Smith: Change the model: A win-win on benefits

Smith: Change the model: A win-win on benefits

December 2nd, 2013 By Robin Smith in Opinion Columns

Robin Smith

Photo by Contributed Photo/Times Free Press.

In the debate over access to Chattanooga city employee insurance benefits, I propose a common-sense solution.

The solution lies in treating health insurance as we do homeowners insurance and auto insurance -- not as income but as a service purchased by the customer, the actual consumer.

Employment-based health insurance and benefit programs reach back to the 1870s as mining and railroad companies provided company doctors to workers as a form of an incentive for employment.

Department store retailer Montgomery Ward offered one of the first group insurance plans to employees in 1910, but the more standard use of health care coverage as a form of compensation did not occur until the National War Labor Board froze wages during World War II with a simultaneous shortage of workers in 1943.

The quick embrace of employment-based health benefits by the business industry offered a specific tax advantage over cash income: Workers' health benefits are not subject to income tax or other payroll taxes such as Social Security and Medicare.

Over time, the customers of the insurance companies have become the employers and not the patients. A third-party payer health care industry has resulted that exists in both the private market and in the public sector of health care with the government being the customer and not the patient in Medicare, Medicaid and the Veterans Administration.

This practice has set up two conflicts -- increased costs of health care as a service and the socially charged decision of awarding an insurance benefit to an individual outside a legal marriage.

Back in 2009, Sen. Bob Corker was advocating the elimination of the 100 percent tax deductibility of health insurance that is most frequently enjoyed by larger companies but not available for individuals purchasing their own insurance. This move would put the patient as the actual purchaser of a health care plan based on his own needs with a demand for competition.

How often do you see the AFLAC duck, the Geico gecko, Allstate's Mayhem Man or the Progressive spokeswoman Flo pitching the savings of their various auto and homeowners' policies with the promise of coverage you need at the best price?

Do you know why the major commercial health insurance plans don't have to advertise and promise a variety of choices of health coverage for competitive and reasonable rates?

It's because, in most cases, the patient is not the customer. In a third-party payer system, large employers and the government determine what coverage you have as an option, what services will be covered in "your plan" and what portion you'll pay as a deductible.

Yep. If individuals purchased their own health care insurance, they could insure their ficus plant if they so desired with no taxpayer money involved, no social implications impacting religious views or activism.

But, as that solution has been offered, those adamantly opposed to personal responsibility and consumer choice have been joined by the commercial payers' lobbyists with loud disdain.

To see the cost of health care reduced, the answer lies in personal ownership of a plan which is portable across state lines and serves the customer, the patient. And, the spat over the other issues goes away.

Win-win-win.

Robin Smith served as chairwoman of the Tennessee Republican Party, 2007 to 2009. She is a partner at the SmithWaterhouse Strategies business development and strategic planning firm and serves on Tennessee's Economic Council on Women.