First, a brief congratulations to all on having seemingly killed the public option. Without our efforts, it would be en route to becoming law. Now there will not be a government owned, government run and government subsidized insurance company that will put all others out of business.

But the current proposal Reid is loudly trumpeting is horribly flawed as well.

It has all of the old flaws (minus the public option) in that the government, through the Secretary of Health, will decide who gets what treatment at what cost and will force rationing through an artificial scarcity on all people, particularly the elderly. And it still has such high premiums for young uninsured people that it will compete with student loans for the honor of being their number one headache.

But the compromise itself is flawed:

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Both the House and Senate versions of the healthcare reform bill would require employers above a certain size to provide health insurance for their workers or face some sort of penalty. The House bill that passed last month would require employers to pay an 8% additional payroll tax for not insuring their workers. The Senate bill now under consideration is much less punitive, requiring employers who do not provide insurance to pay a $750 annual fee per full-time worker, but only if one or more of their employees receive a government subsidy in the insurance exchange.

Quite a difference between the two bills. By way of example, take an employee earning $50,000 per year. Under the House bill, an employer who did not provide insurance would be required to pay an additional tax of $4,000 to the federal government. Compared to only $750 under the Senate bill – a difference of more than 500%.

Now consider whether it would make more sense financially for the employer to provide insurance or pay the penalty. In our example above, under the House bill it would probably be close to a break-even if the employer is providing coverage only for the employee. According to the most recent data from the Bureau of Labor Statistics (BLS), the average monthly insurance premium for private industry employers across all worker categories was $317.63. Or just over $3800 annualized (compared to the $4,000 penalty). However, it would be quite a bit more expensive if the employer was providing family coverage (BLS data: $737.68/mo – $8850/yr).

Obviously under the Senate bill it would be far less expensive for the employer to just pay the $750 penalty rather than provide the insurance.

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