There are exceedingly few companies in the United States today that are required by law to provide insurance for their employees. So why do they do it when it is such a huge expense?
Companies provide insurance benefits to compete in the labor market.
No matter what the unemployment rate, sooner or later companies have to hire new employees. When they do, it doesn’t matter whether there are three employees available or three hundred… no company wants the 3rd best. They compete for the best. They don’t always win the competition, but they try to.
When was the last time you met an electrical engineer with ten years of experience who would even consider working for some fly-by-night company that doesn’t offer medical benefits? Or a Director of Advertising. Or a Senior Database Security Analyst. Or a Vice President of Finance and Accounting? Or a District Manager of Food Service Operations? Or a damn good Administrative Assistant?
To compete for the best talent, companies have to offer the most competitive compensation packages, and in today’s world that means health insurance as a benefit is mandatory.
Now, if a company is paying 15% of its payroll to provide insurance and it finds that it can stop doing that and pay just an 8% penalty… of course it is going to want to do that. But it is only going to be able to do that if workers find that option to be competitive. If the best quality employees, the ones with the most choices and options of where to work, feel that the public insurance and private insurance are equally as good, but their out of pocket cost is $300 a month for the company that provides private insurance (because of the employer contribution) but $900 a month for the company that makes them use the public option, they will work for the company that offers them the private insurance. Until, or unless, the company not offering insurance pays them the $600 a month in cash to make them whole. Likewise, if the out of pocket costs are the same, but the public insurance turns out not to be as good as the private insurance, the best employees are going to either demand to be compensated financially… or flat out refuse to work there.
If it turns out that the public option insurance is as good as the private insurance, and that after paying the 8% penalty and whatever amount they have to pay employees in cash to continue to be competitive it is still economically beneficial for them to do that… well, that will be the proof of the pudding that government can do it better! We should all applaud. The employees will be happy, the company will be happy, the taxpayers will be happy… everyone will be happy except the insurance company CEO that can no longer command a $10 million a year annual salary.