subsidies but beacuse of them. Just like the epipen mess, the less of a bill the customer sees the more you can raise it.
One should also question why an individual healthcare purchase should be charged more than a work based group plan. Shouldn't the operative "group" of patients basically be everybody who is a customer of the insurance company (or at least everybody at some tier of the insurance plan).
The historical (and continuing--hence the controversial Obamacare mandate) problem is adverse selection. If you know you'll be using a lot of expensive insurance coverage you'll buy insurance--probably the most comprehensive you can get. If you're a 20-something who doesn't think he will ever get sick or injured (or just doesn't think about future events a lot), you may pass on insurance entirely.
Outside of health care specifically, this is also why disability plans tend to be relatively inexpensive for large companies to offer but are pretty pricey--when you can even get them--for individuals.
I'm not sure I follow. Healthcare is mandated, or you'd be paying some penalty on your taxes. So charge a startup fee for some entrance check of taxes, but otherwise why would an individual getting insurance be any riskier than a group? (It does make me start to think of farfetched scenarios like people joining a front-company to get group insurance rates...)
Same with disability, examine the individual coming in to make sure they don't already have a disability that's being covered, but after that why would the individual odds be any different than accepting a whole group? If you do an actual exam, they might actually be better.
The mandate is weak enough that there are still healthy individuals who aren't covered by company plans who are choosing not to buy insurance. [ADDED: And there's a fair bit of concern that the number of these individuals will rise as rates go up, driving further rate increases, in what's often called a "death spiral.]
There are non-employer group plans for certain types of insurance e.g. through something like the IEEE but generally not for healthcare AFAIK.
With respect to disability--leaving aside that an exam won't find all pre-existing conditions such as joint problems--there's still adverse selection. The people who would even apply for disability insurance are a higher risk pool (probably older for one thing) than the working population as a whole or all employees working at a large company.
Unfortunately the interests of the industry trumps the interest of affordable healthcare. We need someone to come in and dismantle all the middlemen in healthcare. The Healthcare Industrial Complex is just a machine to move money around.
As a Canadian, this is astonishing. All our governments spend around $4500 usd per capita on health. That's about $6000 Canadian.
That's for full coverage. No deductibles. Only things not covered are dental, vision and prescription drugs.
I have dental, vision and paramedical insurance for $1000 us annually. This covers most of my expenses, and also covers some things like massage therapy and physio. It's also as business expense, and avoids the need to pay into my provincial drug plan. So I more or less break even on this.
Prescription drugs? Depends on the province. In Quebec, if you have no other insurance, the public plan will take around $500 per year off your taxes and give you full coverage.
Personally, I have full coverage through my private health plan (the one that costs $1000 per year). I got it by being, among other things, a writer. That lets me get the group plan for writers. Most professions will have such an organization. Failing that, en entrepreneur can join their chamber of commerce form $150 or so a year, and get a similar plan for similar rates.
I would have been knocked out of business 3-4 times over without this. Major health issue that required surgery three years ago. Cost me $0. And in my first year I had to get my wisdom teeth out: fully covered by my plan. There's been a few other expenses, and also the ability to do physio et al for RSI due to computer work.
I can't fathom doing it the American way. My taxes are somewhat higher in Quebec, but the difference in health costs more than makes up for it.
In particular, I can't believe that with all those medical costs, you still have to pay large deductibles.
Oh, and the services here are good, and fairly for for things that aren't elective. And a private system exists too if you need to go faster.
What are typical American taxes? It was hard to find info, the calculators are confusing. I also heard some cities like manhattan have income taxes too. What would a New Yorker or Californian pay?
We do have a 13% national sales tax which I don't think states have.
Yeah, for those earning over $200K it's quite punishing, and would probably amount to more than the health savings. I think there aren't corporate structures that make it less rough though.
Being from Quebec and working in Manhattan, I figure I can have some input on this.
In Quebec, at income X, my effective tax rate was around 34%, which includes federal and provincial rates. I did have a private plan at work although I don't fully recall how much it would cost me per paycheck, it was really low.
In NY, at income 3X (including exchange rate), the rate is similar, I think around 33-34% including federal, state and municipal income tax (which is ballpark 3%). I do have private insurance here which amounts to a couple hundred a month.
Personally in the end, I get better service in the States but I'm probably biased.
The highest US federal bracket is 39.6% and I believe the highest state bracket is around 12.3% (California). The highest state sales tax is around 9.5% (Tennessee and other states without income tax). Local taxes are typically much lower in magnitude. (NYC income tax is another 3.9% for the highest earners.)
So at the very high end, someone in NYC might pay 52.3% income tax (edit: marginal rate) and 8% in sales tax.
And at the high end in California (San Francisco), someone might pay 51.9% income tax (edit: marginal rate) and 8.75% in sales tax.
(This is a little simplistic; I think you can deduct state income tax from federal tax, lowering the overall high marginal rate somewhat.)
>And at the high end in California (San Francisco), someone might pay 51.9% income tax and 8.75% in sales tax.
What you're talking about is the marginal tax rate, i.e. the limit as income -> infinity, but it's typically much much lower than this (even for the wealthy). Most people pay in the 10-20% range for federal income taxes. Millionares pay in this range too for several reasons, capital gains and write-offs.
> What you're talking about is the marginal tax rate
Yes, this whole comment thread has been discussing marginal rates. I thought that was clear from mentioning tax brackets in both my comment and refurb's grandparent comment, which mine is in comparison to.
I've edited the comment to be really clear that this is not an average rate.
Edit: Whoops, and I left out FICA taxes and it's too late to edit the above comment again. That adds another 7.65% (W-2), up to $118,500; 1.45% above that, and a little more at the top rate.
I see... I guess I'll just point out what you may already know: the way you guys are framing this discussion is really flawed. Marginal rates have no meaning without discussing brackets (and other important details), which can be quite different in different countries. Effective tax rate distributions are the only meaningful way to compare different countries' rates.
As an analogy, it would be like comparing Buffalo's weather to San Diego's based on the average high temperature in the summer (which may lead you to believe Buffalo is hotter than San Diego).
Most states have a income tax [1]. Our federal tax is progressive so you pay 15% of the first $X. Anything you make over that is taxed at 25% and on and on.
We get a standard deduction, which varies depending on whether you are single, married, and/or have children. Deductions reduce your taxable income. For example a single person making $35,000 would get a standard deduction of $6,300 making their taxable income $28,700.
You are entitled to a dependent deduction, so if the hypothetical single person above has a kid he can knock another $4,050 [2] off of his taxable income making it $24,650.
The other ways to reduce your taxable income for working people are retirement plan and health saving (HSA) contributions. every dollar you take out of you paycheck and contribute to either of those is not counted towards your taxable income. There are maximum amounts to both. Typically a person making $35,000 won't have much income available to put away in this way so working people don't usually get to take advantage of those [3]. There's also flexible spending accounts which work the same as HSAs except if you don't spend the money input in a set amount of time you lose it. These accounts make sense for sunk costs like daycare.
Lastly there are tax credits. Credits reduce the amount of tax owed (as opposed to the amount of taxable income). For example, if my taxable income $10,000 and I was taxed at 15%, I would have a tax bill of $1,500. If I also got a $500 tax credit, my tax bill would be reduced to $1,000. Parents get a $1,000 for each child[4]. There's also a childcare credit which is a pain to calculate so I won't do it here.
There are of course other exemptions and credits but for most people, what I've listed sums up how our tax code works.
If you are in a state with subsidies you are in pretty good shape.
Also, you're numbers are a bit inflated if my experience is anything to go by. I have insurance through my company but my wife is on an Obamacare plan (because it was cheaper and better than what my company offers through a national HR company) for herself and our three children. We pay about $6000 per year for normal deductibles and a plan comparable with what she had working for the state of Texas (really good) before she went back to school. My only complaint is that this insurance company (Humana, I think) is very particular about the prescriptions it allows but I think you get that with any insurance company.
Texas is definitely cheaper than NY. However, Texas has been approved for one of the biggest premium increases for 2017, but their numbers have not yet been released (they will in a few days). You should anticipate at least a 30% increase in your wife's premiums, unfortunately.
That is a lot of money. :-( So it is true, the bad US health care system really is a startup limitation.
Maybe it is time for countries with nice weather and cheap health care to woo Silicon Valley...?
Something like: "Get here for less than a month's health care, do Skype meetings and you'll need a telescope to see the end of your startup's runway". :-)
Kenya and Tanzania have some good beaches and they got OK Internet now? Or most places in Asia? How cheap is it to live in a small fishing city in Japan?
It's not really tech startups I'm worried about as they are more likely to receive VC/angel and can be started by young hackers. I'm talking about your average small business, whether it be a self-employed consultant, a small hardware shop, a bakery, mechanic shop, cafe, etc. I observe that small business has been decimated in America and giant chains have proliferated. When you drive through small towns in the US you will usually find a few large chains like WalMart, McDonalds, Jiffy Lube, etc on the Main St and not much else. When I travel UK, Australia, NZ, Europe, small business seems to be in better shape. Much of this is due to active skepticism of large corporate chains and their scale advantages (trading hour restrictions come to mind).
I think there may be some confirmation bias there; the UK is also discussing the question of what it calls "clone towns", where all the high street shops are either national chains, charity shops, or empty unlet units. The big ones like ASDA/Walmart are out of town.
I think the only place small businesses are really thriving in Europe is Germany.
It depends on the town a bit I think. In Brighton there are lots of small business and some areas have no chains at all. Not sure if that is because of planning policy or for another reason.
That's very definitely the result of both council and cultural factors. Brighton is special.
Mind you, so are a lot of other places. I see from http://www.rudi.net/node/22184 that Cambridge is very clone-ridden, which feels about right. It's an odd collision between architecturally interesting colleges and medieval street layout on the one hand, but an almost total lack of properly local shops due to high costs. Since the takeover of Heffers and Eaden Lilley the only one I can think of is Mackay's.
Here in upstate NY, $20k/year for a mid-30s with family of four gets you a Platinum no-deductible, copay-only plan with a $4k/year out-of-pocket cap (my exact situation - 2016 premium is $1,700/month). Bronze plans are dramatically cheaper, and if you're doing a bare-bones startup you're also likely to be in the income range that gets subsidies.
Subsidies - let's say you pull $70,000 your first year. Your subsidies will be $4,000 per year, so the platinum plan is still $16,000/yr net. After-tax on $70k is $54,000. That means your healthcare premiums alone are 30% of your post-tax income even with the subsidy! That means only $3,150/mo remains for your rent, transportation, food, utilities, etc...
subsidies in Albany are $578/month for an income of $70k, with an average cost of Silver plans being about $500/month post-subsidy. At ~9% of income, that's also tax-deductible spending.
I just ran my numbers, the cost is about $2500/year for me (and this is with roughly the same Kaiser Permanente plan I have at work). That's about two months rent out here in the Bay Area. I've worked at three startups here so far, only one has had an older CEO with kids and the wife, so I think your numbers might be on the high side.
34 here, 32 yr old wife, newborn, Florida. $12k/yr. silver plan.
We're discussing me working remotely (all of us relocating) from Panama or Belize; same first world income without the requirement to buy US health insurance (requirement is waved if you reside outside the country for 330 days/year). Our costs then drop to $3k/year for family coverage.
As someone from the Bay Area, please tell me where $2500 will get you 2 months of rent. Unless of course you mean a single room with a handful of roommates.
The article is about small business creation in the US, not Bay Area tech startups (they use the term "startups" in the headline disingenuously as clickbait; people don't really say "I'm doing a startup" when they open an auto-body shop).
I live in Melbourne, Australia, and pay $350/month for supplementary private health insurance for my family of five with three kids under ten. (All Australians of course have free access to the public Medicare health care system.)
Last year I had cochlear implant surgery. The cost of the operation & implant is probably around $40k - $50k. My out-of-pocket expense was $410 for the overnight stay in hospital and $35 for painkillers. My premiums haven't changed since the operation.
For a quick comparison in rates vs. Obamacare plans, here is my insurance company's website: http://www.bupa.com.au/
Suffice it to say that I ignore emails from American recruiters.
Yeah, I am actually emigrating to there, and healthcare is a major factor. The system there works so much better. And costs aside, simply navigating payments, billings, costs, etc. even with private insurance is so much smoother and less stressful.
Also of note is the way pharmaceuticals are priced in Australia. None of this EpiPen price hike type of nonsense. The government body Therapeutic Goods Administration negotiates all pharmaceuticals offered in Australia, and agrees on what they will pay the manufacturer. The public just pays A$39 for any drug, even if it costs the govt $100,000/yr.
Where are plans like this so expensive? My family plan's premiums for very good PPO insurance are $23k/yr (including employer contributions). HDHP plans were in the realm of $5k per year when I was insured by one, just a few years ago.
>Take a look at S&P500's profit margins. They are at record highs and not coming down as economics teaches us, meaning new entrants are not coming into the market.
It's not possible for this stuff to adjust instantaneously. The economy takes a long time to move. Profit margins are cyclical; they will decrease as inflation creeps in and wages and capital costs rise at a rate higher than prices can increase. Input costs are extremely low right now.
Take a look at the data; we have 10 years of above average margins following 10 years of below average margins.
could the health exchange been better if the US Congress just used their heads and used their Medicare/Medicaid buying power and juts enroll everyone in that?
> Look up 2017 numbers. You are looking at $12,000 - $24,000 per year in premiums alone and then massive deductibles and coinsurance of 30% to actually access services.
This is a little high, and depends on your income. More likely it's 6-8k in premiums for a plan with a ~1,500 deductible, no co-insurance.
It's still way too high, but it's not that insane.
Note: that deductible is yearly and applies to literally everything, even a $150 doctor's appointment.
Can you suggest ways in which 'barely wealthy' people can help new potential entrepreneurs? For example, I don't have enough money to be an angel or involved with an incubator or VC, but I have enough money to subsidize someone's health care costs, if that's all that's needed.
The main problem with healthcare is it is still semi-tied to employment/employers. There should be huge breaks to take out independent insurance not breaks for companies to offer it.
Tying health insurance to a company is an ancient and legacy system that needs to go away. It makes entrepreneurship much more difficult and leads to things like ageism and making it difficult to change jobs or start companies.
We don't get other insurance from our company, not auto, not life, not home, why the hell do we bind our most important insurance to employment?
ACA was a start in that you can now actually get coverage (though not that great). In 2010 when I went fulltime on my business I got denied for about a year, under 30 and barely ever used healthcare. The same companies I was insured under at fulltime jobs wouldn't cover me individually. I was blown away and a bit scared, I knew then how bad the system before ACA was and it isn't much better now.
The main cause of price disparity and risk is tying it to employment, we take the costs and hide them in insurance and employers backroom dealings, noone knows what anything costs because noone pays it directly.
We need insurance companies to be consumer facing not employer facing, we need new competition in new insurance companies that are like that (more like Geico, Progressive, Nationwide for health not just auto rather than these employer focused companies in Aetna and Bluecross et al).
We need to unlink healthcare from a job! It is becoming easier to start companies in any country where healthcare is not part of the normal benefits of a job. In the US we could start by making it illegal eventually to provide healthcare from a job (but providing extra money for it is ok). Eventually people will move to independent insurance or some public system like medicare for all. That way when you leave your job or start a company, it doesn't involve a heavy burden/risk on your health and insurance.
Side note, every year since ACA has started I get my plan cancelled at the end of the year. They have rules in raising rates so they just end the plan and force you to jump on a new one. So every holiday season I get the joy of signing up to another freaking plan. I have no idea how this doesn't add tons of admin costs across the board. What a waste. And you can only join on enrollment not like every other insurance ever in that you can join at any time. The current insurance companies are trying to kill ACA and they were not setup to be independent insurance companies, we need better competition and a directive to remove healthcare from employment. Health insurance is the most non-independent and non-consumer friendly product in the US because it has never seen a real market, it is largely an employers service not individual consumer service.
Who can bootstrap a business like this? So people are staying with their powerful big corporations if they can't get millions in funding for a startup (and outside of tech this is simply not even a consideration).
Edit: and if at some point you hire an employee, you will need / want to provide them with health insurance, and it will cost just as much. Large corporations have an advantage in that they negotiate lower premiums in bulk. Add this as yet another barrier to entry, along with their lobbying for protectionism, tax loopholes, their ability to hire huge teams of tax lawyers and accountants, and if you really start to get their attention, they can sue you baselessly by throwing lawyers at you to keep you in court. Merely defending yourself and getting to the point of dismissal is unaffordable for a budding small business.
Take a look at S&P500's profit margins. They are at record highs and not coming down as economics teaches us, meaning new entrants are not coming into the market.