Addicted To Other People’s Money

Three minutes. Citizens are allowed three minutes to address the Beachwood City Council at regularly scheduled meetings. This isn’t a Q & A. If the Councilmen deign to respond to the concerns raised or answer the questions asked, it will happen whenever they choose. The agenda designates this as Citizens’ Remarks. The microphone is yours. You have three minutes.

I used to attend every Council meeting. A special entry was added to the City’s agenda, Chamber Report, for me to address Council. But I am no longer the president of the chamber of commerce and I have other ways to spend two Monday evenings a month. I forced myself to attend last night’s (July 19th) meeting.

The City of Beachwood is ready to take a 33% income tax hike. Beachwood would jump from one and a half percent to two. City revenues are down in these tough economic times. The goal is to tax the people who work here, but can’t vote, as opposed to the people who live here and can. I was at the meeting to watch City Council sing and dance.

I had no intention of speaking at the meeting until I saw item 9 on the agenda:

An Ordinance extending a Contract with Medical Mutual of Ohio (MMO) for renewal of health insurance coverage for City employees, declaring the existence of an emergency condition regarding health insurance coverage and further waiving competitive bidding.

I read that paragraph several times. This was easily one of the most ridiculous things I had seen in thirty-two years in the insurance business. Ticked off, I waited for the Citizens’ Remarks portion of the meeting.

I began by clearly stating that I don’t work with municipalities. My interest was strictly that of a taxpayer. I noted that there are no insurance emergencies. The City had plenty of time to get bids from countless other insurers. Anthem? UnitedHealth Care? Aetna? They simply didn’t bother. Why would they? They’ve got us to pay the bills.

As the meeting dragged on, we eventually learned that the City never negotiated with the employees to accept a less expensive policy. The City never negotiated with the employees to increase their contribution. Beachwood hasn’t solicited for bids in years. The Mayor and Council can’t help themselves. They are addicted to other people’s money.

Other people’s money is a common addiction. I was thinking about it earlier yesterday as I was reading an email from Michelle Obama. Yes, I’m on her email list. She and other members of the White House send me emails all of the time.

Anyway, Michelle (she calls me David) wanted me to know about all of the great ways that the new health care bill was going to help my family and lower costs.

So much of what makes this law great is its emphasis on preventive care--right now, too many people aren’t getting the check-ups or the screenings they need to stay healthy. Twelve percent of kids haven’t seen a doctor in the past year. And 59 million adults--and 11 million children--depend on an insurance plan that does not cover basic immunizations.

Health reform is changing that. Under this new law, all new private plans will provide basic preventive services--things like childhood immunizations and checkups, mammograms, colonoscopies, cervical screenings, and treatment for high blood pressure--absolutely free of charge. No copay. No deductible. No co-insurance needed.

Does this mean that America’s doctors will be providing free exams? Will labs dedicate entire months to free blood work? Will pharmacies dispense free blood pressure medications? Of course not. Our medical providers expect to be paid for their time and efforts. Rightfully so. These tests, services, and products aren’t free. Your insurance will pay for them. And you will pay more for your insurance.

Nothing is free save your mother’s love. But when you are addicted to other people’s money, you lose sight of the real cost of anything. There is always someone there to pick up the tab. And eventually the addicts forget that there is a cost. But actions have consequences. Goods and services and not free.

Beachwood, and countless other municipalities around the country, will get a crash course in effective budget management. They may even be forced to make some tough decisions. The new health bill has already begun to force business owners to make tough decisions. The only Americans unaffected are like my email buddy, Michelle, the ones addicted to other people’s money.


The Blind Squirrel

Should all businesses provide health insurance benefits to their employees? As a guy who makes his living selling group health policies to employers, you might think that I would answer with an emphatic “YES”. In theory, all businesses should provide benefits. In practice, not necessarily.

Sunday’s Plain Dealer included an article about the White Castle hamburger chain and the unintended/intended consequences of the recent health care legislation. According to the article, White Castle has been providing health insurance coverage to its full-time employees for a very long time. And, they are more than generous, paying 70% to 89% of the cost. By these measures, White Castle is a good corporate citizen.

But it is not enough. The Patient Protection and Affordable Care Act imposes a $3,000 per employee penalty on companies whose workers pay more than 9.5% of household income in premiums for company provided insurance. “White Castle estimates that this new rule could cost as much as 55% of its yearly net income."

Before we go any further, it is important to note that a recent study found that 78.9% of all statistics were created at the moment of their citation.

So I may not be certain about the actual pain White Castle may experience. Of course, when Nancy-Ann DeParle, Director of the White House Office of Health Reform, is quoted later in that same article that 97% of the nation’s companies won’t pay any penalties, I am equally skeptical.

Let’s talk real numbers. There are lots and lots of people earning $9 an hour. Is that right? Should they be paid more? I don’t know. You hire them and let me know. Today we’ll simply work with reality.

$9 an hour times 35 hours per week times 52 weeks per year equals $16,380. This person could only be charged $30 per week to participate in the company health plan. Anything more and the employer is charged $3,000 per employee. Restaurant worker, Retail employee. Clerk. There are a lot of people earning less than $20,000 per year. Their employers have a problem. Or a choice.

Will employers absorb even more of the rising health insurance premiums? Will employers make do with fewer workers? Or, will businesses cancel their private insurance and pay the lower $2,000 per employee penalty for not providing coverage?

The cheapest option, even less than providing high quality health insurance to its employees, may be to pay the $2,000 per employee penalty and to cancel the benefits. This just funnels more people into the government plan.

The article also quotes Steven Kreisberg of the American Federation of State, County, and Municipal Employees Union (AFSCME). Uniquely unqualified to address the concerns of any business, Mr. Kreisberg assures us that the young and healthy will simply opt out of their employers’ plans. The employers would then save premium dollars by paying $2,000 per employee per year for nothing. Forgetting that businesses hate to spend money for nothing, we still understand that taking the young and the healthy out of the employers’ groups will only make their premiums skyrocket.

The structure of these penalties only make sense if the ultimate goal is a government run health care system.

There were other experts and ax-grinders quoted in the Plain Dealer article. One was the number one Republican in the House of Representatives, John Boehner (Oh). Mr. Boehner is the George Hamilton of national politics. While Mr. Hamilton’s movies feature his tan and a lightweight plot, Mr. Boehner’s TV appearances tend to feature his tan and his lightweight logic. I have always thought that his job was to keep the seat warm till a real leader emerges. I am not a fan.

Imagine my surprise when I read this quote from Mr. Boehner. “The irony is that in the name of expanding health care coverage, the administration is making it harder than ever for unskilled workers to get started in the workforce.”

Sure the populism is feigned. But truth is truth. In a rush to achieve a goal with little thought to the consequences or collateral damage, this administration has begun to implement its health care takeover. And, as per Mr. Boehner, it is true. Even a blind squirrel can eventually find a nut.